Restructuring Charges

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 fiscal 2012 restructuring included plans to close our Best Buy branded large-format stores in the U.K. by the end of the fourth quarter of fiscal 2012 and refocus our Best Buy Europe strategy on our small-format stores. Within our Domestic segment, the actions included a decision to modify our strategy for certain mobile broadband offerings. We view these restructuring activities as necessary to meet our long-term financial performance objectives by refocusing our investments on areas that meet our return expectations.

We incurred $131 of charges related to the fiscal 2012 restructuring in the first nine months of fiscal 2012. Of the total charges, $17 related to our Domestic segment and consisted primarily of property and equipment impairments (primarily information technology assets) resulting from the modified strategy for certain mobile broadband offerings. The remaining $114 of charges related to our International segment and consisted primarily of property and equipment impairments, inventory write-downs, termination benefits and other costs, and were directly associated with the closure of our Best Buy branded stores in the U.K.

We expect further restructuring charges related to these activities to impact both our Domestic and International segments in the fourth quarter of fiscal 2012. We expect to incur approximately $10 of restructuring charges in our Domestic segment in the fourth quarter of fiscal 2012 related to the changes in our mobile broadband offerings discussed above. In addition, we expect to incur between $100 and $115 of restructuring charges in our International segment in the fourth quarter of fiscal 2012 related to the closure of the Best Buy branded stores in the U.K. The remaining charges in the International segment will consist primarily of facility closure costs, employee termination benefits and other contractual obligations and costs. We expect to substantially complete these restructuring activities in fiscal 2012.

Of the charges incurred in the first nine months of fiscal 2012 related to these restructuring activities, the inventory write-downs are presented in the restructuring charges – cost of goods sold line item in our condensed consolidated statements of earnings, and the remainder of the restructuring charges are included in the restructuring charges line item in our condensed consolidated statements of earnings. The composition of the restructuring charges we incurred in the nine months ended November 26, 2011, as well as the cumulative amount incurred through November 26, 2011, for our fiscal 2012 restructuring activities for both the Domestic and International segments, were as follows:



	Domestic				International				Total
	Nine Months Ended November 26, 2011		Cumulative Amount through November 26, 2011		Nine Months Ended November 26, 2011		Cumulative Amount through November 26, 2011		Nine Months Ended November 26, 2011		Cumulative Amount through November 26, 2011
Inventory write-downs	$	—	$	—	$	13	$	13	$	13	$	13
Property and equipment impairments	17		17		92		92		109		109
Termination benefits	—		—		7		7		7		7
Facility closure and other costs, net	—		—		2		2		2		2
Total	$	17	$	17	$	114	$	114	$	131	$	131

The following table summarizes our restructuring accrual activity related to our fiscal 2012 restructuring activities during the nine months ended November 26, 2011, related to termination benefits and facility closure and other costs:



	Termination Benefits		Facility Closure and Other Costs		Total
Balance at February 26, 2011	$	—	$	—	$	—
Charges	7		2		9
Cash payments	—		—		—
Adjustments	—		—		—
Changes in foreign currency exchange rates	—		—		—
Balance at November 26, 2011	$	7	$	2	$	9

Fiscal 2011 Restructuring

In the fourth quarter of fiscal 2011, we implemented a series of actions to restructure operations in our domestic and international businesses. The fiscal 2011 restructuring included plans to exit the Turkey market, restructure the Best Buy branded stores in China and improve efficiencies in our Domestic segment’s operations. As part of the international restructuring, we also recognized the impairment of certain information technology 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. We believe these actions will improve the financial performance of our International segment and increase efficiency, enhance customer service and reduce costs in our Domestic segment’s operations.

We incurred $23 of charges related to the fiscal 2011 restructuring in the first nine months of fiscal 2012. Of the total charges, $23 related to our Domestic segment and consisted primarily of property and equipment impairments (notably information technology assets), facility closure costs and a tradename impairment. The restructuring charges recorded in the third quarter of fiscal 2012 were primarily related to our exit from certain digital delivery services within our entertainment product category, for which we entered into a sale agreement with a third party during the quarter. As the proceeds from the sale were lower than original expectations, additional impairments totaling $18 were recorded during the third quarter of fiscal 2012 to write down the tangible and intangible assets to their realizable value. Within our International segment, charges resulting from the completion of our exit from the Turkey market were effectively offset by adjustments associated with the restructure of our Best Buy branded stores in China during the first nine months of fiscal 2012. The net reduction in restructuring charges recorded in the third quarter of fiscal 2012 were primarily associated with adjustments to estimated facility closure costs, as we exited leased locations in China.

We do not expect to incur further material restructuring charges related to our fiscal 2011 restructuring activities in either our Domestic or International segments. We expect to substantially complete these restructuring activities in fiscal 2012.

All charges incurred in the first nine months of fiscal 2012 related to our fiscal 2011 restructuring activities are included in the restructuring charges line item in our consolidated statements of earnings. The composition of the restructuring charges we incurred in the nine months ended November 26, 2011, as well as the cumulative amount incurred through November 26, 2011, for our fiscal 2011 restructuring activities for both the Domestic and International segments, were as follows:



	Domestic				International					Total
	Nine Months Ended November 26, 2011		Cumulative Amount through November 26, 2011		Nine Months Ended November 26, 2011			Cumulative Amount through November 26, 2011		Nine Months Ended November 26, 2011			Cumulative Amount through November 26, 2011
Inventory write-downs	$	—	$	10	$	—		$	14	$	—		$	24
Property and equipment impairments	15		30		—			132		15			162
Termination benefits	1		17		7			19		8			36
Intangible asset impairments	3		13		—			—		3			13
Facility closure and other costs, net	4		4		(7		)	6		(3		)	10
Total	$	23	$	74	$	—		$	171	$	23		$	245

The following table summarizes our restructuring accrual activity related to our fiscal 2011 restructuring activities during the nine months ended November 26, 2011, related to termination benefits and facility closure and other costs:



	Termination Benefits			Facility Closure and Other Costs⁽¹⁾			Total
Balance at February 26, 2011	$	28		$	13		$	41
Charges	11			2			13
Cash payments	(26		)	(13		)	(39		)
Adjustments	(3		)	4			1
Changes in foreign currency exchange rates	—			1			1
Balance at November 26, 2011	$	10		$	7		$	17


⁽¹⁾	Included within the facility closure and other costs adjustments is $10 from the first quarter of fiscal 2011, representing an adjustment to exclude non-cash charges or benefits, which had no impact on our consolidated statements of earnings in the first nine months of fiscal 2012.