<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BEST BUY Co., Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
BEST BUY CO., INC
7075 FLYING CLOUD DRIVE
EDEN PRAIRIE, MINNESOTA 55344
[LOGO]
NOTICE OF REGULAR MEETING OF SHAREHOLDERS
The 1996 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
19, 1996, at 3:00 p.m., for the following purposes:
1. To elect four Class 1 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 transact such other business as may properly come before the meeting.
Only Shareholders of record at the close of business on Wednesday, April 24,
1996, 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 8, 1996
<PAGE>
PROXY STATEMENT
BEST BUY CO., INC.
7075 FLYING CLOUD DRIVE
EDEN PRAIRIE, MINNESOTA 55344
REGULAR MEETING OF SHAREHOLDERS -- JUNE 19, 1996
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 19, 1996, 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 8, 1996.
As of April 24, 1996, 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 42,970,069 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 Bradbury H. Anderson,
Frank D. Trestman, David Stanley and James C. Wetherbe be re-elected as Class 1
directors, each to hold office until the 1998 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 five meetings during the fiscal year ended March
2, 1996. 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
reviews the general parameters of the Company's leases. 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 March 2, 1996.
<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 1 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
</TABLE>
- ------------------------
* Committee chairperson
There is no family relationship among the nominees or between any nominee
and any of the Company's other directors.
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
2
<PAGE>
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, 1996, as to
the Chief Executive Officer and each of the next five most highly compensated
executive officers during the most recent fiscal year, each director including
the nominees for election as Class 1 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 55 9,486,672(1) 21.97%
Chairman, Chief Executive Officer and Director
Bradbury H. Anderson 46 557,003(2) 1.29%
President, Chief Operating Officer and Director
Allen U. Lenzmeier 52 343,290(3) *
Executive Vice President and Chief Financial
Officer
Wade R. Fenn 37 127,738(4) *
Executive Vice President -- Marketing
George S. Fouts 58 163,763(5) *
Senior Vice President -- Sales
Lee H. Schoenfeld 43 103,239(6) *
Senior Vice President -- Marketing
Elliot S. Kaplan 59 110,752(7) *
Secretary and Director
Frank D. Trestman 61 166,000(8) *
Director
Culver Davis, Jr. 57 66,000(9) *
Director
David Stanley 60 43,000(10) *
Director
James C. Wetherbe 47 33,000(11) *
Director
All directors and executive officers, as a group -- 11,548,104(12) 26.05%
(19 individuals)
</TABLE>
- ------------------------
* Less than 1%.
3
<PAGE>
(1) The figure represents (a) 8,218,958 outstanding shares owned by Mr.
Schulze; (b) 207,900 outstanding shares owned by Mr. Schulze and his wife as
joint tenants; (c) 60 outstanding shares held in Mr. Schulze's individual
retirement account; (d) 185,328 outstanding shares registered in the name of
Mr. Schulze and a co-trustee and held by them as trustees of a trust for the
benefit of Mr. Schulze; (e) 300,000 outstanding shares registered in the
name of Mr. Schulze and held by him as trustee of a trust for the benefit of
his children (Mr. Schulze has disclaimed beneficial ownership of such
shares); (f) 185,328 outstanding shares registered in the name of Mr.
Schulze's wife and a co-trustee and held by them as trustees of a trust for
the benefit of Mrs. Schulze (Mr. Schulze has disclaimed beneficial ownership
of such shares); (g) 26,122 outstanding shares owned by a partnership in
which Mr. Schulze is a partner; (h) 7,001 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; (i) 8,600
outstanding shares registered in the name of Best Buy Foundation, a
charitable foundation of which Mr. Schulze is a Board member; (j) options
granted to Mr. Schulze, available for exercise within 60 days, to purchase
302,375 shares; and (k) preferred securities owned by Mr. Schulze, available
for conversion within 60 days into 45,000 shares.
(2) The figure represents (a) 238,170 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 317,500 shares.
(3) The figure represents (a) 142,790 outstanding shares owned by Mr.
Lenzmeier; and (b) options granted to Mr. Lenzmeier, available for exercise
within 60 days, to purchase 200,500 shares.
(4) The figure represents (a) 19,386 outstanding shares owned by Mr. Fenn; (b)
7,970 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 the benefit of 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 99,376 shares.
(5) This figure represents (a) 28,676 outstanding shares owned by Mr. Fouts;
(b) 100 outstanding shares owned by Mr. Fouts' wife; (c) 3,887 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.
Fouts; and (d) options granted to Mr. Fouts, available for exercise within
60 days, to purchase 131,100 shares.
(6) The figure represents (a) 70,166 outstanding shares owned by Mr.
Schoenfeld; (b) 5,323 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 27,750 shares.
(7) The figure represents (a) 77,752 outstanding shares owned by Mr. Kaplan;
and (b) options granted to Mr. Kaplan, available for exercise within 60
days, to purchase 33,000 shares.
4
<PAGE>
(8) 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 33,000 shares.
(9) The figure represents (a) 42,000 outstanding shares owned by Mr. Davis; and
(b) options granted to Mr. Davis, available for exercise within 60 days, to
purchase 24,000 shares.
(10) 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 42,000 shares.
(11) 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 24,000 shares.
(12) The figure represents (a) outstanding shares and options described in the
preceding footnotes; (b) 127,570 outstanding shares owned by, and options,
available for exercise within 60 days, to purchase 208,500 shares granted
to, the Company's other executive officers; (c) 10,677 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; and (d) 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).
NOMINEES AND DIRECTORS
NOMINEES FOR CLASS 1 DIRECTORS
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.
5
<PAGE>
CLASS 2 DIRECTORS -- TERMS EXPIRE IN 1997
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.
CULVER DAVIS, JR. has served as a director of the Company since August 1986.
Mr. Davis has been employed as Director of Sales for Galyan's Trading Company in
Plainfield, Indiana since January 1996. Previously, 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 in 1994.
CERTAIN TRANSACTIONS
The Company leases two of its current 251 stores (Burnsville and Edina,
Minnesota) from Richard M. Schulze, leases one of its stores (Maplewood,
Minnesota) from a partnership 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 an
escalation clause after the tenth year. 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
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 Mr. Schulze of $210,600
per year. Aggregate rents paid and accrued by the Company to Mr. Schulze,
partnerships in which he is a partner (including rents pursuant to a lease for a
store location in West St. Paul, Minnesota, which expired in January 1996) or
Mrs. Schulze during the fiscal year ended March 2, 1996, were $1,509,613, a
portion of which was used to service debt on the properties where the stores are
located and, for some of such stores, to pay real estate taxes and insurance.
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. 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 the Lease Committee, that any such transaction is on terms
more favorable to the Company than could be obtained from unaffiliated third
parties.
6
<PAGE>
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 mid-point 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 has
historically considered 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 addition,
the Committee has 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.
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 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 have generally
been set to be comparable to the midpoint of those of the surveyed executives.
The Compensation Committee determined that in light of the Company's financial
performance in fiscal 1995, there would be no change in executive officer base
salary for fiscal 1996. For that reason, the comparative research referred to in
Overview and Philosophy, above, was not updated for purposes of determining base
salaries in fiscal 1996, although the Committee believes that updated
information would have indicated an increase in executive compensation.
Bonus Incentive Program. The Company offers an annual incentive for
executive officers pursuant to a program that was approved by Shareholders in
1994 and 1995. 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
7
<PAGE>
executive officer's base salary up to $1,000,000. 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 previously
surveyed executives. In fiscal 1996, each executive officer was entitled to a
bonus equal to 25% of base salary if the Company's budgeted net income was
achieved, which percentage could be increased to 60% if net income for the year
was at least 170% of budget. The relationship between net income and the bonus
percentage was determined by the Compensation Committee at the beginning of
fiscal 1996. 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.
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.
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. Mr. Schulze's base salary for fiscal 1996 was unchanged from fiscal
1995. 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
8
<PAGE>
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 of $750,000 for the period from April 1, 1995 to
March 31, 1996 was unchanged from the previous year. The Compensation Committee
determined that since the fiscal 1995 budget had not been achieved, there would
be no increase in Mr. Schulze's base salary in fiscal 1996.
Mr. Schulze did not earn a bonus for fiscal 1996. 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 was not achieved and, therefore, no bonus was paid to Mr. Schulze for
fiscal 1996.
Mr. Schulze received options during fiscal 1996 to purchase 100,000 shares
of the Company's Common Stock, or double the number of options awarded the
previous year. The exercise price of such options is $23.18 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 the fact
that Mr. Schulze had received no increase in base salary for fiscal 1996 and
determined that the potential additional long-term compensation would be
appropriate. 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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of David Stanley (Chairman),
Frank D. Trestman and James C. Wetherbe. No executive officer of the Company is
a member of the Compensation Committee.
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash 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 five 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 1996 $ 750,000 $ -- 100,000 $ 24,422
Founder, Chairman, 1995 727,528 -- 50,000 25,904
Chief Executive Officer 1994 555,374 280,000 151,500 26,213
Bradbury H. Anderson 1996 565,000 -- 80,000 10,410
President, Chief Operating Officer 1995 548,317 -- 40,000 11,561
1994 421,150 212,500 123,000 11,593
Allen U. Lenzmeier 1996 435,000 -- 50,000 9,038
Executive Vice President, 1995 421,760 -- 25,000 9,678
Chief Financial Officer 1994 321,538 162,500 84,000 10,011
Wade R. Fenn 1996 343,077 -- 30,000 3,640
Executive Vice President -- Marketing 1995 294,873 -- 15,000 3,976
1994 255,385 130,000 54,000 4,135
George S. Fouts 1996 280,000 -- 30,000 4,334
Senior Vice President -- Sales 1995 272,502 -- 15,000 4,781
1994 217,308 110,000 54,000 4,850
Lee H. Schoenfeld 1996 280,000 -- 30,000 3,638
Senior Vice President -- Marketing 1995 274,214 -- 15,000 4,085
1994 205,192 105,100 36,000 4,332
</TABLE>
- ------------------------------
(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>
<CAPTION>
FISCAL YEAR
ENDED "A" "B" "C"
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Richard M. Schulze......................................... 1996 $ 630 $ 2,492 $ 21,300
1995 576 4,028 21,300
1994 576 4,337 21,300
Bradbury H. Anderson....................................... 1996 348 3,062 7,000
1995 348 4,213 7,000
1994 204 4,389 7,000
Allen U. Lenzmeier......................................... 1996 576 3,462 5,000
1995 576 4,102 5,000
1994 576 4,435 5,000
Wade R. Fenn............................................... 1996 132 3,508 --
1995 132 3,844 --
1994 132 4,003 --
George S. Fouts............................................ 1996 900 3,434 --
1995 900 3,881 --
1994 900 3,950 --
Lee H. Schoenfeld.......................................... 1996 204 3,434 --
1995 204 3,881 --
1994 204 4,128 --
</TABLE>
10
<PAGE>
OPTIONS AND GRANTS
The following tables summarize option grants and exercises during the fiscal
year ended March 2, 1996, to or by the Chief Executive Officer and the next five
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.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM
UNDERLYING EMPLOYEES IN FISCAL PRICE EXPIRATION ---------------------
OPTIONS 1996 ($/SHARE) DATE 5% 10%
------------ ------------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Schulze................ 100,000(1) 6.79% $ 23.18 4-09-00 $ 640,421 $1,415,162
9,000(2) .61 23.18 4-09-00 57,638 127,365
Bradbury H. Anderson.............. 80,000(1) 5.43 23.18 4-09-00 512,337 1,132,130
9,000(2) .61 23.18 4-09-00 57,638 127,365
Allen U. Lenzmeier................ 50,000(1) 3.39 23.18 4-09-00 320,210 707,581
Wade R. Fenn...................... 30,000(1) 2.03 23.18 4-09-00 192,126 424,549
George S. Fouts................... 30,000(1) 2.03 23.18 4-09-00 192,126 424,542
Lee H. Schoenfeld................. 30,000(1) 2.03 23.18 4-09-00 192,126 424,542
</TABLE>
- ------------------------------
The price of one share of the Company's Common Stock acquired at $23.18 per
share would equal approximately $29.58 and $37.33 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 10,
1995, 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 10,
1995, pursuant to the Company's 1987 Directors' Non-Qualified Stock Option
Plan. The options are exercisable as of the date of grant.
OPTION EXERCISES DURING FISCAL 1996 AND VALUE OF OPTIONS AT END OF FISCAL 1996
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE AT END OF FISCAL 1996 AT END OF FISCAL 1996
NAME ON EXERCISE REALIZED (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- -------------------------- --------------- ----------- ----------------------------- ----------------------------
<S> <C> <C> <C> <C>
Richard M. Schulze........ 184,500 $3,004,125 201,125/236,875 $ 1,343,456/$632,568
Bradbury H. Anderson...... 67,500 1,535,625 236,500/189,500 2,013,540/506,055
Allen U. Lenzmeier........ 45,000 995,625 143,875/127,625 1,325,186/375,978
Wade R. Fenn.............. 11,250 217,968 67,876/75,000 563,631/198,841
George S. Fouts........... 16,876 352,286 73,500/75,000 638,149/198,841
Lee H. Schoenfeld......... 48,000 780,382 9,000/63,000 28,980/132,802
</TABLE>
- ------------------------------
(1) Value based on market value of the Company's Common Stock on the date of
exercise or at the end of fiscal 1996, as applicable, minus the exercise
price.
11
<PAGE>
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>
BEST BUY CO. INC. INDUSTRY INDEX BROAD INDEX
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 261.19 136.74 131.97
1993 491.04 166.18 142.46
1994 966.67 168.78 163.72
1995 841.36 160.18 166.40
1996 599.69 156.65 211.19
</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
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 March 2, 1996, the Company
matched 50% of the first 4% of participating employees' pre-tax earnings, or
$1,701,107, including $19,392 in the aggregate on behalf of the Chief Executive
Officer and the other five most highly compensated executive officers. Although
the Company, in adopting the Retirement
12
<PAGE>
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 received $12,000 per year plus
expenses for his services as a director in fiscal 1996, which amount will
increase to $15,000 in fiscal 1997. In addition to the annual director fee,
there is a $3,000 annual fee payable to each committee chairperson. On April 10,
1995, the Company granted to each director an option to purchase 9,000 shares of
Common Stock at an exercise price of $23.18 per share. All of the options were
granted pursuant to the Company's 1987 Directors' Non-Qualified Stock Option
Plan (the "Directors' Plan"), described below. Options, outstanding as of March
31, 1996, to purchase 231,000 shares of the Company's Common Stock at exercise
prices ranging from $3.50 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, Elliot S. Kaplan realized a net value of
securities (market value less exercise price) of $238,500 pursuant to the
exercise of options granted under the Directors' Plan.
1987 DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
In 1987, the 1987 Directors' Non-Qualified Stock Option 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, as
amended, 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
5,000 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 5,000 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, 1996, options to purchase 528,000 shares of
the Company's Common Stock have been granted pursuant to the Directors' Plan and
231,000 remain outstanding.
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
March 2, 1996.
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 March 3, 1996. A proposal to
ratify that appointment will be presented
13
<PAGE>
at the Meeting. Ernst & Young LLP has served as the Company's auditor since
August 1994. 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 two fiscal years preceding their dismissal
contained no adverse opinion or disclaimer of opinion and were not qualified or
modified with respect to uncertainty, audit scope or accounting principle.
During such 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,
and there were no "reportable events" as defined by the Rules and Regulations of
the Securities and Exchange Commission. Ernst & Young LLP has no relationship
with the Company other than that arising from its engagement as independent
auditor. 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.
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.
PROPOSALS FOR THE NEXT REGULAR MEETING
Any proposals by a Shareholder to be presented at the 1997 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 1,
1997.
By Order of the Board of Directors
[SIG]
Elliot S. Kaplan
SECRETARY
Dated: May 8, 1996
14
<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 19, 1996
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,
April 24, 1996, at the Regular Meeting of Shareholders to be held on Wednesday,
June 19, 1996, 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 8,
1996.
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 AND 2.
1. ELECTION OF FOUR CLASS 1 DIRECTORS:
NOMINEES: Bradbury H. Anderson, Frank D. Trestman, David Stanley, and
James C. Wetherbe
/ / 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. In their discretion, the Proxy Agents are authorized to vote upon such other
business as may properly come before the meeting.
Dated: _________________________, 1996
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.
