Bed, Bath and Beyond 2008 Annual Report Download - page 9

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BED BATH & BEYOND 2008 ANNUAL REPORT
7
Net cash used in financing activities in fiscal 2007 was $705.5 million, compared with $250.3 million in fiscal 2006. The increase
in net cash used in financing activities was primarily attributable to common stock repurchased of $734.2 million in fiscal 2007
compared to $301.0 million in fiscal 2006 under the Company’s stock repurchase program.
Auction Rate Securities
As of February 28, 2009, the Company held approximately $216.6 million of net investments in auction rate securities. Beginning
in mid-February 2008 due to current market conditions, the auction process for the Company’s auction rate securities failed and
continues to fail. 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.
During fiscal 2008, the Company entered into an agreement with the investment firm that sold the Company a portion of its
auction rate securities to redeem at par approximately $43.2 million of these securities. This agreement provides for, among other
things, the option to redeem these securities at par during fiscal 2010. The Company recorded a net pre-tax other-than-temporary
impairment loss of approximately $1.8 million related to these securities and also recorded $1.8 million of pre-tax income to
reflect the fair value of the option to redeem these securities at par value. This resulted in no impact on the Company’s net
earnings for fiscal 2008 and the Company anticipates that any future changes in the fair value of the related auction rate securi-
ties will be offset by the changes in the fair value of the option with no material impact to the Company’s net earnings.
The remainder of approximately $176.0 million of these securities at par had a temporary valuation adjustment of approximately
$2.6 million to reflect their current lack of liquidity. Since this valuation adjustment is deemed to be temporary, it was recorded in
accumulated other comprehensive loss, net of a related tax benefit of approximately $1.0 million, and did not affect the
Company’snet earnings for fiscal 2008.
The Company does not anticipate that any potential lack of liquidity in its 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. These investments are primarily 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 continue to be reviewed quarterly.
During fiscal 2008, approximately $107.6 million of auction rate securities were redeemed at par. Subsequent to the end of
fiscal 2008 through April 20, 2009, the Company additionally redeemed approximately $1.1 million at par.
Other Fiscal 2008 Information
At February28, 2009, the Company maintained two uncommitted lines of credit of $100 million each, with expiration dates of
September 3, 2009 and February26, 2010, 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 2008, the Company did not have any direct borrowings under the
uncommitted lines of credit. As of February 28, 2009, there was approximately $7.1 million of outstanding letters of credit
and approximately $45.5 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 2009, internally generated funds will be sufficient to fund its operations, including its
expansion program and planned capital expenditures.
Between December 2004 and September 2007, the Company’sBoardof Directors authorized, through several share repurchase
programs, the repurchase of $2.950 billion of its shares of common stock. 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 $919 million remaining of authorized share repurchases as of February 28, 2009.
The execution of the Company’scurrent share repurchase program will consider current business and market conditions, including
but not limited to, the liquidity of its auction rate security investments.