6. Operating Lease
Commitments
The Company currently both owns and leases portions of its corporate
facilities and conducts essentially all of its retail and the majority of
its distribution operations from leased locations. The terms of the lease
agreements generally range from three to 16 years for Best Buy stores and
three to 20 years for Musicland stores. The leases require payment of real
estate taxes, insurance and common area maintenance in addition to rent.
Most of the leases contain renewal options and escalation clauses, and the
majority of the Musicland stores and several Best Buy stores require
contingent rents based on specified percentages of sales. Certain
Musicland store leases provide the Company with an early cancellation
option if sales for a designated period do not reach a specified level as
defined in the lease. Certain leases contain covenants related to
maintenance of financial ratios. Also, the Company leases various
equipment under operating leases. 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 composition of total rental expenses for all operating leases during
the past three fiscal years, including leases of buildings and equipment,
was as follows:
Master Lease
During fiscal 2001, the Company entered into a $60 million, five-year
master lease agreement for the purpose of constructing and leasing new
retail locations. An operating lease agreement will be entered into for
certain retail stores providing for an initial lease term of five years.
The leases will require payment of real estate taxes, insurance and common
area maintenance. 
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