Best Buy 2007 Annual Report Download - page 54

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PART II
changes in accrued income taxes and merchandise
inventories. The increase in cash used for changes in
accrued income taxes resulted mainly from a higher
effective income tax rate combined with the timing of
payments. The increase in cash used for changes in
merchandise inventories was due primarily to increased
inventory levels. Inventory levels increased due to the
addition of new stores, expanded product assortments in
key product categories and improved in-stock positions.
Investing Activities
Cash used in investing activities was $780 million in fiscal
2007, compared with $754 million in fiscal 2006 and $1.4
billion in fiscal 2005. The change in cash used in investing
activities in fiscal 2007, compared with fiscal 2006, was
due primarily to cash used to acquire Pacific Sales and Five
Star, and higher capital expenditures, partially offset by
increased net sales of investments in debt securities. Refer to
“Capital Expenditures” below for additional information. In
fiscal 2007, we used cash for the construction of new retail
locations, information systems and other store projects,
including relocations and remodels. The primary purposes
of the cash investment activity were to support our
expansion plans and improve our operational efficiency.
Financing Activities
Cash used in financing activities was $513 million in fiscal
2007, compared with $619 million and $459 million in
fiscal 2006 and fiscal 2005, respectively. The change in
cash used in financing activities in fiscal 2007, compared
with fiscal 2006, was due primarily to a decrease in
repurchases of our common stock. During fiscal 2007, we
repurchased $599 million of our common stock, compared
with $772 million in fiscal 2006. The decrease in
repurchases of common stock was partially offset by a
decrease in proceeds from the issuance of common stock in
connection with our stock-based compensation programs.
Sources of Liquidity
Our most significant sources of liquidity continue to be
funds generated by operating activities, available cash and
cash equivalents, and short-term investments. We believe
funds generated from the expected results of operations,
available cash and cash equivalents, and short-term
investments will be sufficient to finance anticipated
expansion plans and strategic initiatives for the next fiscal
year. In addition, our revolving credit facilities are available
for additional working capital needs or investment
opportunities. There can be no assurance, however, that we
will continue to generate cash flows at or above current
levels or that we will be able to maintain our ability to
borrow under our revolving credit facilities.
Our Domestic segment has a $200 million bank revolving
credit facility which is guaranteed by certain of our
subsidiaries. The facility expires on December 22, 2009.
Borrowings under this facility are unsecured and bear
interest at rates specified in the credit agreement. We also
pay certain facility and agent fees. There were no
borrowings outstanding under these facilities for any period
presented. However, amounts outstanding under letters of
credit reduce amounts available under this facility. At
March 3, 2007, and February 25, 2006, $200 million and
$199 million, respectively, were available under this facility.
We also have inventory financing facilities through which
certain suppliers receive payments from a designated
finance company on invoices we owe them. At March 3,
2007, and February 25, 2006, $39 million and $59
million, respectively, were outstanding and included in
accrued liabilities in our consolidated balance sheets; and
$196 million and $177 million, respectively, were available
for use under these inventory financing facilities.
Our International segment has a $21 million revolving
demand facility for our Canada operations, of which
$17 million is available from February through July, and
$21 million is available from August through January of
each year. There is no set expiration date for this facility. All
borrowings under this facility are made available at the sole
discretion of the lender and are payable on demand.
Borrowings under this facility are unsecured and bear
interest at rates specified in the agreement. There were no
borrowings outstanding under this facility for any period
presented. However, amounts outstanding under letters of
credit and letters of guarantee reduced amounts available
under this facility to $16 million and $17 million, at
March 3, 2007, and February 25, 2006, respectively.
Our International segment also has a $23 million revolving
demand facility to finance working capital requirements for
our China operations. This facility may be terminated at any
time and is subject to review by June 30, 2007. $20 million
in borrowings were outstanding under this facility as of the
balance sheet date. Borrowings under this facility are
secured by a guarantee of Best Buy Co., Inc. and bear
interest at rates specified in the agreement.
Our ability to access our credit facilities is subject to our
compliance with the terms and conditions of the credit
facilities, including financial covenants. The financial