Best Buy 2008 Annual Report Download - page 65

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Foreign Currency Exchange Rate Risk facilities would change our annual pre-tax earnings by
$2 million.
We have market risk arising from changes in foreign
currency exchange rates related to our International Our convertible debentures are not subject to material
segment operations. We do not manage our foreign interest rate risk. The interest rate on our debentures may
currency exchange rate risk through the use of any be reset but not more than 100 basis points higher than
financial or derivative instruments, forward contracts or the current rates. If the interest rate on the debentures at
hedging activities. March 1, 2008, were to be reset 100 basis points higher,
our annual pre-tax earnings would decrease by $4 million.
During fiscal 2008, the U.S. dollar has been generally
weaker throughout the year relative to the currencies of Short-term and long-term investments in debt securities
the foreign countries in which we operate. The overall
At March 1, 2008, our short-term and long-term
weakness of the U.S. dollar had a positive impact on our
investments were comprised primarily of debt securities,
International segment’s revenue and net earnings because
specifically commercial paper and auction-rate securities.
the foreign denominations translated into more U.S.
These investments are not subject to material interest rate
dollars.
risk. A hypothetical 100-basis-point change in the interest
It is not possible to determine the exact impact of foreign rate would change our annual pre-tax earnings by
currency exchange rate changes; however, the effect on $5 million. We do not currently manage interest rate risk
reported revenue and net earnings can be estimated. We on our investments through the use of derivative
estimate that the overall weakness of the U.S. dollar had a instruments.
favorable impact on revenue of approximately
$561 million in fiscal 2008. In addition, we estimate that Other Market Risks
such weakness had a favorable impact of approximately
Investments in auction-rate securities
$22 million on net earnings in fiscal 2008.
At March 1, 2008, we held $417 million (par value) in
Interest Rate Risk investments in auction-rate securities and concluded no
temporary impairment exists on these securities. Given
Short-term and long-term debt
current conditions in the auction-rate securities market as
At March 1, 2008, our short-term and long-term debt was described above in the Liquidity and Capital Resources
comprised primarily of credit facilities and convertible section, included in Item 7, Management’s Discussion and
debentures. We do not manage the interest rate risk on Analysis of Financial Condition and Results of Operations,
our debt through the use of derivative instruments. of this Annual Report on Form 10-K, we may incur
Our credit facilities are not subject to material interest rate temporary unrealized losses or other-than-temporary
risk. The credit facilities’ interest rates may be reset due to realized losses in the future if market conditions persist and
fluctuations in a market-based index, such as the federal we are unable to recover the cost of our investments in
funds rate, the London Interbank Offered Rate (LIBOR), or auction-rate securities. A hypothetical 100-basis-point loss
the base rate or prime rate of our lenders. A hypothetical from the par value of these investments would result in a
100-basis-point change in the interest rates of our credit $4 million impairment.
57