<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BEST BUY CO., INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Anne M. Rosenberg, Robins, Kaplan, Miller & Ciresi,
on behalf of the Registrant
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
$125
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
Schedule 14A - Preliminary Proxy Statement
------------------------------------------------------------------------
3) Filing Party:
Best Buy Co., Inc.
------------------------------------------------------------------------
4) Date Filed:
April 26, 1995
------------------------------------------------------------------------
<PAGE>
BEST BUY CO., INC.
7075 FLYING CLOUD DRIVE
EDEN PRAIRIE, MINNESOTA 55344
[LOGO]
NOTICE OF REGULAR MEETING OF SHAREHOLDERS
The 1995 Regular Meeting of the Shareholders of Best Buy Co., Inc., a
Minnesota corporation (the "Company"), will be held at the Company's corporate
offices at 7075 Flying Cloud Drive, Eden Prairie, Minnesota, on Wednesday, June
21, 1995, at 3:00 p.m., for the following purposes:
1. To elect three Class 2 directors to serve on the Board of Directors for
a term of two years.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditor for the Company's current fiscal year.
3. To approve an amendment to the bonus compensation program for the
Company's senior officers.
4. To transact such other business as may properly come before the meeting.
Only Shareholders of record at the close of business on Wednesday, May 3,
1995, the record date, are entitled to notice of and to vote at the meeting and
any adjournments thereof.
Whether or not you expect to attend the meeting in person, please complete,
sign and promptly return the enclosed form of Proxy.
By Order of the Board of Directors
[SIG]
Elliot S. Kaplan
SECRETARY
Minneapolis, Minnesota
May 17, 1995
<PAGE>
PROXY STATEMENT
BEST BUY CO., INC.
7075 FLYING CLOUD DRIVE
EDEN PRAIRIE, MINNESOTA 55344
REGULAR MEETING OF SHAREHOLDERS -- JUNE 21, 1995
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed Proxy is solicited by the Board of Directors of Best Buy Co.,
Inc. (the "Company"), for use at the Regular Meeting of Shareholders to be held
Wednesday, June 21, 1995, at 3:00 p.m., local time, at the Company's corporate
headquarters at 7075 Flying Cloud Drive, Eden Prairie, Minnesota, or any
adjournments thereof (the "Meeting"), for the purposes set forth herein and in
the accompanying Notice of Regular Meeting of Shareholders. Proxies will be
voted in accordance with the directions specified therein. ANY PROXY IN WHICH NO
DIRECTION IS SPECIFIED WILL BE VOTED IN FAVOR OF EACH OF THE MATTERS TO BE
CONSIDERED. These proxy solicitation materials are first being sent to
Shareholders on or about May 17, 1995.
As of May 3, 1995, the record date fixed for the determination of
Shareholders of the Company entitled to notice of and to vote at the Meeting,
there were outstanding 42,564,021 shares of Common Stock, which is the only
class of the capital stock of the Company outstanding.
Each Shareholder will be entitled to one vote per share on all matters acted
upon at the Meeting. The aggregate number of votes cast by all Shareholders
present in person or by proxy at the Meeting will be used to determine whether a
motion is carried. Thus, an abstention from voting on a matter by a Shareholder,
while included for purposes of calculating a quorum for the Meeting, has no
effect on the item on which the Shareholder abstained from voting. In addition,
although broker "non-votes" will be counted for purposes of attaining a quorum,
they will have no effect on the vote.
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time prior to its use by (i) delivering to the principal office
of the Company a written notice of revocation, (ii) filing with the Company a
duly executed Proxy bearing a later date or (iii) attending the Meeting and
voting in person.
The costs of this solicitation will be borne by the Company. Proxies may be
solicited by the Company's directors, officers and regular employees, without
extra compensation, by mail, telegram, telephone and personal solicitation. The
Company will request brokerage houses, banks and other custodians, nominees and
fiduciaries to forward soliciting material to beneficial owners of the Company's
Common Stock. The Company will reimburse brokerage firms, banks and other
custodians, nominees, fiduciaries and other persons representing beneficial
owners for reasonable expenses incurred by them in forwarding proxy solicitation
materials and annual reports to the beneficial owners of shares in accordance
with the New York Stock Exchange schedule of charges.
<PAGE>
ELECTION OF DIRECTORS
GENERALLY
The Company's By-laws provide that the Board of Directors shall consist of
seven directors, four of whom are Class 1 directors and three of whom are Class
2 directors. Directors are elected for a term of two years and the terms are
staggered so that Class 1 directors are elected in even-numbered years and Class
2 directors are elected in odd-numbered years.
Management and the Board of Directors recommend that Richard M. Schulze,
Elliot S. Kaplan, and Culver Davis, Jr. be re-elected as Class 2 directors, each
to hold office until the 1997 Regular Meeting of Shareholders and until his
successor is duly elected and qualified. All of the nominees are members of the
Board of Directors of the Company and have served in that capacity since
originally elected or designated as indicated below.
The Board of Directors held six meetings during the fiscal year ended
February 25, 1995. All nominees participated in each meeting.
The Board of Directors of the Company has four standing committees. The
Personnel Committee was established to identify, select and evaluate officers
and key employees for the Company. The Compensation Committee was established to
determine and periodically evaluate various levels and methods of compensation
for directors, officers and employees of the Company. The Lease Committee was
established to review the Company's leases and to confirm that all of the
Company's leases conform to the Company's stated Real Estate Lease policy. The
Audit Committee was established to review and monitor all matters pertaining to
the accounting activities of the Company and the relationship of the Company
with its independent auditor. The following table shows the date each committee
was established and the names of the directors serving thereon as of February
25, 1995.
<TABLE>
<CAPTION>
NUMBER OF MEETINGS
DURING LAST FISCAL
COMMITTEE DATE ESTABLISHED YEAR MEMBERS
- ----------------- ----------------- --------------------- ---------------------------
<S> <C> <C> <C>
Personnel June 1, 1984 2 Richard M. Schulze
Bradbury H. Anderson
Audit June 1, 1984 3 Frank D. Trestman*
Culver Davis, Jr.
James C. Wetherbe
Compensation March 6, 1985 1 David Stanley*
Frank D. Trestman
James C. Wetherbe
Lease March 6, 1985 1 Elliot S. Kaplan*
Culver Davis, Jr.
Frank D. Trestman
<FN>']
- ------------------------
* Committee chairperson
</TABLE>
There is no family relationship among the nominees or between any nominee
and any of the Company's other directors.
2
<PAGE>
VOTING INFORMATION
A Shareholder submitting a Proxy may vote for all or any of the nominees for
election to the Board of Directors or may withhold his or her vote from any such
nominee. IF A SUBMITTED PROXY IS PROPERLY SIGNED BUT UNMARKED IN RESPECT OF THE
ELECTION OF DIRECTORS, THE PROXY AGENTS NAMED IN THE PROXY WILL VOTE THE SHARES
REPRESENTED THEREBY FOR THE ELECTION OF ALL OF THE NOMINEES. Each of the
nominees has agreed to continue serving the Company as a director if elected;
however, should any nominee become unwilling or unable to serve if elected, the
Proxy Agents named in the Proxy will exercise their voting power in favor of
such other person as the Board of Directors of the Company may recommend. The
Company's Articles of Incorporation prohibit cumulative voting and each director
will be elected by a majority of the voting power of the shares present and
entitled to vote at the Meeting. Shareholders entitled to vote for the election
of directors can withhold authority to vote for all or certain nominees for
director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information as of March 31, 1995, as to
the Chief Executive Officer and each of the next four most highly compensated
executive officers during the most recent fiscal year, each director including
the nominees for election as Class 2 directors, all directors and executive
officers as a group, and each person known to the Company to be the beneficial
owner of more than 5% of the outstanding shares of Common Stock of the Company:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME AGE BENEFICIALLY OWNED BENEFICIALLY OWNED
- -------------------------------------------------- --- ------------------ ------------------
<S> <C> <C> <C>
Richard M. Schulze 54 9,037,533(1) 21.20%
Chairman, Chief Executive
Officer and Director
Bradbury H. Anderson 46 533,003(2) 1.25%
President, Chief Operating
Officer and Director
Allen U. Lenzmeier 51 310,065(3) *
Executive Vice President
and Chief Financial Officer
Wade R. Fenn 36 95,663(4) *
Senior Vice President -- Sales
Lee H. Schoenfeld 42 125,870(5) *
Senior Vice President -- Marketing
Elliot S. Kaplan 58 110,052(6) *
Secretary and Director
Frank D. Trestman 60 157,000(7) *
Director
Culver Davis, Jr. 56 58,000(8) *
Director
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME AGE BENEFICIALLY OWNED BENEFICIALLY OWNED
- -------------------------------------------------- --- ------------------ ------------------
<S> <C> <C> <C>
David Stanley 59 34,000(9) *
Director
James C. Wetherbe 46 24,000(10) *
Director
All directors and executive officers, -- 10,807,573(11) 24.80%
as a group (16 individuals)
Jundt Associates, Inc. -- 3,345,400(12) 7.91%
1550 Utica Avenue South
Suite 950
Minneapolis, MN 55416
The Equitable Companies Incorporated -- 2,745,900(12) 6.50%
787 Seventh Avenue
New York, NY 10019
FMR Corp. -- 4,052,950(13) 9.59%
82 Devonshire Street
Boston, MA 02109
<FN>
- ------------------------
* Less than 1%.
(1) The figure represents (a) 8,332,566 outstanding shares owned by Mr.
Schulze; (b) 316,848 outstanding shares registered in the name of Mr.
Schulze and held by him as custodian for the benefit of his children (Mr.
Schulze has disclaimed beneficial ownership of such shares); (c) 5,000 out-
standing shares owned by a partnership in which Mr. Schulze is a partner;
(d) 6,494 outstanding shares registered in the name of Wilmington Trust
Company, and held by it as trustee of the Company's Retirement Savings Plan
for the benefit of Mr. Schulze; and (e) options granted to Mr. Schulze,
available for exercise within 60 days, to purchase 376,625 shares.
(2) The figure represents (a) 236,670 outstanding shares owned by Mr. Anderson;
(b) 1,333 outstanding shares registered in the name of Wilmington Trust
Company, and held by it as trustee of the Company's Retirement Savings Plan
for the benefit of Mr. Anderson; and (c) options granted to Mr. Anderson,
available for exercise within 60 days, to purchase 295,000 shares.
(3) The figure represents (a) 121,190 outstanding shares owned by Mr.
Lenzmeier; and (b) options granted to Mr. Lenzmeier, available for exercise
within 60 days, to purchase 188,875 shares.
(4) The figure represents (a) 8,136 outstanding shares owned by Mr. Fenn; (b)
7,395 outstanding shares registered in the name of Wilmington Trust
Company, and held by it as trustee of the Company's Retirement Savings Plan
for the benefit of Mr. Fenn; (c) 830 outstanding shares owned by Mr. Fenn's
wife; (d) 176 outstanding shares registered in the name of Mr. Fenn as
trustee of a trust for his son (Mr. Fenn has disclaimed beneficial
ownership of such shares); and (e) options granted to Mr. Fenn, available
for exercise within 60 days, to purchase 79,126 shares.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
(5) The figure represents (a) 106,296 outstanding shares owned by Mr.
Schoenfeld; (b) 5,324 outstanding shares registered in the name of
Wilmington Trust Company, and held by it as trustee of the Company's
Retirement Savings Plan for the benefit of Mr. Schoenfeld; and (c) options
granted to Mr. Schoenfeld, available for exercise within 60 days, to
purchase 14,250 shares.
(6) The figure represents (a) 68,052 outstanding shares owned by Mr. Kaplan;
and (b) options granted to Mr. Kaplan, available for exercise within 60
days, to purchase 42,000 shares.
(7) The figure represents (a) 115,000 outstanding shares owned by Mr. Trestman;
(b) 18,000 outstanding shares registered in the name of Mr. Trestman's wife
as trustee of an irrevocable family trust (Mr. Trestman has disclaimed
beneficial ownership of such shares); and (c) options granted to Mr.
Trestman, available for exercise within 60 days, to purchase 24,000 shares.
(8) The figure represents (a) 43,000 outstanding shares owned by Mr. Davis; and
(b) options granted to Mr. Davis, available for exercise within 60 days, to
purchase 15,000 shares.
(9) The figure represents (a) 1,000 outstanding shares owned by Mr. Stanley;
and (b) options granted to Mr. Stanley, available for exercise within 60
days, to purchase 33,000 shares.
(10) The figure represents (a) 9,000 outstanding shares owned by Dr. Wetherbe;
and (b) options granted to Dr. Wetherbe, available for exercise within 60
days, to purchase 15,000 shares.
(11) The figure represents (a) outstanding shares and options described in the
preceding footnotes; (b) 69,600 outstanding shares owned by, and options,
available for exercise within 60 days, to purchase 240,976 shares granted
to, the Company's other executive officers; (c) 7,841 outstanding shares
registered in the name of Wilmington Trust Company, and held by it as
trustee of the Company's Retirement Savings Plan for the benefit of certain
other executive officers; (d) 2,970 outstanding shares registered in the
name of the custodian for an executive officer's individual retirement plan
account; (e) 900 outstanding shares owned by certain other executive
officers as custodian for the benefit of their children (where appropriate,
such officers have disclaimed beneficial ownership of such shares); and (f)
100 outstanding shares owned by the spouse of another executive officer.
(12) As reported on or about February 15, 1995, on the beneficial owner's
Schedule 13G.
(13) As reported on or about March 13, 1995, on the beneficial owner's Schedule
13G.
</TABLE>
NOMINEES AND DIRECTORS
NOMINEES FOR CLASS 2 DIRECTORS
RICHARD M. SCHULZE is a founder of the Company. He has served as an officer
and director of the Company from its inception in 1966 and currently serves as
its Chairman and Chief Executive Officer. Mr. Schulze is also a director of
Pentair Inc.
ELLIOT S. KAPLAN has served as a director and Secretary of the Company since
January 1971. Since 1961, he has been an attorney with the law firm of Robins,
Kaplan, Miller & Ciresi, Minneapolis, Minnesota, which serves as outside general
counsel to the Company. Mr. Kaplan is also a director of American Business
Information, Inc.
5
<PAGE>
CULVER DAVIS, JR. has served as a director of the Company since August 1986.
He had been employed by CUB Foods, a warehouse style supermarket chain which he
co-founded in 1960. He became its President and Chief Executive Officer in 1985,
and its Chairman and Chief Executive Officer in 1992. Mr. Davis retired from CUB
Foods on December 31, 1994.
CLASS 1 DIRECTORS -- TERMS EXPIRE IN 1996
BRADBURY H. ANDERSON has served as a director of the Company since August
1986. He is the Company's President and Chief Operating Officer, having served
as Executive Vice President-- Marketing of the Company from February 1986. He
has been employed in various capacities with the Company since 1973, including
retail salesperson, store manager and sales manager.
FRANK D. TRESTMAN has served as a director of the Company since December
1984. He is President of Trestman Enterprises, an investment and business
development firm. He had been a consultant to McKesson Corporation and is the
former Chairman of the Board and Chief Executive Officer of Mass Merchandisers,
Inc., a distributor of non-food products to retailers in the grocery business
and now a subsidiary of McKesson Corporation. Mr. Trestman is also a director of
Insignia Systems, Inc.
DAVID STANLEY has served as a director of the Company since August 1990. He
is Chairman of the Board of Directors and Chief Executive Officer of Payless
Cashways, Inc., a building materials specialty retailer, where he has been an
officer since 1980. Mr. Stanley is also a director of Piper Jaffray Inc. and
Digi International, Inc.
JAMES C. WETHERBE has served as a director of the Company since July 1993.
He has been a professor at the University of Minnesota since 1980 and is
currently Professor of Management Information Systems and Director of the
University of Minnesota MIS Research Center. In addition, he has been the
Federal Express Professor and Director of the Fedex Center for Cycle Time
Research at the University of Memphis since August 1993. He is a leading
consultant and lecturer on information technology and the author of 15 books and
over 200 articles in the field of management and information systems.
CERTAIN TRANSACTIONS
The Company leases two of its current 204 stores (Burnsville and Edina,
Minnesota) from Richard M. Schulze, leases two facilities (West St. Paul and
Maplewood, Minnesota) from partnerships in which he is a partner, and leases one
of its stores (Minneapolis, Minnesota) from his wife. The lease for the
Burnsville store expires in 2006. Annual rent is equal to $350,000, and includes
escalation clauses after the fifth and tenth years. The lease for the Edina
store expires in 2002, and provides for the payment to Mr. Schulze of base rent
of $183,820 and percentage rent equal to 4% of gross sales made on the premises,
but in no event more than $572,000 in the aggregate in any lease year. The lease
for the West St. Paul facility expires in 1996 and provides for the payment of
rent equal to 1% of gross sales at the location, subject to a fixed minimum rent
of $133,728. The Company no longer operates a store at this location. The lease
for the Maplewood store expires in 2008, includes renewal options and fixed
minimum rent of $243,311. The lease for the Minneapolis store expires in 1998,
includes renewal options, and provides for the payment of rent to Mrs. Schulze
of $210,600 per year. Aggregate rents paid and accrued by the Company to Mr.
Schulze, partnerships in which he is a partner or Mrs. Schulze during the fiscal
year ended February 25, 1995, were $1,589,974, a portion of which was used to
service debt on the properties where the five facilities are located.
6
<PAGE>
All of the leases with Mr. Schulze, partnerships in which he is a partner
and Mrs. Schulze were negotiated and approved by the Board of Directors with Mr.
Schulze abstaining, the Board of Directors acting in reliance upon one or more
of its disinterested members with respect to the determination of market
comparisons, alternative rental agreements and negotiations with Mr. Schulze.
The leases were determined to be in the best interests of the Company. In March
1985, the Board of Directors appointed the Lease Committee, a committee of
disinterested directors, for the purpose of examining and reviewing leases. It
is the Company's policy that the Company not engage in real estate transactions
with officers, directors, controlling persons and others affiliated with them
unless a determination is made by the disinterested members of the Board of
Directors, on recommendation by such committee, that any such transaction is on
terms more favorable to the Company than could be obtained from unaffiliated
third parties.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors, composed of three
non-employee directors, is responsible for determining and periodically
evaluating various levels and methods of compensating the Company's directors
and officers. In accordance therewith, the Compensation Committee determines, on
an annual basis, the compensation to be paid to the Chief Executive Officer and
each of the other executive officers of the Company. The objective of the
Compensation Committee is to establish a compensation program for executive
officers that will attract and retain superior management talent, recognize and
reward individual performance, and align the financial interests of the
executive officers with the success of the Company.
The Company's compensation program for executive officers provides
compensation opportunities that approximate the midpoint of compensation levels
for similarly situated executives within the retail industry, as well as within
a broader group of companies of comparable size. Actual compensation levels may
be greater or less than average competitive levels in comparable companies
because of annual and long-term Company performance as well as individual
performance. In setting the levels of executive compensation, the Committee
considers information provided by a nationally recognized compensation and
benefits firm, including the results of salary surveys of comparably sized
companies generally including national retailers. In fiscal 1995, the Committee
also considered information provided by the consulting firm with respect to the
compensation of the executive officers of a self-selected, relevant peer group
of national retail companies, as disclosed in their proxy statements. Certain of
the companies in the peer group are also included in the Industry Index included
in the Comparative Stock Performance graph below.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The three components of the Company's executive officer compensation program
are base salary, annual incentive compensation in the form of a cash bonus and
long-term incentive compensation in the form of stock options. Executive
officers are also entitled to various benefits including participation in the
Company's medical plan and Retirement Savings Plan, which are generally
available to employees of the Company.
Base Salary. Base salary levels for the Company's executive officers are
determined by the Compensation Committee early in the fiscal year. Members of
the Committee consider individual
7
<PAGE>
experience, performance and annual expectations for the officer, as well as the
base salaries of executive officers in comparable companies. The base salaries
of executive officers are generally set to be comparable to the midpoint of
those of the surveyed executives.
Bonus Incentive Program. The Company offers an annual incentive for
executive officers pursuant to a program that was approved by the Shareholders
in 1994. The purpose of the program is to provide a direct financial incentive
in the form of an annual cash bonus to executive officers to achieve or exceed
the Company's annual goals. Bonus amounts are equal to a percentage of the
executive officer's base salary. The percentages used for determining bonuses
are established annually to provide total cash compensation to the Company's
executive officers, assuming the Company's annual goals are achieved, at a level
that is comparable to the midpoint of the surveyed executives. In fiscal 1995,
each executive officer was entitled to a bonus equal to 33 1/3% of base salary
if the Company's budgeted net income was achieved, which percentage could be
increased to 50% if net income for the year exceeded budget by 20%. The
relationship between net income and the bonus percentage was determined by the
Compensation Committee at the beginning of fiscal 1995. Federal tax laws limit
the amount of individual compensation that can be deducted by the Company for
tax purposes to $1,000,000. Qualifying performance-based compensation is not
subject to the deduction limit. The Company's bonus program for executive
officers is intended to meet the requirements of a qualifying performance-based
compensation plan. An amendment to the bonus program, which amends the program
to comply with proposed Federal regulations regarding performance-based
compensation, will be submitted to the Shareholders at the Meeting for their
consideration.
Stock Option Plan. The Company utilizes stock options as a long-term
incentive for executive officers. The objectives of the stock option plan are to
further the growth and general prosperity of the Company by enabling current
executive officers who have been or will be given responsibility for the
administration of the affairs of the Company and upon whose judgment, initiative
and effort the Company was or is largely dependent for the successful conduct of
its business, to acquire shares of the Company's Common Stock, thereby
increasing their personal involvement in the Company.
The Company's Shareholder-approved 1987 Employee Non-Qualified Stock Option
Plan (the "Employee Plan") gives the Compensation Committee discretion to award
stock options to executive officers and certain other employees. The award
levels are subjective and not subject to specific criteria. The Employee Plan,
as amended, authorizes the Company to grant to certain categories of employees
options to purchase in the aggregate not more than 7,250,000 shares of the
Company's Common Stock.
Stock options are granted on an annual basis, have five-year terms and have
exercise restrictions that lapse ratably over the last four years of the term.
The exercise prices for options granted pursuant to the plan equal the fair
market value of the Common Stock as of the dates of grant. Awards are made to
each eligible employee at a level calculated to be competitive within the retail
industry as well as within a broader group of comparable companies. Employees
eligible to receive options under the Employee Plan include: (i) key executive
personnel, including officers, senior management employees and members of the
Board of Directors who are employees of the Company; (ii) staff management
employees, including managers, supervisors and their functional equivalents for
warehousing, service, merchandising, leaseholds, installation, and finance and
administration; (iii) line management employees, including retail stores and
field managers, supervisors and their functional equivalents; and (iv) any
employee having served the Company continuously for a period of not less than
ten years.
8
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Schulze has served as an officer and director of the Company from its
inception in 1966 and currently serves as its Chairman and Chief Executive
Officer. In determining Mr. Schulze's compensation for fiscal 1995, the
Compensation Committee used as a guide the results of a study performed for the
Company by a nationally recognized firm of compensation and benefits
consultants. The study included a review of executive level compensation for
eleven national retailers (the "Proxy Group") as disclosed in their proxy
statements for their respective fiscal years ended between December 1992 and
January 1994. Four of the companies in the Proxy Group are also included in the
Industry Index in the Comparative Stock Performance graph below. The Company
considers three of the companies in the Proxy Group to be direct competitors of
the Company. The study also included the results of two national executive
compensation surveys which included national retailers such as the Company (the
"Survey Group").
Mr. Schulze's base salary for the period from April 1, 1994 to March 31,
1995 was $750,000, a 34% increase over the prior year. Mr. Schulze's base salary
will remain at $750,000 for the period from April 1, 1995 to March 31, 1996. The
average base salary of chief executives in the Proxy Group for periods ending up
to fifteen months prior to the beginning of the period for which Mr. Schulze's
compensation was set was $655,000 and the average base salary of chief
executives in the Survey Group, as updated to April 1, 1994, was approximately
$604,000. In determining Mr. Schulze's base salary, the Committee considered not
only the results of the study but the effort required from Mr. Schulze to manage
the Company through the growth experienced in fiscal 1994 and his role in
raising the capital necessary to support that growth, as well the anticipated
effort that would be required to manage a company that expected to continue its
rapid expansion. In addition, the Committee considered the superior return on
investment, over the previous five fiscal years, particularly the previous two
fiscal years.
Mr. Schulze did not earn a bonus for fiscal 1995. The Company's bonus
program for executive officers provides for bonuses to be earned based upon the
level of the Company's net income. The net income level required for payment of
bonuses for fiscal 1995 was not achieved and, therefore, no bonus was paid to
Mr. Schulze. Bonuses paid for the Proxy Group and the Survey Group averaged 87%
and 56% of base salary, respectively. Average total cash compensation of the
chief executives in the Proxy Group and the Survey Group was $1,228,000 and
$845,000, respectively.
Mr. Schulze received options during fiscal 1995 to purchase 50,000 shares of
the Company's Common Stock at $32.40 per share, the market price at the time of
the grant. The determination of the number of options awarded is subjective and
not subject to specific criteria. However, in determining the number of options
to grant, the Committee considered Mr. Schulze's contributions in leading the
Company through a year of tremendous growth in a highly competitive market. The
options were issued pursuant to the Company's 1987 Employee Non-Qualified Stock
Option Plan.
COMPENSATION COMMITTEE
DAVID STANLEY (CHAIRMAN)
FRANK D. TRESTMAN
JAMES C. WETHERBE
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of David Stanley (Chairman),
Frank D. Trestman and James C. Wetherbe. Prior to June 1, 1994, Elliot S. Kaplan
was a member of the Compensation Committee. Mr. Kaplan, who also serves as
Secretary of the Company, is a member of the law firm of Robins, Kaplan, Miller
& Ciresi, Minneapolis, Minnesota, which serves as outside general counsel to the
Company. In order to comply with the new Federal tax laws, Mr. Kaplan, who would
have been deemed to be an "inside" director, was replaced on the Compensation
Committee by Dr. Wetherbe.
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned during the period by the Chief
Executive Officer of the Company and the next four most highly compensated
individuals serving as executive officers of the Company.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION NUMBER OF
SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
YEAR ENDED SALARY BONUS OPTIONS COMPENSATION (1)
------------- --------- --------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Richard M. Schulze 1995 $ 727,528 $ -- 50,000 $ 25,904
Founder, Chairman, 1994 555,374 280,000 151,500 26,213
Chief Executive Officer 1993 492,308 175,000 121,500 26,548
Bradbury H. Anderson 1995 548,317 -- 40,000 11,561
President, Chief Operating Officer 1994 421,150 212,500 123,000 11,593
1993 369,231 131,250 99,000 11,799
Allen U. Lenzmeier 1995 421,760 -- 25,000 9,678
Executive Vice President, Chief Financial 1994 321,538 162,500 84,000 10,011
Officer 1993 275,769 98,000 67,500 9,881
Wade R. Fenn 1995 294,873 -- 15,000 3,976
Senior Vice President -- Sales 1994 255,385 130,000 54,000 4,135
1993 198,514 70,000 27,000 4,040
Lee H. Schoenfeld 1995 274,214 -- 15,000 4,085
Senior Vice President -- Marketing 1994 205,192 105,100 36,000 4,332
1993 143,295 43,500 15,000 3,069
(FOOTNOTE ON FOLLOWING PAGE)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
<FN>
- ------------------------------
(1) Includes the portions of premiums paid by the Company for life insurance
coverage exceeding $50,000 ("A"), the officers' shares of the Company's
contribution to its Retirement Savings Plan ("B"), and for Messrs, Schulze,
Anderson and Lenzmeier, the premiums paid by the Company for split-dollar
life insurance ("C"), as follows:
</TABLE>
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED "A" "B" "C"
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Richard M. Schulze..................................... 1995 $ 576 $ 4,028 $ 21,300
1994 576 4,337 21,300
1993 576 4,678 21,300
Bradbury H. Anderson................................... 1995 348 4,213 7,000
1994 204 4,389 7,000
1993 204 4,595 7,000
Allen U. Lenzmeier..................................... 1995 576 4,102 5,000
1994 576 4,435 5,000
1993 348 4,533 5,000
Wade R. Fenn........................................... 1995 132 3,844 --
1994 132 4,003 --
1993 108 3,932 --
Lee H. Schoenfeld...................................... 1995 204 3,881 --
1994 204 4,128 --
1993 204 2,865 --
</TABLE>
OPTIONS AND GRANTS
The following tables summarize option grants and exercises during the fiscal
year ended February 25, 1995, to or by the Chief Executive Officer and the next
four most highly compensated executive officers of the Company at the end of the
Company's last fiscal year, and the value of the options held by such persons at
the end of such fiscal year.
OPTIONS GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------------ STOCK PRICE
NUMBER OF % OF TOTAL OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM
UNDERLYING EMPLOYEES IN FISCAL PRICE EXPIRATION --------------------
OPTIONS 1995 ($/SHARE) DATE 5% 10%
------------- ------------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Schulze.................. 50,000(1) 3.89% $ 32.40 4-3-99 $ 447,576 $ 989,026
6,000(2) .47 32.40 4-3-99 53,709 118,683
Bradbury H. Anderson................ 40,000(1) 3.11 32.40 4-3-99 358,061 791,221
6,000(2) .47 32.40 4-3-99 53,709 118,683
Allen U. Lenzmeier.................. 25,000(1) 1.94 32.40 4-3-99 223,788 494,513
Wade R. Fenn........................ 15,000(1) 1.17 32.40 4-3-99 134,273 296,708
Lee H. Schoenfeld................... 15,000(1) 1.17 32.40 4-3-99 134,273 296,708
<FN>
- ------------------------------
The price of one share of the Company's Common Stock acquired at $32.40 per
share would equal approximately $41.35 and $52.18 when compounded annually at 5%
and 10%, respectively, over the option term.
(1) Number of shares issuable upon the exercise of options granted on April 4,
1994, pursuant to the Company's 1987 Employee Non-Qualified Stock Option
Plan. Options become exercisable 25% per year beginning one year after date
of grant.
(2) Number of shares issuable upon the exercise of options granted on April 4,
1994, pursuant to the Company's 1987 Directors' Non-Qualified Stock Option
Plan. The options are exercisable as of the date of grant.
</TABLE>
11
<PAGE>
OPTION EXERCISES DURING FISCAL 1995 AND VALUE OF OPTIONS AT END OF FISCAL 1995
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE AT END OF FISCAL 1995 AT END OF FISCAL 1995
NAME ON EXERCISE REALIZED (1) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE) (1)
- -------------------------- ----------------- ----------- ----------------------------- ----------------------------
<S> <C> <C> <C> <C>
Richard M. Schulze........ 33,750 $ 639,259 281,625/231,875 $ 5,006,324/$2,572,012
Bradbury H. Anderson...... 66,000 1,306,206 219,000/185,500 3,818,422/2,057,610
Allen U. Lenzmeier........ -- -- 133,500/133,000 2,425,395/1,530,270
Wade R. Fenn.............. 3,000 82,998 49,501/74,625 844,609/810,558
Lee H. Schoenfeld......... 12,000 246,492 37,500/52,500 664,102/511,687
<FN>
- ------------------------------
(1) Value based on market value of the Company's Common Stock on the date of
exercise or at the end of fiscal 1995, as applicable, minus the exercise
price.
</TABLE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the S&P Industry Group 450-Retail (Specialty) Index (the
"Industry Index") and the S&P Mid-Cap Companies Index (the "Broad Index"),
published by Standard & Poors over the same period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN OF COMPANY,
INDUSTRY INDEX AND BROAD INDEX*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
. 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Best Buy Co.,
Inc. $ 100 $ 99 $ 257 $ 484 $ 952 $ 829
Industry Index $ 100 $ 115 $ 157 $ 191 $ 194 $ 184
Broad Index $ 100 $ 118 $ 155 $ 168 $ 193 $ 196
</TABLE>
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding year in Best Buy common stock, the Industry
Index and the Broad Index.
* Cumulative Total Return assumes reinvestment of dividends.
Source: Media General Financial Services
12
<PAGE>
RETIREMENT SAVINGS PLAN
Effective October 1, 1990, the Company adopted a retirement savings plan
intending to meet the requirements of Internal Revenue Code Section 401(k) (the
"Retirement Savings Plan"). Employees who have been employed by the Company for
at least one year, worked 1,000 hours and attained age 21, may elect to save up
to 15% of their pre-tax earnings. The Company will match employee contributions
at a rate determined by the Board of Directors annually. Participants are fully
vested in their contributions and become vested in the Company's matching
contributions according to a five-year vesting schedule provided in the
Retirement Savings Plan. During the fiscal year ended February 25, 1995, the
Company matched 40% of the first 5% of participating employees' pre-tax
earnings, or $1,376,033, including $20,068 in the aggregate on behalf of the
Chief Executive Officer and the other four most highly compensated executive
officers. Although the Company, in adopting the Retirement Savings Plan,
expressed its intention to continue funding the trust created by the plan on a
permanent basis, the Retirement Savings Plan may be terminated by the Board of
Directors at will. Upon a termination of the Retirement Savings Plan, each
participant becomes 100% vested. The trustee for the Retirement Savings Plan is
Wilmington Trust Company.
DIRECTORS' COMPENSATION
Each non-employee director of the Company is currently entitled to receive
$12,000 per year plus expenses for his services as a director. In addition to
the $12,000 annual fee, there is a $3,000 annual fee payable to each committee
chairperson. On April 4, 1994, the Company granted to each director an option to
purchase 6,000 shares at an exercise price of $32.40 per share. All of the
options were granted pursuant to the Company's 1987 Directors' Non-Qualified
Stock Option Plan, described below (the "Directors' Plan"). Options, outstanding
as of March 31, 1995, to purchase 228,000 shares of the Company's Common Stock
at exercise prices ranging from $2.50 to $32.40 have been granted to the
Company's directors for their services as directors, including directors who are
employees of the Company. During the last fiscal year, Frank D. Trestman
realized a net value of securities (market value less exercise price) of
$935,063 pursuant to the exercise of options granted under the Directors' Plan.
1987 DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
In 1987 the Directors' Plan was adopted by the Board of Directors and
approved by the Shareholders. The number of shares subject to the Director's
Plan is 900,000 shares. The Directors' Plan currently provides that annually, at
the first regular meeting of the Company's Board of Directors each year, each
director will be given an option to purchase 9,000 shares of the Company's
Common Stock at an exercise price equal to the average of the closing price for
the stock, as quoted on the New York Stock Exchange, on the date preceding the
date of grant and the closing price of the stock on the date of grant (the
"Exercise Price"). The Directors' Plan also provides that an option to purchase
9,000 shares of the Company's Common Stock at the Exercise Price will be granted
to each new director at such time as he or she becomes a director of the
Company. An option granted pursuant to the Directors' Plan is exercisable for a
period of five years after the date of grant of the option. As of March 31,
1995, options to purchase 465,000 shares of the Company's Common Stock have been
granted pursuant to the Directors' Plan and 228,000 remain outstanding. The
Directors amended the Directors' Plan in April 1995, effective beginning with
fiscal 1997, to reduce to 5,000 the number of shares subject to options to be
granted under this plan.
13
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's equity securities, to file with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Such persons are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based solely on its review of the copies of such reports
furnished to the Company and written representations that no other reports were
required to be filed, all Section 16(a) filing requirements applicable to its
officers, directors and beneficial owners of more than ten percent of the
Company's outstanding stock were complied with during the fiscal year ended
February 25, 1995.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent auditor for the fiscal year which began February 26, 1995. A
proposal to ratify that appointment will be presented at the Meeting. On August
16, 1994, the Company dismissed Deloitte & Touche LLP as its independent
auditors and retained Ernst & Young LLP. The Audit Committee of the Board of
Directors approved the decision to change auditors. The reports of Deloitte &
Touche LLP for each of the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified with respect to
uncertainty, audit scope or accounting principle. During the past two fiscal
years and through the date of dismissal, there were no disagreements with
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. During the same
time period there were no "reportable events" as defined by the Rules and
Regulations of the Securities and Exchange Commission. Representatives of Ernst
& Young LLP are expected to be present at the Meeting, will have an opportunity
to make a statement if they desire to do so and will be available to respond to
appropriate questions from Shareholders.
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Ernst & Young LLP. If the appointment is not ratified by the
Shareholders, the Board of Directors is not obligated to appoint other auditors,
but the Board of Directors will give consideration to an unfavorable vote.
APPROVAL OF AN AMENDMENT TO THE BONUS COMPENSATION
PROGRAM FOR SENIOR OFFICERS
In 1994, the Company's Board of Directors adopted, and the Shareholders
approved, the Company's Bonus Program for Senior Officers (the "Bonus Program")
in order to qualify the amount of bonuses paid to such officers for deduction
under Section 162(m) of the Internal Revenue Code. Section 162(m), which was
added to the Code in 1993, places a limit of $1,000,000 on the amount of
compensation that may be deducted by the Company in any tax year with respect to
each of the Company's five most highly paid executives. However, certain
performance-based compensation that has been approved by shareholders is not
subject to the deduction limit. The Bonus Program is intended to provide this
type of performance-based compensation.
In April 1995, the Board of Directors amended the Bonus Program effective
February 26, 1995, subject to approval by the Shareholders, to fix at $1,000,000
the maximum potential bonus that may
14
<PAGE>
be paid to any individual in a given year (the "Amendment"). Bonuses under the
Bonus Program will continue to be based upon objective performance measures, and
the Bonus Program will continue to make executive compensation variable with the
net income of the Company. The Amendment would have had no effect on bonuses
under the Bonus Program for fiscal 1995 as the performance criteria was not met
and no bonuses were earned. Bonuses for fiscal 1996 range from 25% of base
salary if budgeted net income is achieved to a maximum of 60% of base salary if
fiscal 1996 actual net income is approximately 170% of budget, increasing in 5%
increments. These bonus levels are designated as levels A (25%) through H (60%)
in the following table. The additional net income required for each incremental
bonus level is approximately 10.5% of budgeted net income for the year. As shown
below, the Amendment will not affect the bonus opportunities for senior officers
for fiscal 1996 as potential bonuses for fiscal 1996 are below the maximum
specified by the Amendment.
BONUS PROGRAM BENEFITS
<TABLE>
<CAPTION>
NAME AND TITLE A B C D E F G H
- -------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard M. Schulze $ 187,500 $ 225,000 $ 262,500 $ 300,000 $ 337,500 $ 375,000 $ 412,500 $ 450,000
Founder, Chairman, Chief
Executive Officer
Bradbury H. Anderson 141,250 169,500 197,750 226,000 254,250 282,500 310,750 339,000
President, Chief Operating
Officer
Allen U. Lenzmeier 108,750 130,500 152,250 174,000 195,750 217,500 239,250 261,000
Executive Vice President, Chief
Financial Officer
Wade R. Fenn 75,000 90,000 105,000 120,000 135,000 150,000 165,000 180,000
Senior Vice-President--Sales
Lee H. Schoenfeld 70,000 84,000 98,000 112,000 126,000 140,000 154,000 168,000
Senior
Vice-President--Marketing
All executive officers, as a 978,750 1,174,500 1,370,250 1,566,000 1,761,750 1,957,500 2,153,250 2,349,000
group
(12 individuals)
All non-executive officer 0 0 0 0 0 0 0 0
directors, as a group (5
individuals)
All non-executive officer 0 0 0 0 0 0 0 0
employees, as a group
</TABLE>
The Board of Directors recommends a vote FOR the proposal to approve the
Amendment. The affirmative vote of the holders of the majority of the voting
power of the shares present, in person or by Proxy, and entitled to vote is
required to approve the Amendment.
IT IS INTENDED THAT, UNLESS OTHERWISE INSTRUCTED, THE SHARES REPRESENTED BY
THE PROXY WILL BE VOTED IN FAVOR OF THE APPROVAL OF THE AMENDMENT.
OTHER BUSINESS
The Company knows of no other matters to be acted upon at the Meeting. If
any other matters properly come before the Meeting it is the intention of the
persons named in the enclosed Proxy to vote the shares they represent as the
Board of Directors may recommend.
15
<PAGE>
PROPOSALS FOR THE NEXT REGULAR MEETING
Any proposals by a Shareholder to be presented at the 1996 Regular Meeting
of Shareholders must be received at the Company's principal executive offices at
7075 Flying Cloud Drive, Eden Prairie, Minnesota 55344, no later than January
15, 1996.
By Order of the Board of Directors
[SIG]
Elliot S. Kaplan
SECRETARY
Dated: May 17, 1995
16
<PAGE>
PROXY
BEST BUY CO., INC.
7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
FOR THE REGULAR MEETING OF SHAREHOLDERS -- JUNE 21, 1995
The undersigned hereby appoint(s) Richard M. Schulze and Elliot S.
Kaplan, or either of them, each with the power of substitution, as proxies
and agents ("Proxy Agents"), in the name of the undersigned to represent and
to vote as designated below all of the shares of Common Stock of Best Buy
Co., Inc. (the "Company"), held of record by the undersigned on Wednesday,
May 3, 1995, at the Regular Meeting of Shareholders to be held on Wednesday,
June 21, 1995, at 3:00 p.m., and any adjournment(s) thereof, the undersigned
herewith ratifying all that the said Proxy Agents may so do. The undersigned
further acknowledges receipt of the Notice of Regular Meeting and the Proxy
Statement in support of Management's solicitation of proxies dated May 17,
1995.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE>
BEST BUY CO., INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED TO THE COMPANY WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF THREE CLASS 2 DIRECTORS:
NOMINEES: Richard M. Schulze, Elliot S. Kaplan, and Culver Davis, Jr.
/ / FOR / / WITHHOLD / / FOR ALL NOMINEES EXCEPT AS WRITTEN BELOW
--------------------------------------------------------------------------
2. Proposal to approve the appointment of Ernst & Young LLP as the Company's
independent auditor for the current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to approve an amendment to the Company's bonus program for senior
officers to fix a maximum bonus per year per individual at $1,000,000.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxy Agents are authorized to vote upon such other
business as may properly come before the meeting.
Dated: _________________________, 1995
Signature(s)___________________________________________
_______________________________________________________
Please date and sign exactly as name(s) appears hereon
and return promptly in the accompanying postpaid
envelope. If shares are held by joint tenants or as
community property, both shareholders should sign.
