Bed Bath & Beyond (BBBY)

Liquidity and Capital Resources

Fiscal 2008 compared to Fiscal 2007

The Company has been able to finance its operations, including its expansion program, through internally generated funds. Net cash provided by operating activities for the nine months ended November 29, 2008 was $107.0 million as compared with $239.9 million in the corresponding period of fiscal 2007. The decrease in net cash provided by operating activities was principally driven by lower net earnings.

Inventory per square foot was $60.85 as of November 29, 2008, a slight decrease compared to the $60.91 as of December 1, 2007. Excluding the incremental inventory in the Company’s new distribution and E-service fulfillment facilities, which opened in the fourth quarter of fiscal 2007, inventory per square foot decreased by approximately 2.6% from December 1, 2007 to November 29, 2008.

Net cash used in investing activities for the nine months ended November 29, 2008 was $72.5 million as compared with $349.0 million of net cash provided by investing activities in the corresponding period of fiscal 2007. The current year use of cash in investing activities is primarily due to $163.0 million of capital expenditures partially offset by $95.3 million of redemptions of investment securities. In the prior year, net cash was provided by $691.9 million of redemptions of investment securities, net of purchases, partially offset by $257.1 million of capital expenditures and the $85.9 million payment for the acquisition of buybuy BABY.

Net cash used in financing activities for the nine months ended November 29, 2008 was $25.2 million as compared with $611.8 million in the corresponding period of 2007. The decline in net cash used was primarily attributable to a decrease in common stock repurchases in the current year.

Auction Rate Securities

As of November 29, 2008, the Company held approximately $231.4 million of investments related to auction rate securities. In October 2008, the Company entered into an agreement (the “Agreement”) with the investment firm that sold the Company a portion of its auction rate securities, which have a par value of approximately $43.2 million at November 29, 2008.  By entering into the Agreement, the Company (1) received the right (“Put Option”) to sell these auction rate securities back to the investment firm at par, at its sole discretion, anytime during the period from June 30, 2010 through July 2, 2012, and (2) gave the investment firm the right to purchase these auction rate securities or sell them on the Company’s behalf at par anytime after the execution of the Agreement through July 2, 2012. The Company

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Liquidity and Capital Resources

Fiscal 2008 compared to Fiscal 2007

The Company has been able to finance its operations, including its expansion program, through internally generated funds. Net cash provided by operating activities for the six months ended August 30, 2008 was $168.0 million as compared with $277.9 million in the corresponding period of fiscal 2007. The decrease in net cash provided by operating activities was principally driven by lower net earnings and working capital changes primarily due to an increase in merchandise inventories partially offset by an increase in accounts payable.

Inventory per square foot was $58.81 as of August 30, 2008, an increase of approximately 5% from $56.02 as of September 1, 2007. Excluding the inventory in the Company’s new distribution and E-service fulfillment facilities, which opened in the fourth quarter of fiscal 2007, the increase in inventory per square foot from September 1, 2007 to August 30, 2008 was approximately 1%. The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the six months ended August 30, 2008 was $80.1 million as compared with $146.5 million of net cash provided by investing activities in the corresponding period of fiscal 2007. The current year use of cash in investing activities is primarily due to capital expenditures partially offset by redemptions of investment securities. In the prior year, net cash was provided by redemptions of investment securities, net of purchases, partially offset by capital expenditures and the payment for the acquisition of buybuy BABY.

Net cash used in financing activities for the six months ended August 30, 2008 was $23.5 million as compared with $514.8 million in the corresponding period of 2007. The decline in net cash used was primarily attributable to a decrease in common stock repurchases in the current year.

Auction Rate 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. 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. The Company believes that given their high credit quality, it will ultimately recover at par all amounts invested in these securities. The Company does not anticipate that any potential lack of liquidity in these auction rate securities, even for an extended period of time, will affect its ability to finance its operations, including its expansion program and planned capital expenditures. The Company continues to monitor efforts by the financial markets to find alternative means for restoring the liquidity of these investments. During the six months ended August 30, 2008, approximately $31.4 million of auction rate securities were redeemed at par. These investments are primarily classified as non-current assets until the Company has better visibility as to when their liquidity will be restored.  The classification and valuation of these securities will continue to be reviewed quarterly.

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Liquidity and Capital Resources

Fiscal 2008 compared to Fiscal 2007

The Company has been able to finance its operations, including its expansion program, through internally generated funds. Net cash provided by operating activities for the three months ended May 31, 2008 was $65.8 million as compared with $117.6 million in the corresponding period of fiscal 2007. The decrease in net cash provided by operating activities was principally driven by lower net earnings and working capital changes primarily due to an increase in merchandise inventories partially offset by an increase in accounts payable.

Inventory per square foot was $56.72 as of May 31, 2008 and $55.08 as of June 2, 2007. The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the three months ended May 31, 2008 was $51.5 million as compared with $128.9 million of net cash provided by investing activities in the corresponding period of fiscal 2007. The current year use of cash in investing activities is primarily due to capital expenditures. In the prior year, net cash was provided by redemptions of investment securities, net of purchases, which was partially offset by the payment for the acquisition of buybuy BABY and capital expenditures.

Net cash provided by financing activities for the three months ended May 31, 2008 was $1.9 million as compared with $276.8 million of net cash used in financing activities, in the corresponding period of 2007. The change in net cash due to financing activities was primarily attributable to a decrease in common stock repurchases in the current year.

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Liquidity and Capital Resources

The Company has been able to finance its operations, including its expansion program, through internally generated funds. Net cash provided by operating activities for the nine months ended December 1, 2007 was $239.9 million as compared with $217.7 million in the corresponding period of fiscal 2006. The increase in net cash provided by operating activities in 2007 compared to 2006 was primarily the result of an increase in net earnings, as adjusted for non-cash expenses, primarily depreciation. There were no significant changes in the net components of working capital.

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Liquidity and Capital Resources

The Company has been able to finance its operations, including its expansion program, through internally generated funds. Net cash provided by operating activities for the six months ended September 1, 2007 was $277.9 million as compared with $233.7 million in the corresponding period of fiscal 2006. The increase in net cash provided by operating activities in 2007 compared to 2006 was principally driven by working capital changes primarily due to a favorable change in merchandise inventories partially offset by unfavorable changes in other current assets and accounts payable, and an increase in income taxes payable (primarily due to the timing of payments).

Inventory per square foot was $56.02 as of September 1, 2007 and $54.22 as of August 26, 2006. The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash provided by investing activities for the six months ended September 1, 2007 was $146.5 million as compared with net cash used of $320.6 million in the corresponding period of fiscal 2006. The increase in net cash provided by investing activities was primarily attributable to an increase in the redemptions of investment securities and a decrease in the purchase of investment securities partially offset by the acquisition of buybuy BABY.

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Liquidity and Capital Resources

The Company has been able to finance its operations, including its expansion program, through internally generated funds. Net cash provided by operating activities for the three months ended June 2, 2007 was $117.6 million as compared with $82.0 million in the corresponding period of fiscal 2006. The increase in net cash provided by operating activities was principally driven by working capital changes primarily due to a favorable change in merchandise inventories partially offset by an unfavorable change in accounts payable, and an increase in income taxes payable (primarily due to the timing of payments).

Inventory per square foot was $55.08 as of June 2, 2007 and $53.87 as of May 27, 2006.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash provided by investing activities for the three months ended June 2, 2007 was $128.9 million as compared with net cash used of $248.9 million in the corresponding period of fiscal 2006.  The decrease in net cash used in investing activities was primarily attributable to an increase in the redemptions of investment securities and a decrease in the purchase of investment securities partially offset by the acquisition of buybuy BABY.

Net cash used in financing activities for the three months ended June 2, 2007 was $276.8 million as compared with $7.0 million of net cash provided by financing activities, in the corresponding period of 2006. The net cash used in financing activities was primarily attributable to common stock repurchases of $289.2 million.

Liquidity and Capital Resources

Net cash provided by operating activities for the nine months ended November 25, 2006 was $217.7 million as compared with $297.4 million in the corresponding period of fiscal 2005.  This decrease is driven by working capital changes due to the increase in merchandise inventories (primarily as a result of new store space) and an increase in other current assets (due to an increase in receivables).

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Inventory per square foot was $60.06 as of November 25, 2006 and $56.98 as of November 26, 2005.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the nine months ended November 25, 2006 was $187.7 million as compared with $178.9 million in the corresponding period of fiscal 2005.  The increase in net cash used in investing activities was attributable to a decrease in redemptions of investment securities and an increase in capital expenditures partially offset by a decrease in purchases of investment securities.

Net cash provided by financing activities for the nine months ended November 25, 2006 was $22.7 million as compared with $28.0 million in the corresponding period of 2005. The decrease in net cash provided by financing activities is primarily attributable to a decrease in proceeds from the exercise of stock options in the current year, partially offset by the increase in the excess tax benefit from stock-based compensation.

For fiscal 2006, the Company believes that its current operating cash flow, working capital and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of business, including capital expenditures and new store openings.

On December 20, 2006, subsequent to the end of the fiscal third quarter, the Company announced that the Board of Directors approved a $1 billion share repurchase program, authorizing the repurchase of its common stock.  The Company intends to fund the program from present and expected future excess cash flows.

Liquidity and Capital Resources

Net cash provided by operating activities for the six months ended August 26, 2006 was $233.7 million as compared with $246.7 million in the corresponding period of fiscal 2005.  This decrease is driven by working capital changes due to the increase in merchandise inventories (primarily as a result of new store space) partially offset by increases in accounts payable and accrued expenses and other liabilities (as a result of the timing of payments).

Inventory per square foot was $54.22 as of August 26, 2006 and $52.23 as of August 27, 2005.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

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Net cash used in investing activities for the six months ended August 26, 2006 was $320.6 million as compared with $193.1 million in the corresponding period of fiscal 2005.  The increase in net cash used in investing activities was primarily attributable to a decrease in redemptions of investment securities partially offset by a decrease in purchases of investment securities.

Net cash provided by financing activities for the six months ended August 26, 2006 was $7.2 million as compared with $20.7 million in the corresponding period of 2005.  The decrease in net cash provided by financing activities is primarily attributable to a decrease in proceeds from the exercise of stock options in the current year.

For fiscal 2006, the Company believes that its current operating cash flow, working capital and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of business, including capital expenditures and new store openings.

Liquidity and Capital Resources

Net cash provided by operating activities for the three months ended May 27, 2006 was $82.0 million as compared with $97.7 million in the corresponding period of fiscal 2005. The decrease in net cash provided by operating activities was primarily due to a decrease in accounts payable and accrued liabilities (due to timing of payments) and a decrease in the excess tax benefit from stock-based compensation (due to fewer stock option exercises and the adoption of SFAS No. 123R).

Inventory per square foot was $53.87 as of May 27, 2006 and $53.29 as of May 28, 2005. The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the three months ended May 27, 2006 was $248.9 million as compared with $104.1 million in the corresponding period of fiscal 2005. The increase in net cash

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used in investing activities was primarily attributable to a decrease in redemptions of investment securities partially offset by a decrease in purchases of investment securities.

Net cash provided by financing activities for the three months ended May 27, 2006 was $7.0 million as compared with $8.8 million in the corresponding period of 2005. The decrease in net cash provided by financing activities is primarily attributable to a decrease in proceeds from the exercise of stock options in the current year.

For fiscal 2006, the Company believes that its current operating cash flow, working capital and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of business, including capital expenditures and new store openings.

Liquidity and Capital Resources

Net cash provided by operating activities for the nine months ended November 26, 2005 was $312.4 million as compared with $315.3 million in the corresponding period of fiscal 2004.  The modest decrease in net cash provided by operating activities was primarily attributable to an increase in merchandise inventories (primarily as a result of new store space) and a decrease in income taxes payable, offset by the timing of certain liability payments.

Inventory per square foot was $56.98 as of November 26, 2005 and $54.29 as of November 27, 2004.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the nine months ended November 26, 2005 was $193.9 million as compared with $285.4 million in the corresponding period of fiscal 2004.  The decrease in net cash used in investing activities was attributable to a decrease in purchases of investment securities partially offset by a decrease in redemptions of investment securities and an increase in capital expenditures.  The increase in capital expenditures was primarily attributable to expenditures for furniture, fixtures and leasehold improvements for the new BBB stores opened and stores under construction during the first nine months of fiscal 2005, a warehouse facility expansion and information technology enhancements, compared to expenditures for furniture, fixtures and leasehold improvements for the new BBB stores opened and stores under construction and information technology enhancements in the corresponding period last year.

Net cash provided by financing activities for the nine months ended November 26, 2005 was $28.0 million as compared with $20.8 million in the corresponding period of 2004.  The increase in net cash provided by financing activities is primarily attributable to an increase in proceeds from the exercise of stock options in the current year.

For fiscal 2005, the Company believes that its current operating cash flow, working capital and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of business, including capital expenditures and new store openings.

Liquidity and Capital Resources

Net cash provided by operating activities for the six months ended August 27, 2005 was $246.5 million as compared with $243.6 million in the corresponding period of fiscal 2004.  The increase in net cash provided by operating activities was primarily attributable to an increase in net income, the timing of certain liability payments, an increase in the tax benefit received from the exercise of stock options, and an increase in deferred rent and other liabilities, mostly offset by an increase in merchandise inventories (primarily a result of new store space) and a decrease in income taxes payable.

Inventory per square foot was $52.23 as of August 27, 2005 and $49.42 as of August 28, 2004.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the six months ended August 27, 2005 was $192.9 million as compared with $245.1 million in the corresponding period of fiscal 2004.  The decrease in net cash used in investing activities was attributable to a decrease in purchases of investment securities partially offset by a decrease in redemptions of investment securities and an increase in capital expenditures.  The increase in capital expenditures was primarily attributable to expenditures for furniture, fixtures and leasehold improvements for the 26 new BBB stores opened and stores under construction during the first six months of fiscal 2005, a warehouse facility expansion and information technology enhancements, compared to expenditures for furniture, fixtures and leasehold improvements for the 31 new BBB stores opened and stores under construction and information technology enhancements in the corresponding period last year.

Net cash provided by financing activities for the six months ended August 27, 2005 was $20.7 million as compared with $2.0 million in the corresponding period of 2004.  The increase in net cash provided by financing activities is attributable to an increase in proceeds from the exercise of stock options in the current year.

For fiscal 2005, the Company believes that its current operating cash flow, working capital, and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of business, including capital expenditures and new store openings.

Liquidity and Capital Resources

Net cash provided by operating activities for the three months ended May 28, 2005 was $87.6 million as compared with $60.1 million in the corresponding period of fiscal 2004.  The increase in net cash provided by operating activities was primarily attributable to an increase in net income, the timing of certain liability payments, an increase in income taxes payable and an increase in the tax benefit received from the exercise of stock options, partially offset by an increase in merchandise inventories (primarily a result of new store space).

Inventory per square foot was $53.29 as of May 28, 2005 and $50.96 as of May 29, 2004.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the three months ended May 28, 2005 was $94.0 million as compared with $97.9 million in the corresponding period of fiscal 2004.  The decrease in net cash used in investing activities was attributable to a decrease in purchases of investment securities partially offset by a decrease in redemptions of investment securities and an increase in capital expenditures.  The increase in capital expenditures was primarily attributable to expenditures for

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Liquidity and Capital Resources

Net cash provided by operating activities for the nine months ended November 27, 2004 was $315.3 million as compared with $300.9 million in the corresponding period of fiscal 2003.  The increase in net cash provided by operating activities was primarily attributable to an increase in net income partially offset by an increase in merchandise inventories (primarily a result of new store space), the timing of liability payments and the reduction of the tax benefit received from the exercise of stock options.

Inventory per square foot was $54.29 as of November 27, 2004 and $57.49 as of November 29, 2003.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the nine months ended November 27, 2004 was $379.2 million as compared with $224.1 million used in the corresponding period of fiscal 2003.  This change is primarily the result of a net increase in investment securities in the current year and the payment for the acquisition of CTS in the prior year. The increase in capital expenditures was primarily attributable to expenditures for furniture, fixtures and leasehold improvements for the 65 new BBB stores opened during the first nine months of fiscal 2004 and information technology enhancements, compared to expenditures for leasehold improvements, furniture, fixtures and information technology for the 79 new BBB stores opened in the corresponding period last year.

Net cash provided by financing activities for the nine months ended November 27, 2004 was $20.8 million as compared with $27.9 million in the corresponding period of 2003.  The decrease in net cash provided by financing activities is primarily attributable to a decrease in proceeds from the exercise of stock options in the current year offset by the prepayment of CTS’ debt in the prior year in conjunction with the acquisition.

For fiscal 2004, the Company believes that its current operating cash flow, working capital, and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of

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Liquidity and Capital Resources

Net cash provided by operating activities for the nine months ended November 27, 2004 was $315.3 million as compared with $300.9 million in the corresponding period of fiscal 2003.  The increase in net cash provided by operating activities was primarily attributable to an increase in net income partially offset by an increase in merchandise inventories (primarily a result of new store space), the timing of liability payments and the reduction of the tax benefit received from the exercise of stock options.

Inventory per square foot was $54.29 as of November 27, 2004 and $57.49 as of November 29, 2003.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the nine months ended November 27, 2004 was $379.2 million as compared with $224.1 million used in the corresponding period of fiscal 2003.  This change is primarily the result of a net increase in investment securities in the current year and the payment for the acquisition of CTS in the prior year. The increase in capital expenditures was primarily attributable to expenditures for furniture, fixtures and leasehold improvements for the 65 new BBB stores opened during the first nine months of fiscal 2004 and information technology enhancements, compared to expenditures for leasehold improvements, furniture, fixtures and information technology for the 79 new BBB stores opened in the corresponding period last year.

Net cash provided by financing activities for the nine months ended November 27, 2004 was $20.8 million as compared with $27.9 million in the corresponding period of 2003.  The decrease in net cash provided by financing activities is primarily attributable to a decrease in proceeds from the exercise of stock options in the current year offset by the prepayment of CTS’ debt in the prior year in conjunction with the acquisition.

For fiscal 2004, the Company believes that its current operating cash flow, working capital, and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of

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