Bed Bath & Beyond (BBBY)

Available-for-sale securities

As of August 30, 2008, the Company’s available-for-sale securities represented approximately $295.3 million par value of auction rate securities, less a temporary valuation adjustment of approximately $6.6 million to reflect their current lack of liquidity. Since this valuation adjustment is deemed to be temporary it was recorded in other comprehensive income, net of a related tax benefit of $2.5 million, and did not affect the Company’s earnings for the six months ended August 30, 2008. During the six months ended August 30, 2008, approximately $31.4 million of auction rate securities were redeemed at par. Due to their lack of liquidity, the Company classified $278.7 million and $319.5 million of these investments as long term investment securities at August 30, 2008 and March 1, 2008, respectively. All of these investments carry triple-A credit ratings from one or more of the major credit rating agencies as of August 30, 2008. Approximately $252.1 million of these securities at par are invested in preferred shares of closed end municipal bond funds, which are required, pursuant to the Investment Company Act of 1940, to maintain minimum asset coverage ratios of 200%. The remaining approximately $43.2 million at par are invested in securities collateralized by student loans which are currently more than 100% collateralized and with approximately 90% of such collateral in the aggregate being guaranteed by the United States government. None of the auction rate securities held by the Company are mortgage-backed debt obligations.

Subsequent to the end of the fiscal second quarter through October 7, 2008, the Company redeemed approximately $10 million of auction rate securities at par.

Available-for-sale securities

As of May 31, 2008, the Company’s available-for-sale securities represented approximately $321.9 million par value of auction rate securities, less a temporary valuation adjustment of approximately $7.2 million to reflect the current lack of liquidity of these investments. Since this valuation adjustment is deemed to be temporary, it was recorded in other comprehensive income, net of the related tax benefit of $2.7 million, and did not affect the Company’s earnings for the three months ended May 31, 2008. During the three months ended May 31, 2008, approximately $4.8 million of auction rate securities were redeemed at par.  The Company classified these investments primarily as long term investment securities at May 31, 2008 to reflect the current lack of liquidity of these investments. All of these investments carry triple-A credit ratings from one or more of the major credit rating agencies as of May 31, 2008. Approximately $278.7 million of these securities at par are invested in preferred shares of closed end municipal bond funds, which are required, pursuant to the Investment Company Act of 1940, to maintain minimum asset coverage ratios of 200%.  The remaining approximately $43.2 million at par are invested in securities collateralized by student loans which are currently more than 100% collateralized and with approximately 90% of such collateral in the aggregate being guaranteed by the United States government.  None of the auction rate securities held by the Company are mortgage-backed debt obligations.

From June 1, 2008 through July 8, 2008, the Company had redemptions of auction rate securities of approximately $15.2 million at par.

Available-for-sale securities

As of March 1, 2008, the Company had approximately $326.7 million par value of auction rate securities, less a temporary valuation adjustment of approximately $7.2 million to reflect the current lack of liquidity of these investments. Since this valuation adjustment is deemed to be temporary, it was recorded in other comprehensive income, net of the related tax benefit of $2.7 million, and did not affect the Company’s earnings for fiscal 2007. The Company reclassified these investments to long term investment securities at March 1, 2008 to reflect the current lack of liquidity of these investments. All of these investments carry triple-A credit ratings from one or more of the major credit rating agencies. Approximately $283.5 million of these securities at par are invested in preferred shares of closed end municipal bond funds, which are required, pursuant to the Investment Company Act of 1940, to maintain minimum asset coverage ratios of 200%. The remaining approximate $43.2 million at par are invested in securities collateralized by student loans which are currently more than 100% collateralized and with approximately 90% of such collateral in the aggregate being guaranteed by the United States government. None of the auction rate securities held by the Company are mortgage-backed debt obligations.

The Company’s auction rate securities carry interest rates that reset periodically, every 7, 28 or 35 days, through an auction process. Due to current market conditions, these investments have experienced failed auctions beginning in mid-February 2008. These failed auctions result in a lack of liquidity in the securities, but do not affect the underlying collateral of the securities. Upon the auction failures of the securities held by the Company, the interest rates reset based on a predetermined maximum contractual rate, which is nominally higher than the interest rates earned prior to the auction failures. The Company continues to earn and receive interest on these securities. The Company’s auction rate securities will continue to be presented for auction every 7, 28 or 35 days until the auction succeeds, the issuer calls the security, or they mature, as in the case of securities collateralized by student loans.