Master
Lease
In the fourth quarter of fiscal 2001, we entered into a $60 master
lease agreement for the purpose of constructing and leasing new
retail locations. At the end of fiscal 2002, $39 in capitalized
leases for new stores had been financed under the master lease
agreement.
Inventory
Financing
We have a $200 inventory financing line. Borrowings are
collateralized by a security interest in certain merchandise
inventories approximating the outstanding borrowings. The terms of
this arrangement allow us to extend the due dates of invoices
beyond their normal terms. The amounts extended generally bear
interest at a rate approximating the prime rate. No amounts were
extended under this line in fiscal 2002 or 2001. The line has
provisions that give the financing source a portion of the cash
discounts provided by the manufacturers.
Other
During fiscal 2002, 2001 and 2000, interest expense totaled $28,
$7 and $5, respectively, and is included in net interest (expense)
income. Fiscal 2002 interest expense includes an $8 pretax charge
for the early
retirement of debt. The fair value of long-term debt approximates
$829, which was based primarily on quotes from external sources.
The future
maturities of long-term debt, including capitalized leases,
consist of the following:
4.
Shareholders’ Equity
Stock Options
We currently sponsor three non-qualified stock option plans for
our employees and our Board of Directors. These plans provide for
the issuance of up to 73.2 million shares of common stock. Options
may be granted only to employees or directors at exercise prices
not less than the fair market value of our common stock on the
date of the grant. The options vest over a four-year period and
expire over a range of five to 10 years. In addition, there are
options outstanding under two non-qualified stock option plans
that expired in fiscal 1998. At March 2, 2002, options to purchase
27.5 million shares were outstanding under all of these plans.
In connection
with the Musicland acquisition, certain outstanding stock options
held by employees of Musicland were converted into options
exercisable into our shares of common stock. These options were
fully vested at the time of conversion and expire based on the
remaining option term of up to 10 years. These options did not
reduce the shares available for grant under any of our other
option plans. The acquisition was accounted for as a purchase and,
accordingly, the fair value of these options was included as a
component of the purchase price using the Black-Scholes option
pricing model.
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