Bed, Bath and Beyond 2009 Annual Report Download - page 9

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BED BATH & BEYOND 2009 ANNUAL REPORT
7
Fiscal 2008 compared to Fiscal 2007
Net cash provided by operating activities in fiscal 2008 was $584.0 million, compared with $614.5 million in fiscal 2007. Year over
year, the Company experienced a decrease in cash provided by net earnings, partially offset by lower cash used for the net com-
ponents of working capital (primarily income taxes payable and merchandise inventories offset by merchandise credit and gift
card liabilities and accrued expenses and other current liabilities).
Inventory per square foot was $51.24 as of February 28, 2009, a decrease of approximately 4.4% from $53.58 as of March 1, 2008.
Net cash used in investing activities in fiscal 2008 was $113.1 million, compared with net cash provided by investing activities
of $101.7 million in fiscal 2007. In fiscal 2008, net cash used in investing activities was primarily due to $215.9 million of capital
expenditures partially offset by $107.6 million of redemptions of investment securities. In fiscal 2007, net cash provided by invest-
ing activities was due to $545.8 million of redemptions of investment securities, net of purchases, partially offset by $358.2 million
of capital expenditures and $85.9 million in payment for the acquisition of buybuy BABY.
Net cash used in financing activities in fiscal 2008 was $26.8 million, compared with $705.5 million in fiscal 2007. The decrease in
net cash used in financing activities was primarily attributable to a decrease in common stock repurchases.
Auction Rate Securities
As of February 27, 2010, the Company held approximately $178.6 million of net investments in auction rate securities. Beginning
in mid-February 2008, the auction process for the Company’s auction rate securities failed and continues to fail. These failed auc-
tions result in a lack of liquidity in the securities but do not affect the underlying collateral of the securities. All of these invest-
ments 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 $42.8 million of these securities. This agreement provides for, among
other things, the option to redeem these securities at par anytime during the period from June 30, 2010 through July 2, 2012.
As of February 27, 2010, the fair value of this option was approximately $2.3 million. Because the Company intends to exercise
its right to redeem these securities as soon as practicably possible during fiscal 2010, the fair value of these securities of approxi-
mately $40.5 million and the related option of approximately $2.3 million were classified as short term investment securities as of
February 27, 2010.
During fiscal 2009, the Company recorded an unrealized loss of approximately $0.5 million related to these securities and also
recorded approximately $0.5 million of pre-tax income to reflect the increase in fair value of the option to redeem these securi-
ties at par value. This resulted in no impact on the Company’s net earnings. The Company anticipates that any future changes in
the fair value of the related auction rate securities will be offset by the changes in the fair value of the option with no material
impact to the Company’s net earnings.
As of February 27, 2010, the remainder of approximately $137.9 million of these securities at par had a temporary valuation
adjustment of approximately $2.1 million to reflect their current lack of liquidity. Since this valuation adjustment is deemed to be
temporary, it was recorded in accumulated other comprehensive income (loss), net of a related tax benefit, and did not affect the
Company’s net earnings for fiscal 2009. As of February 27, 2010, the Company classified approximately $15.0 million of these secu-
rities as short term investment securities due to expected redemptions at par during the first half of fiscal 2010.
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 will remain 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.