BBY » Topics » Stock-Based Compensation

These excerpts taken from the BBY 10-K filed Apr 29, 2009.

Stock-Based Compensation

We apply the fair value recognition provisions of SFAS No. 123 (revised 2004), Share-Based Payment ("123(R)") as it relates to our stock-based compensation, which requires us to recognize expense for the fair value of our stock-based compensation awards. We elected the modified prospective transition method as permitted by

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$ in millions, except per share amounts or as otherwise noted


SFAS No. 123(R). Under this transition method, stock-based compensation expense in fiscal 2009, 2008 and 2007 included: (i) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of February 26, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation; and (ii) compensation expense for all stock-based compensation awards granted subsequent to February 26, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). We recognize compensation expense on a straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if earlier). In accordance with the modified prospective transition method of SFAS No. 123(R), financial results for prior periods have not been restated.

Stock-Based Compensation



We apply the fair value recognition provisions of SFAS No. 123 (revised 2004), Share-Based
Payment
("123(R)") as it relates to our stock-based compensation, which requires us to recognize expense for the fair value of our stock-based compensation awards. We elected
the modified prospective transition method as permitted by



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HREF="#bg19101a_main_toc">Table of Contents





$ in millions, except per share amounts or as otherwise noted






SFAS
No. 123(R). Under this transition method, stock-based compensation expense in fiscal 2009, 2008 and 2007 included: (i) compensation expense for all stock-based compensation awards
granted prior to, but not yet vested as of February 26, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123,
Accounting for Stock-Based
Compensation
; and (ii) compensation expense for all stock-based compensation awards granted subsequent to
February 26, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). We recognize compensation expense on a
straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if earlier). In accordance with the modified prospective transition method
of SFAS No. 123(R), financial results for prior periods have not been restated.



These excerpts taken from the BBY 10-K filed Apr 30, 2008.

Stock-Based Compensation

At the beginning of fiscal 2006, we early-adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), Share-Based Payment (123(R)), requiring us to recognize expense related to the fair value of our stock-based compensation awards. We elected the modified prospective transition method as permitted by SFAS No. 123(R). Under this transition method, stock-based compensation expense in fiscal 2008, 2007 and 2006 included: (i) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of February 26, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation; and (ii) compensation expense for all stock-based compensation awards granted subsequent to February 26, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). We recognize compensation expense on a straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if earlier). Total stock-based compensation expense included in our consolidated statements of earnings for fiscal 2008, 2007 and 2006 was $105 ($72, net of tax), $121 ($82, net of tax) and $132 ($87, net of tax), respectively. In accordance with the modified prospective transition method of SFAS No. 123(R), financial results for prior periods have not been restated.

Stock-Based Compensation



At the beginning of fiscal 2006, we early-adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), Share-Based
Payment
(123(R)), requiring us to recognize expense related to the fair value of our stock-based compensation awards. We elected the modified prospective transition method as
permitted by SFAS No. 123(R). Under this transition method, stock-based compensation expense in fiscal 2008, 2007 and 2006 included: (i) compensation expense for all stock-based
compensation awards granted prior to, but not yet vested as of February 26, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123,
Accounting for Stock-Based
Compensation
; and (ii) compensation expense for all stock-based compensation awards granted subsequent to
February 26, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). We recognize compensation expense on a
straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if earlier). Total stock-based compensation expense included in our
consolidated statements of earnings for fiscal 2008, 2007 and 2006 was $105 ($72, net of tax), $121 ($82, net of tax) and $132 ($87, net of tax), respectively. In accordance with the modified
prospective transition method of SFAS No. 123(R), financial results for prior periods have not been restated.



This excerpt taken from the BBY 10-Q filed Jan 5, 2006.
Stock-Based Compensation, of the Notes to Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q.

 

This excerpt taken from the BBY 10-Q filed Oct 6, 2005.
Stock-Based Compensation, of the Notes to Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q.

 

This excerpt taken from the BBY 10-Q filed Jul 7, 2005.
Stock-Based Compensation, of the Notes to Consolidated Condensed Financial Statements in this Quarterly Report on Form 10-Q.

 

Revenue for the first quarter of fiscal 2006 increased 12% to $6.1 billion, compared with $5.5 billion for the first quarter of the prior fiscal year. The addition of new stores in the past 12 months accounted for more than one-half of the revenue increase for the first quarter of fiscal 2006; the 4.4% comparable store sales gain accounted for nearly two-fifths of the revenue increase for the fiscal first quarter; and the favorable effect of fluctuations in foreign currency exchange rates accounted for the remainder of the revenue increase for the first quarter of fiscal 2006.

 

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Our fiscal 2006 first-quarter comparable store sales increased 4.4% on top of an 8.3% comparable store sales gain for the first quarter of the prior fiscal year. We believe our comparable store sales performance for the fiscal first quarter reflected improved in-store execution and an increase in the average ticket, which more than offset customer traffic declines in our stores. In addition, comparable store sales were driven by consumer demand for and the increased affordability of digital products, as well as improved assortments and higher in-stock levels in select digital product categories. Products having the largest effect on our fiscal first-quarter comparable store sales gain included MP3 players, digital televisions, video gaming, digital cameras and accessories, and notebook computers. These gains were partially offset by comparable store sales declines in the desktop computer, analog television and cellular phone product categories.

 

Our gross profit rate increased by 1.6% of revenue to 25.5% of revenue for the first quarter of fiscal 2006, compared with 23.9% of revenue for the first quarter of the prior fiscal year. For the first quarter of fiscal 2006, our Domestic segment’s gross profit rate increased by 1.6% of revenue and our International segment’s gross profit rate increased by 1.0% of revenue. The improvement in our gross profit rate for the fiscal first quarter was due primarily to a more modest promotional environment; reduced markdowns due to improved product model transitions; and supply chain benefits related to pricing, global sourcing and private label initiatives. Our gross profit rate for the first quarter of fiscal 2006 also benefited from an increase in higher-margin services in the revenue mix and the conversion of more stores to our customer centricity operating model, as stores operating under the new operating model have produced higher gross profit rates than other U.S. Best Buy stores. See the Outlook section in this Quarterly Report on Form 10-Q for additional information regarding our expectations for our fiscal 2006 gross profit rate.

 

Our SG&A rate increased by 1.0% of revenue to 21.6% of revenue for the first quarter of fiscal 2006, compared with 20.6% of revenue for the first quarter of the prior fiscal year. For the first quarter of fiscal 2006, our Domestic segment’s SG&A rate increased by 1.1% of revenue and our International segment’s SG&A rate increased by 0.2% of revenue. The increase in our SG&A rate for the fiscal first quarter was due primarily to increased stock-based compensation expense, which increased our SG&A rate by approximately 0.5% of revenue compared with the same period of the prior fiscal year. Expenses associated with accelerating our customer centricity initiative and expanding our services business, and higher store relocation costs also placed pressure on our SG&A rate. These factors were partially offset by expense leverage resulting from the 12% revenue gain.

 

This excerpt taken from the BBY 10-K filed May 10, 2005.

Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. SFAS No. 148 requires expanded and more prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method on reported results.

We have a stock-based compensation plan that includes stock options and restricted stock. We also have an employee stock purchase plan. We continue to apply Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for these plans. Accordingly, no compensation expense has been recognized for stock option grants, as the exercise price equals the stock price on the date of grant. In addition, compensation expense has not been recognized for our employee stock purchase plan as it is intended to be a plan that qualifies under Section 423 of the Internal Revenue Code of 1986, as amended. Restricted stock awards result in compensation expense as discussed in Note 5, Shareholders' Equity.

We expect to include the total expense associated with stock-based compensation issued to employees and directors in our consolidated statement of earnings, beginning in the first quarter of fiscal 2006. See New Accounting Standards, below for a discussion of our transition to SFAS No. 123(R), Share-Based Payments.

The table below illustrates the effect on net earnings and earnings per share as if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation for each of the last three fiscal years.

 
  2005

  2004

  2003

 

 
Net earnings, as reported   $ 984   $ 705   $ 99  
Add: Stock-based compensation expense included in reported net earnings, net of tax(1)     (1 )   5     1  
Deduct: Stock-based compensation expense determined under fair value method for all awards, net of tax(2)     (60 )   (101 )   (85 )
   
 
 
 
Net earnings, pro forma   $ 923   $ 609   $ 15  
   
 
 
 
Earnings per share:                    
  Basic — as reported   $ 3.02   $ 2.18   $ 0.31  
  Basic — pro forma   $ 2.83   $ 1.88   $ 0.05  
  Diluted — as reported   $ 2.94   $ 2.13   $ 0.31  
  Diluted — pro forma   $ 2.80   $ 1.88   $ 0.05  
(1)
Amounts represent the after-tax compensation costs for restricted stock awards.

(2)
In the fourth quarter of fiscal 2005, we increased our expected participant stock option forfeiture rate as a result of transferring to a third-party provider certain corporate employees, and the departure of certain senior executives. This higher level of expected stock option forfeitures reduced our fiscal 2005 pro forma stock-based compensation expense. Fiscal 2005 pro forma stock-based compensation expense may not be indicative of future stock-based compensation expense.

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The fair value of each stock option was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

 
  2005

  2004

  2003


Risk-free interest rate(1)   3.4%   3.3%   4.2%
Expected dividend yield   0.9%   0.8%  
Expected stock price volatility(2)   40%   60%   60%
Expected life of stock options(3)   5.5 years   5.5 years   5.0 years
(1)
Based on the five-year treasury constant maturity interest rate whose term is consistent with the expected life of our stock options.

(2)
Beginning in fiscal 2005, we used an outside valuation advisor to assist us in more accurately projecting the expected stock price volatility. We considered both historical data and observable market prices of similar equity instruments. Prior to fiscal 2005, expected stock price volatility was based primarily on historical experience.

(3)
We estimate the expected life of stock options based upon historical experience.

The weighted average fair value of stock options granted during fiscal 2005, 2004 and 2003 used in computing pro forma compensation expense was $21.26, $30.93 and $23.91 per share, respectively.

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