BBY 5/5/12 10Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 5, 2012 

OR 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to             

Commission File Number: 1-9595

 
BEST BUY CO., INC.
(Exact name of registrant as specified in its charter)
Minnesota
 
41-0907483
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
7601 Penn Avenue South
 
 
Richfield, Minnesota
 
55423
(Address of principal executive offices)
 
(Zip Code)
(612) 291-1000
(Registrant’s telephone number, including area code) 
N/A
(Former name, former address and former fiscal year, if changed since last report) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer ¨
 
 
 
Non-accelerated filer ¨
 
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ¨ No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS: 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $.10 Par Value — 339,903,251 shares outstanding as of June 6, 2012.


Table of Contents

BEST BUY CO., INC.
FORM 10-Q FOR THE QUARTER ENDED MAY 5, 2012 
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2
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PART I — FINANCIAL INFORMATION
 
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS
 
BEST BUY CO., INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
ASSETS 
($ in millions, except per share amounts) 
(Unaudited)
 
May 5, 2012
 
March 3, 2012
 
April 30, 2011
 
 
 
 
 
(recast)
CURRENT ASSETS
 

 
 

 
 
Cash and cash equivalents
$
1,386

 
$
1,199

 
$
2,793

Short-term investments
—

 
—

 
20

Receivables
1,846

 
2,288

 
1,713

Merchandise inventories
6,065

 
5,731

 
6,508

Other current assets
1,019

 
1,079

 
1,135

Total current assets
10,316

 
10,297

 
12,169

 
 
 
 
 
 
PROPERTY AND EQUIPMENT, NET
3,407

 
3,471

 
3,797

 
 
 
 
 
 
GOODWILL
1,335

 
1,335

 
2,506

 
 
 
 
 
 
TRADENAMES, NET
130

 
130

 
136

 
 
 
 
 
 
CUSTOMER RELATIONSHIPS, NET
224

 
229

 
194

 
 
 
 
 
 
EQUITY AND OTHER INVESTMENTS
128

 
140

 
316

 
 
 
 
 
 
OTHER ASSETS
471

 
403

 
454

 
 
 
 
 
 
TOTAL ASSETS
$
16,011

 
$
16,005

 
$
19,572

 
NOTE:  The Consolidated Balance Sheet as of March 3, 2012, has been condensed from the audited consolidated financial statements.
 
See Notes to Condensed Consolidated Financial Statements.

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BEST BUY CO., INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
LIABILITIES AND EQUITY 
($ in millions, except per share amounts)
(Unaudited)
 
May 5,
2012
 
March 3,
2012
 
April 30,
2011
 
 
 
 
 
(recast)
CURRENT LIABILITIES
 

 
 

 
 

Accounts payable
$
5,731

 
$
5,364

 
$
6,102

Unredeemed gift card liabilities
416

 
456

 
453

Accrued compensation and related expenses
638

 
539

 
538

Accrued liabilities
1,595

 
1,685

 
1,585

Accrued income taxes
272

 
288

 
308

Short-term debt
306

 
480

 
39

Current portion of long-term debt
43

 
43

 
442

Total current liabilities
9,001

 
8,855

 
9,467

 
 
 
 
 
 
LONG-TERM LIABILITIES
1,025

 
1,099

 
1,179

 
 
 
 
 
 
LONG-TERM DEBT
1,678

 
1,685

 
1,704

 
 
 
 
 
 
CONTINGENCIES AND COMMITMENTS
 
 
 
 
 
 
 
 
 
 
 
EQUITY
 

 
 

 
 

Best Buy Co., Inc. shareholders’ equity
 

 
 

 
 

Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none
—

 
—

 
—

Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 342,247,000, 341,400,000 and 383,610,000 shares, respectively
34

 
34

 
38

Additional paid-in capital
20

 
—

 
—

Retained earnings
3,520

 
3,621

 
6,175

Accumulated other comprehensive income
98

 
90

 
274

Total Best Buy Co., Inc. shareholders’ equity
3,672

 
3,745

 
6,487

Noncontrolling interests
635

 
621

 
735

Total equity
4,307

 
4,366

 
7,222

 
 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
$
16,011

 
$
16,005

 
$
19,572

 
NOTE:  The Consolidated Balance Sheet as of March 3, 2012, has been condensed from the audited consolidated financial statements.
 
See Notes to Condensed Consolidated Financial Statements.

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BEST BUY CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
($ in millions, except per share amounts)
(Unaudited)
 
Three Months Ended
 
May 5, 2012
 
April 30, 2011
 
 
 
(recast)
Revenue
$
11,610

 
$
11,369

Cost of goods sold
8,703

 
8,448

Gross profit
2,907

 
2,921

Selling, general and administrative expenses
2,518

 
2,457

Restructuring charges
127

 
4

Operating income
262

 
460

Other income (expense)
 

 
 

Investment income and other
6

 
17

Interest expense
(33
)
 
(28
)
Earnings from continuing operations before income tax expense and equity in loss of affiliates
235

 
449

Income tax expense
72

 
155

Equity in loss of affiliates
(2
)
 
(1
)
Net earnings from continuing operations
161

 
293

Loss from discontinued operations (Note 3), net of tax benefit of $6 and $20
(9
)
 
(54
)
Net earnings including noncontrolling interests
152

 
239

Net (earnings) from continuing operations attributable to noncontrolling interests
—

 
(38
)
Net loss from discontinued operations attributable to noncontrolling interests
6

 
11

Net earnings attributable to Best Buy Co., Inc.
$
158

 
$
212

 
 
 
 
Basic earnings (loss) per share attributable to Best Buy Co., Inc.
 

 
 

Continuing operations
$
0.47

 
$
0.65

Discontinued operations
(0.01
)
 
(0.11
)
Basic earnings per share
$
0.46

 
$
0.54

 
 
 
 
Diluted earnings (loss) per share attributable to Best Buy Co., Inc.
 
 
 
Continuing operations
$
0.47

 
$
0.64

Discontinued operations
(0.01
)
 
(0.11
)
Diluted earnings per share
$
0.46

 
$
0.53

 
 
 
 
Dividends declared per common share
$
0.16

 
$
0.15

 
 
 
 
Weighted-average common shares outstanding (in millions)
 

 
 

Basic
342.2

 
391.1

Diluted
342.8

 
400.7

 
 
 
 
Comprehensive income including noncontrolling interests
$
196

 
$
382

Comprehensive (income) attributable to noncontrolling interests
(14
)
 
(49
)
Comprehensive income attributable to Best Buy Co., Inc.
$
182

 
$
333

 
See Notes to Condensed Consolidated Financial Statements. 

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BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 
FOR THE THREE MONTHS ENDED MAY 5, 2012, AND APRIL 30, 2011 
($ and shares in millions) 
(Unaudited)
 
Best Buy Co., Inc.
 
 
 
 
 
Common
Shares
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total 
Best Buy
Co., Inc.
 
Non
controlling
Interests
 
Total
Balances at March 3, 2012
341

 
$
34

 
$
—

 
$
3,621

 
$
90

 
$
3,745

 
$
621

 
$
4,366

Adjustment for fiscal year-end change (Note 2)
5

 
—

 
—

 
(108
)
 
(16
)
 
(124
)
 
—

 
(124
)
Balances at January 28, 2012
346

 
34

 
—

 
3,513

 
74

 
3,621

 
621

 
4,242

Net earnings, three months ended May 5, 2012
—

 
—

 
—

 
158

 
—

 
158

 
(6
)
 
152

Foreign currency translation adjustments
—

 
—

 
—

 
—

 
23

 
23

 
20

 
43

Unrealized losses on available-for-sale investments
—

 
—

 
—

 
—

 
1

 
1

 
—

 
1

Stock-based compensation
—

 
—

 
33

 
—

 
—

 
33

 
—

 
33

Issuance of common stock under employee stock purchase plan
1

 
—

 
13

 
—

 
—

 
13

 
—

 
13

Tax deficit from stock options exercised, restricted stock vesting and employee stock purchase plan
—

 
—

 
(9
)
 
—

 
—

 
(9
)
 
—

 
(9
)
Common stock dividends, $0.16 per share
—

 
—

 
—

 
(53
)
 
—

 
(53
)
 
—

 
(53
)
Repurchase of common stock
(5
)
 
—

 
(17
)
 
(98
)
 
—

 
(115
)
 
—

 
(115
)
Balances at May 5, 2012
342

 
$
34

 
$
20

 
$
3,520

 
$
98

 
$
3,672

 
$
635

 
$
4,307

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at February 26, 2011
393

 
$
39

 
$
18

 
$
6,372

 
$
173

 
$
6,602

 
$
690

 
$
7,292

Adjustment for fiscal year-end change (Note 2)
—

 
—

 
(18
)
 
(115
)
 
(20
)
 
(153
)
 
—

 
(153
)
Balances at January 29, 2011
393

 
39

 
—

 
6,257

 
153

 
6,449

 
690

 
7,139

Net earnings, three months ended April 30, 2011
—

 
—

 
—

 
212

 
—

 
212

 
27

 
239

Foreign currency translation adjustments
—

 
—

 
—

 
—

 
125

 
125

 
20

 
145

Unrealized gains on available-for-sale investments
—

 
—

 
—

 
—

 
(6
)
 
(6
)
 
—

 
(6
)
Cash flow hedging instruments – unrealized gains
—

 
—

 
—

 
—

 
2

 
2

 
2

 
4

Dividend distribution
—

 
—

 
—

 
—

 
—

 
—

 
(4
)
 
(4
)
Stock-based compensation
—

 
—

 
37

 
—

 
—

 
37

 
—

 
37

Stock options exercised
1

 
—

 
25

 
—

 
—

 
25

 
—

 
25

Issuance of common stock under employee stock purchase plan
1

 
—

 
23

 
—

 
—

 
23

 
—

 
23

Tax benefit from stock options exercised, restricted stock vesting and employee stock purchase plan
—

 
—

 
2

 
—

 
—

 
2

 
—

 
2

Common stock dividends, $0.15 per share
—

 
—

 
—

 
(57
)
 
—

 
(57
)
 
—

 
(57
)
Repurchase of common stock
(11
)
 
(1
)
 
(87
)
 
(237
)
 
—

 
(325
)
 
—

 
(325
)
Balances at April 30, 2011 (recast)
384

 
$
38

 
$
—

 
$
6,175

 
$
274

 
$
6,487

 
$
735

 
$
7,222

See Notes to Condensed Consolidated Financial Statements.

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BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions) 
(Unaudited)
 
Three Months Ended
 
May 5, 2012
 
April 30, 2011
 
 
 
(recast)
OPERATING ACTIVITIES
 
 
 
Net earnings including noncontrolling interests
$
152

 
$
239

Adjustments to reconcile net earnings including noncontrolling interests to total cash provided by operating activities
 
 
 
Depreciation
227

 
222

Amortization of definite-lived intangible assets
10

 
15

Restructuring charges
133

 
32

Stock-based compensation
33

 
37

Deferred income taxes
(98
)
 
(129
)
Other, net
20

 
—

Changes in operating assets and liabilities
 
 
 
Receivables
623

 
616

Merchandise inventories
765

 
926

Other assets
(96
)
 
(27
)
Accounts payable
(1,153
)
 
(561
)
Other liabilities
(264
)
 
(113
)
Income taxes
27

 
86

Total cash provided by operating activities
379

 
1,343

 
 
 
 
INVESTING ACTIVITIES
 

 
 

Additions to property and equipment
(141
)
 
(172
)
Purchases of investments
(5
)
 
(21
)
Sales of investments
17

 
44

Acquisition of businesses, net of cash acquired
(10
)
 
—

Proceeds from sale of business, net of cash transferred
25

 
—

Change in restricted assets
20

 
6

Total cash used in investing activities
(94
)
 
(143
)
 
 
 
 
FINANCING ACTIVITIES
 

 
 

Repurchase of common stock
(132
)
 
(260
)
Borrowings of debt
221

 
1,406

Repayments of debt
(416
)
 
(945
)
Issuance of common stock under employee stock purchase plan and for the exercise of stock options
13

 
48

Other, net
9

 
(12
)
Total cash (used in) provided by financing activities
(305
)
 
237

 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
5

 
18

 
 
 
 
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS BEFORE ADJUSTMENT
(15
)
 
1,455

 
 
 
 
ADJUSTMENT FOR FISCAL YEAR-END CHANGE (NOTE 2)
202

 
235

 
 
 
 
INCREASE IN CASH AND CASH EQUIVALENTS AFTER ADJUSTMENT
187

 
1,690

 
 
 
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
1,199

 
1,103

 
 
 
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
1,386

 
$
2,793


See Notes to Condensed Consolidated Financial Statements.

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BEST BUY CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in millions, except per share amounts)
(Unaudited)
1.
Basis of Presentation
 
Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Condensed Consolidated Financial Statements refers to Best Buy Co., Inc. and its consolidated subsidiaries.
 
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.
 
Historically, we have realized more of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Europe and Canada, than in any other fiscal quarter. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 3, 2012.
 
Beginning in the first quarter of fiscal 2013, we changed our fiscal year-end. As a result of the change in our fiscal year-end, the comparable prior year financial statements have been recast to conform to the new fiscal calendar. The first quarter of fiscal 2013 included 14 weeks and the recast first quarter of 2012 included 13 weeks. See Note 2, Fiscal Year-end Change, for further information.
 
In order to align our fiscal reporting periods and comply with statutory filing requirements in certain foreign jurisdictions, we consolidate the financial results of our Europe, China and Mexico operations ("lag entities") on a one-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our consolidated financial statements. There were no significant intervening events which would have materially affected our financial condition, results of operations or liquidity had they been recorded during the three months ended May 5, 2012.
 
In preparing the accompanying condensed consolidated financial statements, we evaluated the period from May 6, 2012, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified for this period.

New Accounting Standards
 
Goodwill Impairment — In September 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance on the testing of goodwill for impairment. Under the new guidance, entities may make a qualitative assessment of the likelihood of goodwill impairment in order to determine whether a detailed quantitative analysis is required. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. As such, we adopted the new guidance on March 4, 2012, and determined that it did not have an impact on our consolidated financial position, results of operations or cash flows.

Comprehensive Income — In June 2011, the FASB issued new guidance on the presentation of comprehensive income. Specifically, the new guidance requires an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminated the previous option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changed the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. As such, we adopted the new guidance on March 4, 2012, and have presented total comprehensive income in our Condensed Consolidated Statements of Earnings and Comprehensive Income.

Fair Value Measurement — In April 2011, the FASB issued new guidance to converge fair value measurement and disclosure guidance with International Financial Reporting Standards. This new guidance amended current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. As such, we adopted the new

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guidance on March 4, 2012, and determined that it did not have an impact on our consolidated financial position, results of operations or cash flows.

2.
Fiscal Year-end Change

Beginning in the first quarter of fiscal 2013, we changed our fiscal year-end from the Saturday nearest the end of February to the Saturday nearest the end of January. As a result of this change, our fiscal year 2013 is an 11-month transition period ending on February 2, 2013. In the first quarter of fiscal 2013, we also began consolidating the results of our Europe, China and Mexico operations on a one-month lag as a result of this change, compared to a two-month lag in fiscal year 2012, to continue to align our fiscal reporting periods with statutory filing requirements in certain foreign jurisdictions.

In order to allow an immediate transition to our new fiscal calendar and to maintain transparency and comparability of financial information included in our quarterly Form 10-Q filings, we are presenting such quarterly information on a three-month basis for both the current and prior fiscal years, in both instances based on the new fiscal calendar. Following the change to our fiscal calendar, the first quarter of fiscal 2013 is the three months ended May 5, 2012. Therefore, the Condensed Consolidated Statements of Earnings and Comprehensive Income, Consolidated Statements of Changes in Shareholders' Equity and Consolidated Statements of Cash Flows reflect results for the three-month period ended May 5, 2012. These results include our fiscal month ended March 3, 2012 (“February 2012”) for operations that are not reported on a lag (primarily our Domestic segment and Canadian operations), which were also included in our results for the fiscal year ended March 3, 2012 included in our fiscal 2012 Form 10-K. The change in fiscal calendar does not impact our quarterly financial statements for our lag entities because the reduction in the lag period from two months to one month occurred concurrent with the change in our fiscal calendar.

The following table shows the fiscal months included in the first quarters of fiscal 2013 and 2012 under our new fiscal calendar, as well as the fiscal months included the first quarter of fiscal 2012 under our previous fiscal calendar:
New Fiscal Calendar(1)
 
Previous Fiscal Calendar(1)
2013
 
2012
 
2012
February 2012 - April 2012
 
February 2011 - April 2011
 
March 2011 - May 2011
(1) 
For entities reported on a lag, the fiscal months included in the first quarters of fiscal 2013 and 2012 were January through March under both the new and previous fiscal calendars.

The Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Earnings and Comprehensive Income, Consolidated Statements of Changes in Shareholders' Equity, Consolidated Statements of Cash Flows and corresponding Notes are presented based on the new fiscal calendar (May 5, 2012 for fiscal 2013 and April 30, 2011 for fiscal 2012) and the most recent audited fiscal year (March 3, 2012).

Results for February 2012 and February 2011

As a result of the overlap of February 2012 between the fourth quarter of fiscal 2012 (previous fiscal calendar) and the first quarter of fiscal 2013 (new fiscal calendar), $3,908 of revenue from February 2012 is included in our Condensed Consolidated Statements of Earnings and Comprehensive Income for the first quarter of fiscal 2013, which was also included in our results for the fiscal year ended March 3, 2012 included in our fiscal 2012 Form 10-K.

The following table provides a summary of the adjustment to Retained earnings within the Consolidated Statements of Changes in Shareholders' Equity as a result of the overlap of February 2012 between the fourth quarter of fiscal 2012 (previous fiscal calendar) and the first quarter of fiscal 2013 (new fiscal calendar), as well as a similar overlap in the prior-year period. The primary components of the net reconciling item to Retained earnings include the net earnings from the Domestic segment and Canadian operations, offset by the impact of share repurchases which reduced Retained earnings upon their retirement.
 
February 2012
 
February 2011
Net earnings
$
206

 
$
115

Impact of share repurchases(1)
(98
)
 
—

Net reconciling item to Retained earnings
$
108

 
$
115

(1)
Share repurchases reduced Retained earnings after the Additional paid-in capital balance was reduced to zero during February 2012.


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In addition, the Consolidated Statements of Cash Flows includes a net reconciling item (adjustment) for the cash flows as a result of the overlap described above. The total adjustment for the overlap of February 2012 was $202, primarily due to $135 of cash used in financing activities and $46 of cash used in investing activities. The total adjustment for February 2011 was $235 due almost entirely to $228 of cash used in operating activities. The adjustments for both periods included the effect of exchange rate changes on our cash balances.

3.
Discontinued Operations

Discontinued operations comprise: (i) Napster operations within our Domestic segment; (ii) large-format Best Buy branded store operations in China, Turkey and the United Kingdom ("U.K.") within our International segment; and (iii) The PhoneHouse stores in Belgium within our International Segment. Discontinued operations presentation has been retrospectively applied to all prior periods presented.

The financial results of discontinued operations for three months ended May 5, 2012, and April 30, 2011, were as follows:
 
May 5, 2012
 
April 30, 2011
 
 
 
(recast)
Revenue
$
8

 
$
128

 
 
 
 
Restructuring charges(1)
6

 
28

 
 
 
 
Loss from discontinued operations before income tax benefit
(15
)
 
(74
)
Income tax benefit
6

 
20

Net loss from discontinued operations including noncontrolling interests
(9
)
 
(54
)
Net loss from discontinued operations attributable to noncontrolling interests
6

 
11

Net loss from discontinued operations attributable to Best Buy Co., Inc.
$
(3
)
 
$
(43
)
 
(1)  
See Note 7, Restructuring Charges, for further discussion of the restructuring charges associated with discontinued operations.

4.
Investments
 
Investments were comprised of the following:
 
May 5, 2012
 
March 3, 2012
 
April 30, 2011
 
 
 
 
 
(recast)
Short-term investments
 

 
 

 
 
U.S. Treasury bills
—

 
—

 
20

 
 
 
 
 
 
Equity and other investments
 

 
 

 
 

Debt securities (auction rate securities)
$
66

 
$
82

 
$
97

Marketable equity securities
3

 
3

 
147

Other investments
59

 
55

 
72

Total equity and other investments
$
128

 
$
140

 
$
316

Debt Securities
 
Our debt securities are comprised of auction rate securities (“ARS”). ARS were intended to behave like short-term debt instruments because their interest rates reset periodically through an auction process, most commonly at intervals of seven, 28 and 35 days. The auction process had historically provided a means by which we could rollover the investment or sell these securities at par in order to provide us with liquidity as needed. As a result, we classify our investments in ARS as available-for-sale and carry them at fair value.

In February 2008, auctions began to fail due to insufficient buyers, as the amount of securities submitted for sale in auctions exceeded the aggregate amount of the bids. For each failed auction, the interest rate on the security moves to a maximum rate specified for each security, and generally resets at a level higher than specified short-term interest rate benchmarks. To date, we have collected all interest due on our ARS and expect to continue to do so in the future. Due to persistent failed auctions, and

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the uncertainty of when these investments could be liquidated at par, we have classified all of our investments in ARS as non-current assets within Equity and Other Investments in our Condensed Consolidated Balance Sheet at May 5, 2012.
 
We sold $17 of ARS at par during the first quarter of fiscal 2013. However, at May 5, 2012, our entire remaining ARS portfolio, consisting of 14 investments in ARS with an aggregate value at par of $71, was subject to failed auctions.
 
Our ARS portfolio consisted of the following, at fair value:

Description
 
Nature of collateral or guarantee
 
May 5, 2012
 
March 3, 2012
 
April 30, 2011
 
 
 
 
 
 
 
 
(recast)
Student loan bonds
 
Student loans guaranteed 95% to 100% by the U.S. government
 
$
64

 
$
80

 
$
95

Municipal revenue bonds
 
100% insured by AA/Aa-rated bond insurers at May 5, 2012
 
2

 
2

 
2

Total fair value plus accrued interest(1)
 
 
 
$
66

 
$
82

 
$
97

 
(1) 
The par value and weighted-average interest rates (taxable equivalent) of our ARS were $71, $88 and $101, and 0.66%, 0.50% and 0.75%, respectively, at May 5, 2012, March 3, 2012, and April 30, 2011, respectively.
 
At May 5, 2012, our ARS portfolio was 25% AAA/Aaa-rated, 64% AA/Aa-rated and 11% A/A-rated.
 
The investment principal associated with failed auctions will not be accessible until successful auctions occur, a buyer is found outside of the auction process, the issuers establish a different form of financing to replace these securities, or final payments are due according to the contractual maturities of the debt issuances, which range from four to 30 years. We do not intend to sell our remaining ARS until we can recover the full principal amount through one of the means described above. In addition, we do not believe it is more likely than not that we would be required to sell our remaining ARS until we can recover the full principal amount based on our other sources of liquidity.

We evaluated our entire ARS portfolio of $71 (par value) for impairment at May 5, 2012, based primarily on the methodology described in Note 5, Fair Value Measurements. As a result of this review, we determined that the fair value of our ARS portfolio at May 5, 2012, was $66. Accordingly, a $5 pre-tax unrealized loss is recognized in accumulated other comprehensive income. This unrealized loss reflects a temporary impairment on all of our investments in ARS. The estimated fair value of our ARS portfolio could change significantly based on future market conditions. We will continue to assess the fair value of our ARS portfolio for substantive changes in relevant market conditions, changes in our financial condition or other changes that may alter our estimates described above.

We may be required to record an additional unrealized holding loss or an impairment charge to earnings if we determine that our ARS portfolio has incurred a further decline in fair value that is temporary or other-than-temporary, respectively. Factors that we consider when assessing our ARS portfolio for other-than-temporary impairment include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period, the nature of the collateral or guarantees in place and our intent and ability to hold an investment.
 
We had $(3), $(3) and $(2) of unrealized loss, net of tax, recorded in accumulated other comprehensive income at May 5, 2012, March 3, 2012, and April 30, 2011, respectively, related to our investments in debt securities.
 
Marketable Equity Securities
 
We invest in marketable equity securities and classify them as available-for-sale. Investments in marketable equity securities are classified as non-current assets within Equity and Other Investments in our Condensed Consolidated Balance Sheets and are reported at fair value based on quoted market prices.
 

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Our investments in marketable equity securities were as follows:
 
May 5, 2012
 
March 3, 2012
 
April 30, 2011
 
 
 
 
 
(recast)
Common stock of TalkTalk Telecom Group PLC
$
—

 
$
—

 
$
87

Common stock of Carphone Warehouse Group plc
—

 
—

 
60

Other
3

 
3

 
—

Total
$
3

 
$
3

 
$
147

 
We review all investments for other-than-temporary impairment at least quarterly or as indicators of impairment exist. Indicators of impairment include the duration and severity of the decline in fair value as well as the intent and ability to hold the investment to allow for a recovery in the market value of the investment. In addition, we consider qualitative factors that include, but are not limited to: (i) the financial condition and business plans of the investee including its future earnings potential, (ii) the investee’s credit rating, and (iii) the current and expected market and industry conditions in which the investee operates. If a decline in the fair value of an investment is deemed by management to be other-than-temporary, the cost basis of the investment is written down to fair value, and the amount of the write-down is included in net earnings.

All unrealized holding gains or losses related to our investments in marketable equity securities are reflected net of tax in accumulated other comprehensive income in shareholders’ equity. The total unrealized gain, net of tax, included in accumulated other comprehensive income was $0, $0 and $74 at May 5, 2012, March 3, 2012, and April 30, 2011, respectively.
 
Other Investments
 
The aggregate carrying values of investments accounted for using either the cost method or the equity method at May 5, 2012, March 3, 2012, and April 30, 2011, were $59, $55 and $72, respectively.

5.
Fair Value Measurements
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:
 
Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.
 
Level 2 — Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:
 
•
Quoted prices for similar assets or liabilities in active markets;
•
Quoted prices for identical or similar assets in non-active markets;
•
Inputs other than quoted prices that are observable for the asset or liability; and
•
Inputs that are derived principally from or corroborated by other observable market data.
 
Level 3 — Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.
 

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Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
The fair value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following tables set forth by level within the fair value hierarchy, our financial assets and liabilities that were accounted for at fair value on a recurring basis at May 5, 2012, March 3, 2012, and April 30, 2011, according to the valuation techniques we used to determine their fair values.
 
 
 
Fair Value Measurements
Using Inputs Considered as
 
Fair Value at
May 5, 2012
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
ASSETS
 

 
 

 
 

 
 

Cash and cash equivalents
 

 
 

 
 

 
 

Money market funds
$
439

 
$
439

 
$
—

 
$
—

Other current assets
 

 
 

 
 

 
 

Money market funds (restricted cash)
104

 
104

 
—

 
—

U.S. Treasury bills (restricted cash)
30

 
30

 
—

 
—

Equity and other investments
 

 
 

 
 

 
 

Auction rate securities
66

 
—

 
—

 
66

Marketable equity securities
3

 
3

 
—

 
—


 
 
 
Fair Value Measurements
Using Inputs Considered as
 
Fair Value at
March 3, 2012
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
ASSETS
 

 
 

 
 

 
 

Cash and cash equivalents
 

 
 

 
 

 
 

Money market funds
$
272

 
$
272

 
$
—

 
$
—

Other current assets
 

 
 

 
 

 
 

Money market funds (restricted cash)
119

 
119

 
—

 
—

U.S. Treasury bills (restricted cash)
30

 
30

 
—

 
—

Foreign currency derivative instruments
1

 
—

 
1

 
—

Equity and other investments
 

 
 

 
 

 
 

Auction rate securities
82

 
—

 
—

 
82

Marketable equity securities
3

 
3

 
—

 
—

 
 
 
 
 
 
 
 
LIABILITIES
 

 
 

 
 

 
 

Accrued liabilities
 

 
 

 
 

 
 

Foreign currency derivative instruments
2

 
—

 
2

 
—

 

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Fair Value Measurements
Using Inputs Considered as
 
Fair Value at
April 30, 2011
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(recast)
 
(recast)
 
(recast)
 
(recast)
ASSETS
 

 
 

 
 

 
 

Cash and cash equivalents
 
 
 
 
 
 
 
Money market funds
1,485

 
1,485

 
—

 
—

Commercial paper
60

 
—

 
60

 
—

U.S. Treasury bills
190

 
190

 
—

 
—

Short-term investments
 

 
 

 
 

 
 

U.S. Treasury bills
20

 
20

 
—

 
—

Other current assets
 

 
 

 
 

 
 

Money market funds (restricted assets)
107

 
107

 
—

 
—

U.S. Treasury bills (restricted assets)
70

 
70

 
—

 
—

Foreign currency derivative instruments
9

 
—

 
9

 
—

Equity and other investments
 

 
 

 
 

 
 

Auction rate securities
97

 
—

 
—

 
97

Marketable equity securities
147

 
147

 
—

 
—

Other assets
 

 
 

 
 

 
 

Foreign currency derivative instruments
2

 
—

 
2

 
—

 
 
 
 
 
 
 
 
LIABILITIES
 

 
 

 
 

 
 

Accrued liabilities
 
 
 
 
 
 
 
Foreign currency derivative instruments
2

 
—

 
2

 
—


The following tables provide a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) for the two months ended May 5, 2012, and April 30, 2011.
 
Debt securities-
Auction rate securities only
 
Student loan
bonds
 
Municipal
revenue bonds
 
Total
Balances at March 3, 2012
$
80

 
$
2

 
$
82

Changes in unrealized losses included in other comprehensive income
1

 
—

 
1

Sales
(17
)
 
—

 
(17
)
Balances at May 5, 2012
$
64

 
$
2

 
$
66

  
 
Debt securities-
Auction rate securities only
 
Student loan
bonds
 
Municipal
revenue bonds
 
Total
Balances at February 26, 2011
$
108

 
$
2

 
$
110

Changes in unrealized losses included in other comprehensive income
1

 
—

 
1

Sales
(14
)
 
—

 
(14
)
Balances at April 30, 2011 (recast)
$
95

 
$
2

 
$
97

 
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
 
Money Market Funds.  Our money market fund investments that are traded in an active market were measured at fair value using quoted market prices and, therefore, were classified as Level 1.


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U.S. Treasury Bills.  Our U.S. Treasury notes were classified as Level 1 as they trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.
 
Commercial Paper.  Our investments in commercial paper were measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2.
 
Foreign Currency Derivative Instruments.  Comprised primarily of foreign currency forward contracts and foreign currency swap contracts, our foreign currency derivative instruments were measured at fair value using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. Our foreign currency derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.
 
Auction Rate Securities.  Our investments in ARS were classified as Level 3 as quoted prices were unavailable due to events described in Note 4, Investments. Due to limited market information, we utilized a discounted cash flow (“DCF”) model to derive an estimate of fair value. The unobservable inputs and assumptions we used in preparing the DCF model included estimates with respect to the amount and timing of future interest and principal payments, forward projections of the interest rate benchmarks, the probability of full repayment of the principal considering the credit quality and guarantees in place, and the rate of return required by investors to own such securities given the current liquidity risk associated with ARS. Changes in these unobservable inputs are not likely to have a significant impact on the fair value measurement or our ARS.
 
Marketable Equity Securities.  Our marketable equity securities were measured at fair value using quoted market prices. They were classified as Level 1 as they trade in an active market for which closing stock prices are readily available.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
 
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded within Operating Income in our Condensed Consolidated Statements of Earnings and Comprehensive Income.

With the exception of fixed asset impairments associated with our restructuring activities described in Note 7, Restructuring Charges, we had no significant remeasurements of such assets or liabilities to fair value during the three months ended May 5, 2012, and April 30, 2011. The following table summarizes the fair value remeasurments recorded three months ended May 5, 2012, and April 30, 2011:
 
Three Months Ended
 
Three Months Ended
 
May 5, 2012
 
April 30, 2011
 
Impairments
 
Remaining Net Carrying Value
 
Impairments
 
Remaining Net Carrying Value
 
 
 
 
 
(recast)
 
(recast)
Continuing Operations
 
 
 
 
 
 
 
Property and equipment
$
26

 
$
—

 
$
1

 
$
—


The fair value remeasurements included in the table above were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived using a DCF model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate. In the case of these specific assets, for which their impairment was the result of restructuring activities, no future cash flows have been assumed as the assets will cease to be used and expected sale values are nominal.

Fair Value of Financial Instruments
 
Our financial instruments, other than those presented in the disclosures above, include cash, receivables, other investments, accounts payable, other payables and short- and long-term debt. The fair values of cash, receivables, accounts payable, other payables and short-term debt approximated carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value

15
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hierarchy. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate fair value. See Note 8, Debt, for information about the fair value of our long-term debt.

6.
Goodwill and Intangible Assets
 
The changes in the carrying values of goodwill and indefinite-lived tradenames by segment were as follows in the two months ended May 5, 2012, and April 30, 2011:
 
Goodwill
 
Indefinite-lived Tradenames
 
Domestic
 
International
 
Total
 
Domestic
 
International
 
Total
Balances at March 3, 2012
$
516

 
$
819

 
$
1,335

 
$
19

 
$
111

 
$
130

Changes in foreign currency exchange rates
—

 
(4
)
 
(4
)
 
—

 
—

 
—

Acquisitions
4

 
—

 
4

 
—

 
—

 
—

Balances at May 5, 2012
$
520

 
$
815

 
$
1,335

 
$
19

 
$
111

 
$
130

 

 
Goodwill
 
Indefinite-lived Tradenames
 
Domestic
 
International
 
Total
 
Domestic
 
International
 
Total
Balances at February 26, 2011
$
422

 
$
2,032

 
$
2,454

 
$
21

 
$
84

 
$
105

Changes in foreign currency exchange rates
—

 
52

 
52

 
—

 
3

 
3

Other(1)
—

 
—

 
—

 
—

 
28

 
28

Balances at April 30, 2011 (recast)
$
422

 
$
2,084

 
$
2,506

 
$
21

 
$
115

 
$
136

(1) 
Represents the transfer of certain definite-lived tradenames (at their net book value) to indefinite-lived tradenames following our decision to no longer phase out certain tradenames. We believe these tradenames will continue to contribute to our future cash flows indefinitely.

The following table provides the gross carrying amount of goodwill and cumulative goodwill impairment losses:
 
May 5, 2012
 
March 3, 2012
 
April 30, 2011
 
Gross
Carrying
Amount
 
Cumulative
Impairment
 
Gross
Carrying
Amount
 
Cumulative
Impairment
 
Gross
Carrying
Amount
 
Cumulative
Impairment
 
 
 
 
 
 
 
 
 
(recast)
 
(recast)
Goodwill
$
2,596

 
$
(1,261
)
 
$
2,596

 
$
(1,261
)
 
$
2,571

 
$
(65
)
 
The following table provides the gross carrying values and related accumulated amortization of definite-lived intangible assets:
 
May 5, 2012
 
March 3, 2012
 
April 30, 2011
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
 
 
 
 
 
 
 
 
(recast)
 
(recast)
Customer relationships
463

 
(239
)
 
453

 
(224
)
 
393

 
(199
)

Total amortization expense for the three months ended May 5, 2012, and April 30, 2011, was $10 and $15, respectively. The estimated future amortization expense for identifiable intangible assets is as follows:
Fiscal Year
 
Remainder of fiscal 2013
$
32

2014
41

2015
41

2016
41

2017
23

Thereafter
46



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7.
Restructuring Charges
 
Summary

Restructuring charges incurred in the three months ended May 5, 2012 and April 30, 2011, for our fiscal 2013, fiscal 2012 and fiscal 2011 restructuring activities were as follows:
 
Three Months Ended
 
May 5, 2012
 
April 30, 2011
 
 
 
(recast)
Continuing operations
 
 
 
Fiscal 2013 restructuring
$
133

 
$
—

Fiscal 2012 restructuring
6

 
—

Fiscal 2011 restructuring
(12
)
 
4

Total
127

 
4

Discontinued operations
 
 
 
Fiscal 2013 restructuring
—

 
—

Fiscal 2012 restructuring
3

 
—

Fiscal 2011 restructuring
3

 
28

Total (Note 3)
6

 
28

Total
$
133

 
$
32


Fiscal 2013 Restructuring

In the first quarter of fiscal 2013, we initiated a series of actions to restructure operations in our Domestic segment intended to improve operating performance. The actions include closure of approximately 50 large-format Best Buy branded stores in the U.S., changes to the store and corporate operating models, and other measures intended to reduce costs associated with product life-cycle management and supply chain. The costs of implementing the changes primarily consist of facility closure costs, employee termination benefits and property and equipment (primarily store fixtures) impairments.

We incurred $133 of charges related to the fiscal 2013 restructuring in the first quarter of fiscal 2013. All charges were recorded within our Domestic segment and consisted primarily of termination benefits and property and equipment impairments triggered by our change in the intended use of those assets resulting from the strategic actions.

We expect to incur additional pre-tax restructuring charges (primarily facility closure costs) of between $165 and $215 related to our fiscal 2013 restructuring activities. The estimated facility closure costs associated with lease commitments on vacated stores will be recognized when stores are closed. The majority of the facility closure costs will be recorded in the second quarter of fiscal 2013, as we closed 39 stores. We expect to substantially complete these restructuring activities in fiscal 2013, with the exception of lease payments for vacated stores which will continue until the lease expires or we otherwise terminate the lease.

All restructuring charges related to our fiscal 2013 restructuring activities are from continuing operations and are presented in Restructuring charges in our Condensed Consolidated Statements of Earnings and Comprehensive Income. The composition of the restructuring charges we incurred in the three months ended May 5, 2012 for our fiscal 2013 restructuring activities in the Domestic segment was as follows:
 
Three Months Ended
May 5, 2012
Continuing operations
 
Property and equipment impairments
$
25

Termination benefits
107

Facility closure and other costs, net
1

Total
$
133



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The following table summarizes our restructuring accrual activity during the two months ended May 5, 2012 related to termination benefits and facility closure and other costs associated with our 2013 restructuring activities:
 
Termination
Benefits
 
Facility
Closure and
Other Costs
 
Total
Balance at March 3, 2012
$
—

 
$
—

 
$
—

Charges
103

 
1

 
104

Cash payments
—

 
—

 
—

Adjustments
—

 
—

 
—

Balance at May 5, 2012
$
103

 
$
1

 
$
104


Fiscal 2012 Restructuring

In the third quarter of fiscal 2012, we implemented a series of actions to restructure operations in our Domestic and International segments. The actions within our Domestic segment included a decision to modify our strategy for certain mobile broadband offerings, and in our International segment we closed our large-format Best Buy branded stores in the U.K. to refocus our Best Buy Europe strategy on our small-format stores. In addition, we impaired certain information technology ("IT") assets supporting the restructured activities in our International segment. We view these restructuring activities as necessary to meet our long-term financial performance objectives by refocusing our investments on areas that provide profitable growth opportunities and meet our overall return expectations. All restructuring charges directly related to the large-format Best Buy branded stores in the U.K. are reported within Loss from discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income. Refer to Note 3, Discontinued Operations.

We incurred $9 of charges related to the fiscal 2012 restructuring in the first quarter of fiscal 2013. Of the total charges, $6 related to our Domestic segment and consisted primarily of other costs resulting from the modified strategy for certain mobile broadband offerings. The remaining $3 of charges related to our International segment and were directly associated with the closure of our Best Buy branded stores in the U.K.

We do not expect to incur further material restructuring charges related to our fiscal 2012 restructuring activities in either our Domestic or International segments. We expect to substantially complete these restructuring activities in the first half of fiscal 2013.

All restructuring charges from continuing operations related to our fiscal 2012 restructuring activities are presented in Restructuring charges in our Condensed Consolidated Statements of Earnings and Comprehensive Income, whereas all restructuring charges from discontinued operations related to our fiscal 2012 restructuring activities are presented in Loss from discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income. The composition of the restructuring charges we incurred in the three months ended May 5, 2012, as well as the cumulative amount incurred through May 5, 2012, for our fiscal 2012 restructuring activities for both the Domestic and International segments was as follows:

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Table of Contents

 
Domestic
 
International
 
Total
 
Three Months
Ended
May 5, 2012
 
Cumulative
Amount
through
May 5, 2012
 
Three Months
Ended
May 5, 2012
 
Cumulative
Amount
through
May 5, 2012
 
Three Months
Ended
May 5, 2012
 
Cumulative
Amount
through
May 5, 2012
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
Property and equipment impairments
$
1

 
$
17

 
$
—

 
$
15

 
$
1

 
$
32

Termination benefits
—

 
1

 
—

 
—

 
—

 
1

Facility closure and other costs, net
5

 
5

 
—

 
—

 
5

 
5

Total
6

 
23

 
—

 
15

 
6

 
38

 
 
 
 
 
 
 
 
 
 
 
 
Discontinued operations
 
 
 
 
 
 
 
 
 
 
 
Inventory write-downs
—

 
—

 
—

 
11

 
—

 
11

Property and equipment impairments
—

 
—

 
—

 
96

 
—

 
96

Termination benefits
—

 
—

 
1

 
17

 
1

 
17

Facility closure and other costs, net
—

 
—

 
2

 
84

 
2

 
84

Total
—

 
—

 
3

 
208

 
3

 
208

Total
$
6

 
$
23

 
$
3

 
$
223

 
$
9

 
$
246

 
The following table summarizes our restructuring accrual activity during the two months ended May 5, 2012 related to termination benefits and facility closure and other costs associated with our 2012 restructuring activities:
 
Termination
Benefits
 
Facility
Closure and
Other Costs(1)
 
Total
Balance at March 3, 2012
$
17

 
$
85

 
$
102

Charges
1

 
2

 
3

Cash payments
(14
)
 
(43
)
 
(57
)
Adjustments
—

 
34

 
34

Changes in foreign currency exchange rates
—

 
3

 
3

Balance at May 5, 2012
$
4

 
$
81

 
$
85

(1) 
Included within the facility closure and other costs adjustments is $34 from the first quarter of fiscal 2013, representing an adjustment to exclude non-cash charges or benefits, which had no impact on our Condensed Consolidated Statements of Earnings and Comprehensive Income in the first quarter of fiscal 2013.
 
Fiscal 2011 Restructuring

In the fourth quarter of fiscal 2011, we implemented a series of actions to restructure operations in our Domestic and International segments in order to improve performance and enhance customer service. The restructuring actions included plans to improve supply chain and operational efficiencies in our Domestic segment's operations, primarily focused on modifications to our distribution channels and exit from certain digital delivery services within our entertainment product category. The actions also included plans to exit the Turkey market and restructure the Best Buy branded stores in China. As part of the international restructuring, we also impaired certain IT assets supporting the restructured activities in our International segment. We view these restructuring activities as necessary to meet our long-term growth goals by investing in businesses that have the potential to meet our internal rate of return expectations. All restructuring charges directly related to Turkey and China, as well as the Domestic charges directly related to our exit from certain digital delivery services within our entertainment product category, are reported within discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income. Refer to Note 3, Discontinued Operations.

We incurred $32 of charges related to the fiscal 2011 restructuring in the first quarter of fiscal 2012. Of the total charges, $5 related to our Domestic segment and consisted primarily of property and equipment impairments and facility closure costs associated with supply chain and operational improvements. Within our International segment, we incurred $27 of charges consisting primarily of termination benefits and facility closure costs related to actions taken to exit from the Turkey market and restructure our Best Buy branded stores in China.

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During the first quarter of fiscal 2013, we recorded a net reduction to restructuring charges of $(9), all of which related to our Domestic segment. The net reduction was largely the result of a gain recorded on the sale of a previously impaired distribution facility and equipment during the first quarter of fiscal 2013 (previously impaired through restructuring charges), partially offset by charges associated with the exit from certain digital delivery services within our entertainment product category.

We do not expect to incur further material restructuring charges related to our fiscal 2011 restructuring activities in either our Domestic or International segments.

For continuing operations, the cumulative inventory write-downs related to our fiscal 2011 restructuring activities were presented in Restructuring charges — cost of goods sold in our Condensed Consolidated Statements of Earnings and Comprehensive Income. The remainder of the restructuring charges are presented in Restructuring charges in our Condensed Consolidated Statements of Earnings and Comprehensive Income. However, all restructuring charges from discontinued operations related to our fiscal 2011 restructuring activities are presented in Loss from discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income. The composition of the restructuring charges we incurred in the three months ended May 5, 2012 and April 30, 2011, as well as the cumulative amount incurred through May 5, 2012, for our fiscal 2011 restructuring activities for both the Domestic and International segments was as follows:
 
Domestic
 
International
 
Total
 
Three Months Ended
 
Cumulative
Amount
through
May 5, 2012
 
Three Months Ended
 
Cumulative
Amount
through
May 5, 2012
 
Three Months Ended
 
Cumulative
Amount
through
May 5, 2012
 
May 5,
2012
 
April 30,
2011
 
 
May 5,
2012
 
April 30,
2011
 
 
May 5,
2012
 
April 30,
2011
 
 
 
 
(recast)
 
 
 
 
 
(recast)
 
 
 
 
 
(recast)
 
 
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inventory write-downs
$
—

 
$
—

 
$
28

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
28

Property and equipment impairments
(12
)
 
2

 
3

 
—

 
(1
)
 
107

 
(12
)
 
1

 
110

Termination benefits
—

 
1

 
13

 
—

 
—

 
—

 
—

 
1

 
13

Facility closure and other costs, net
—

 
2

 
4

 
—

 
—

 
—

 
—

 
2

 
4

Total
(12
)
 
5

 
48

 
—

 
(1
)
 
107

 
(12
)
 
4

 
155

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inventory write-downs
—

 
—

 
—

 
—

 
—

 
15

 
—

 
—

 
15

Property and equipment impairments
—