Best Buy 2012 Annual Report Download - page 94

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$ in millions, except per share amounts or as otherwise noted
94
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.
Convertible Debentures
In January 2002, we sold 2.25% convertible subordinated debentures due January 15, 2022, having an aggregate principal
amount of $402. During fiscal 2012, we repurchased and redeemed all of the remaining outstanding convertible debentures
subject to the terms and conditions of the indenture governing the convertible debentures.
Other
The fair value of long-term debt approximated $1,756 and $1,210 at March 3, 2012, and February 26, 2011, respectively, based
primarily on the ask prices quoted from external sources, compared to carrying values of $1,728 and $1,152, respectively.
At March 3, 2012, the future maturities of long-term debt, including capitalized leases, consisted of the following:
Fiscal Year
2013 $ 40
2014 542
2015 40
2016 32
2017 369
Thereafter 705
Total long-term debt $ 1,728
9. Derivative Instruments
We manage our economic and transaction exposure to certain market-based risks through the use of foreign currency derivative
instruments. Our objective in holding derivatives is to reduce the volatility of net earnings and cash flows associated with
changes in foreign currency exchange rates. We do not hold or issue derivative financial instruments for trading or speculative
purposes.
We record all foreign currency derivative instruments on our Consolidated Balance Sheets at fair value and evaluate hedge
effectiveness prospectively and retrospectively when electing to apply hedge accounting treatment. We formally document all
hedging relationships at inception for all derivative hedges and the underlying hedged items, as well as the risk management
objectives and strategies for undertaking the hedge transactions. In addition, we have derivatives which are not designated as
hedging instruments. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by
engaging with major financial institutions as our counterparties.
Cash Flow Hedges
We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on certain revenue
streams denominated in non-functional currencies. The contracts have terms of up to two years. We report the effective portion
of the gain or loss on a cash flow hedge as a component of other comprehensive income, and it is subsequently reclassified into
net earnings in the period in which the hedged transaction affects net earnings or the forecasted transaction is no longer
probable of occurring. We discontinued certain cash flow hedges and reclassified $5 into net earnings during the fourth quarter
of fiscal 2011, as the forecasted transactions were no longer probable of occurring. We report the ineffective portion, if any, of
the gain or loss in net earnings.
Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedging instruments include foreign exchange forward contracts used to manage the impact of
fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-
functional currencies and on certain forecasted inventory purchases denominated in non-functional currencies. The contracts
generally have terms of up to six months. These derivative instruments are not designated in hedging relationships and,
therefore, we record gains and losses on these contracts directly in net earnings.