Best Buy 2008 Annual Report Download - page 85

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$ in millions, except per share amounts or as otherwise noted
bids. Substantially all of our auction-rate securities an impairment charge to earnings if we determine that our
portfolio has been subject to failed auctions. To date, we investment portfolio has incurred a decline in fair value
have collected all interest due on our auction-rate that is temporary or other-than-temporary, respectively.
securities and expect to continue to do so in the future. There were no unrealized holding gains or losses recorded
However, as a result of the persistent failed auctions, and in accumulated other comprehensive income at March 1,
the uncertainty of when these investments could be 2008, and March 3, 2007, related to our investments in
successfully liquidated at par, we have reclassified all of debt securities.
our investments in auction-rate securities to non-current
Realized gains and losses are included in investment
assets within equity and other investments in our
income and other in the consolidated statements of
consolidated balance sheet at March 1, 2008. The
earnings and were not significant for any period presented.
investment principal associated with failed auctions will not
The decrease in the balance of investments in debt
be accessible until successful auctions occur, a buyer is
securities at March 1, 2008 compared with the balance at
found outside of the auction process, the issuers establish
March 3, 2007, was due primarily to the liquidation of a
a different form of financing to replace these securities, or
substantial portion of our investments portfolio to repay
final payments come due according to the contractual
our bridge loan facility and to fund our accelerated share
maturities of the debt issues, which range from 8 to
repurchase (‘‘ASR’’) program. See Note 4, Debt, for further
40 years. We have liquidated $20 in auction-rate
information on the bridge loan facility, and Note 5,
securities at par subsequent to March 1, 2008, and held
Shareholders’ Equity, for further information on the ASR
$397 (par value) in auction-rate securities at April 25,
program. The cost of securities matured or sold is based
2008. We understand that issuers and financial markets
on the specific identification method.
are working on alternatives that may improve liquidity,
although it is not yet clear when or if such efforts will be
Marketable Equity Securities
successful. We intend to hold our auction-rate securities
until we can recover the full principal amount through one The carrying values of our investments in marketable
of the means described above, and have the ability to do equity securities at March 1, 2008, and March 3, 2007,
so based on our other sources of liquidity. were $172 and $4, respectively. The increase in
marketable equity securities since March 3, 2007, was
We evaluated our entire auction-rate securities portfolio for
primarily due to our investment in The Carphone
temporary or other-than-temporary impairment at
Warehouse Group PLC (‘‘CPW’’), Europe’s leading
March 1, 2008, based on review of a variety of inputs,
independent retailer of mobile phones and services.
including (i) pricing provided by the firms managing our
During the second quarter of fiscal 2008, we purchased in
investments, (ii) observable market transactions for
the open market 26.1 million shares of CPW common
identical or similar investments at or subsequent to our
stock for $183, representing nearly 3% of CPW’s
balance sheet date, and (iii) estimates derived internally
outstanding shares.
utilizing a discounted cash flow valuation model. As a
result of this review, we determined that the fair value of Net unrealized losses, net of tax, included in accumulated
our auction-rate securities at March 1, 2008, other comprehensive income were ($25) and ($1) at
approximates par value, and accordingly, we have not March 1, 2008, and March 3, 2007, respectively.
recorded any impairment. The estimated fair values could
change significantly based on future market conditions. We Other Investments
will continue to assess the fair value of our auction-rate
The aggregate carrying values of investments accounted
securities for substantive changes in relevant market
for on either the cost method or the equity method, at
conditions, changes in our financial condition or other
March 1, 2008, and March 3, 2007, were $16 and $16,
changes that may alter our estimates described above. We
respectively.
may be required to record an unrealized holding loss or
77