Best Buy 2016 Annual Report Download - page 85

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77
The 2018 Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and
unsubordinated debt. The 2018 Notes contain covenants that, among other things, limit our ability and the ability of our
subsidiaries to incur debt secured by liens and enter into sale and lease-back transactions.
2016 and 2021 Notes
In March 2011, we issued $350 million principal amount of notes due March 15, 2016 (the “2016 Notes”) and $650 million
principal amount of notes due March 15, 2021 (the “2021 Notes” and, together with the 2016 Notes, the “Notes”). In March
2016, we repaid the 2016 Notes using existing cash resources. The 2016 Notes bore interest at a fixed rate of 3.75% per year,
while the 2021 Notes bear interest at a fixed rate of 5.50% per year. Interest on the Notes is payable semi-annually on March 15
and September 15 of each year, beginning on September 15, 2011. The Notes were issued at a slight discount to par, which
when coupled with underwriting discounts of $6 million, resulted in net proceeds from the sale of the Notes of $990 million.
We may redeem some or all of the Notes at any time at a redemption price equal to the greater of (i) 100% of the principal
amount and (ii) the sum of the present values of each remaining scheduled payment of principal and interest discounted to the
redemption date on a semiannual basis, plus accrued and unpaid interest on the principal amount to the redemption date as
described in the indenture (including the supplemental indenture) relating to the Notes. Furthermore, if a change of control
triggering event occurs, we will be required to offer to purchase the remaining unredeemed Notes at a price equal to 101% of
their principal amount, plus accrued and unpaid interest to the purchase date.
The Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated
debt. The Notes contain covenants that, among other things, limit our ability to incur debt secured by liens or to enter into sale
and lease-back transactions.
Fair Value and Future Maturities
The fair value of long-term debt, excluding debt discounts and issuance costs and financing and capital lease obligations,
approximated $1,543 million and $1,494 million at January 30, 2016, and January 31, 2015, respectively, based primarily on
the quoted market prices, compared to carrying values of $1,525 million and $1,502 million, respectively. If our long-term debt
was recorded at fair value, it would be classified as Level 2 in the fair value hierarchy.
At January 30, 2016, the future maturities of long-term debt, excluding debt discounts and issuance costs and financing and
capital lease obligations (see Note 8, Leases, for the future lease obligation maturities), consisted of the following ($ in
millions):
Fiscal Year
2017 $ 350
2018 —
2019 517
2020 —
2021 —
Thereafter 658
Total long-term debt $ 1,525
6. Derivative Instruments
We manage our economic and transaction exposure to certain risks through the use of foreign currency derivative instruments
and interest rate swaps. Our objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset
value associated with changes in foreign currency exchange rates and interest rates. We do not hold derivative instruments for
trading or speculative purposes. We have no derivatives that have credit risk-related contingent features, and we mitigate our
credit risk by engaging with financial institutions with investment grade credit ratings as our counterparties.
We record all derivative instruments on our Consolidated Balance Sheet at fair value and evaluate hedge effectiveness
prospectively and retrospectively when electing to apply hedge accounting. We formally document all hedging relations at the
inceptions for derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for
undertaking the hedge transaction. In addition, we have derivatives which are not designated as hedging instruments.