Bed, Bath and Beyond 2007 Annual Report Download - page 9

BED BATH& BEYOND ANNUAL REPORT 2007
7
Auction Rate Securities
As of March 1, 2008, the Company had approximately $326.7 million par value of auction rate securities, less a temporary
valuation adjustment of approximately $7.2 million to reflect the current lack of liquidity of these investments. The Company
recorded this temporary valuation adjustment in other comprehensive income, net of the related tax benefit of $2.7 million,
which did not affect fiscal 2007 earnings, and reclassified these investments to long term investment securities to reflect the lack
of liquidity of these investments. Due to current market conditions, these investments have experienced failed auctions beginning
in mid-February 2008. These failed auctions result in a lack of liquidity in the securities, but do not affect the underlying collateral
of the securities. All of these investments carry triple-A credit ratings from one or more of the major credit rating agencies and
the Company believes that given their high credit quality, it will ultimately recover at par all amounts invested in these securities.
The Company does not anticipate that any potential lack of liquidity in these auction rate securities, even for an extended period
of time, will affect its ability to finance its operations, including its expansion program and planned capital expenditures. The
Company continues to monitor efforts by the financial markets to find alternative means for restoring the liquidity of these
investments, including the recent announcements by certain asset managers to redeem a portion of their outstanding auction rate
securities. These investments are classified as non-current assets until the Company has better visibility as to when their liquidity
will be restored. The classification and valuation of these securities will be reviewed quarterly.
Other Fiscal 2007 Information
At March 1, 2008, the Company maintained two uncommitted lines of credit of $100 million each, with expiration dates of
September 3, 2008 and February 27, 2009, respectively. These uncommitted lines of credit are currently and are expected to be
used for letters of credit in the ordinary course of business. In addition, under these uncommitted lines of credit, the Company
can obtain unsecured standby letters of credit. During fiscal 2007, the Company did not have any direct borrowings under the
uncommitted lines of credit. As of March 1, 2008, there was approximately $8.1 million of outstanding letters of credit and
approximately $49.8 million of outstanding unsecured standby letters of credit, primarily for certain insurance programs. Although
no assurances can be provided, the Company intends to renew both uncommitted lines of credit before the respective expiration
dates. The Company believes that during fiscal 2008, internally generated funds will be sufficient to fund its operations, including
its expansion program and planned capital expenditures.
The Company’s Board of Directors has authorized repurchases of shares of its common stock for $1 billion in September 2007, for
$1 billion in December 2006, for $200 million in January 2006, for $400 million in October 2005 and for $350 million in December
2004. The Company was authorized to make repurchases from time to time in the open market or through other parameters
approved by the Board of Directors pursuant to existing rules and regulations. The Company has approximately $967 million
remaining of authorized share repurchases as of March 1, 2008. The execution of the Company’s current share repurchase pro-
gram will consider current economic and market conditions, including but not limited to, the liquidity of its auction rate security
investments.
The Company has contractual obligations consisting mainly of operating leases for stores, offices, warehouse facilities and equip-
ment, purchase obligations and other long-term liabilities which the Company is obligated to pay as of March 1, 2008 as follows:
(in thousands) Total Less than 1 year 1-3 years 4-5 years After 5 years
Operating Lease Obligations (1) $ 3,195,366 $ 404,197 $ 776,185 $ 642,058 $ 1,372,926
Purchase Obligations (2) 433,630 433,630 — — —
Other long-term liabilities (3) 268,153 ————
Total Contractual Obligations $ 3,897,149 $ 837,827 $ 776,185 $ 642,058 $ 1,372,926
(1) The amounts presented represent the future minimum lease payments under non-cancelable operating leases. In addition to minimum rent,
certain of the Company’s leases require the payment of additional costs for insurance, maintenance and other costs. These additional
amounts are not included in the table of contractual commitments as the timing and/or amounts of such payments are not known. As of
March 1, 2008, the Company has leased sites for 56 new stores planned for opening in fiscal 2008 or 2009, for which aggregate minimum
rental payments over the term of the leases are approximately $261.7 million and are included in the table above.
(2) Purchase obligations primarily consist of purchase orders for merchandise and capital expenditures.
(3) The Company’s deferred rent and other liabilities as well as income taxes payable in the Consolidated Balance Sheet as of March 1, 2008
are primarily comprised of deferred rent, income taxes, workers’ compensation and general liability reserves and other various accruals.
As the timing and/or amounts of any cash payment is uncertain, the related amounts have been reflected only in the Total column in the
table above.