Restructuring Charges

Summary

Restructuring charges incurred in the six months ended August 4, 2012 and July 30, 2011, for our fiscal 2013, fiscal 2012 and fiscal 2011 restructuring activities were as follows:



	Six Months Ended
	August 4, 2012			July 30, 2011
				(recast)
Continuing operations
Fiscal 2013 restructuring	$	224		$	—
Fiscal 2012 restructuring	6			—
Fiscal 2011 restructuring	(12		)	4
Total	218			4
Discontinued operations
Fiscal 2013 restructuring	—			—
Fiscal 2012 restructuring	3			—
Fiscal 2011 restructuring	2			29
Total (Note 3)	5			29
Total	$	223		$	33

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. and changes to the store and corporate operating models. 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 $91 of charges related to the fiscal 2013 restructuring in the second quarter of fiscal 2013, consisting primarily of facility closure and other costs related to our closure of 41 stores, partially offset by an adjustment to reduce our expected termination benefits due to a greater number of employees finding new positions within Best Buy than originally planned. In the first six months of fiscal 2013, we incurred $224 of restructuring charges related to the fiscal 2013 restructuring consisting primarily of facility closure and other costs, termination benefits and property and equipment impairments.

We expect to incur additional pre-tax restructuring charges (primarily facility closure costs) of between $25 and $75 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. 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 six months ended August 4, 2012 for our fiscal 2013 restructuring activities in the Domestic segment was as follows:



	Six Months Ended August 4, 2012
Continuing operations
Property and equipment impairments	$	27
Termination benefits	81
Facility closure and other costs, net	116
Total	$	224

The following table summarizes our restructuring accrual activity during the five months ended August 4, 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	107			116			223
Cash payments	(35		)	(2		)	(37		)
Adjustments	(27		)	(6		)	(33		)
Balance at August 4, 2012	$	45		$	108		$	153

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 six months 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, as we have substantially completed these restructuring activities.

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 six months ended August 4, 2012, as well as the cumulative amount incurred through August 4, 2012, for our fiscal 2012 restructuring activities for both the Domestic and International segments was as follows:



	Domestic				International				Total
	Six Months Ended August 4, 2012		Cumulative Amount through August 4, 2012		Six Months Ended August 4, 2012		Cumulative Amount through August 4, 2012		Six Months Ended August 4, 2012		Cumulative Amount through August 4, 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



	Termination Benefits			Facility Closure and Other Costs⁽¹⁾			Total
Balance at March 3, 2012	$	17		$	85		$	102
Charges	1			2			3
Cash payments	(17		)	(77		)	(94		)
Adjustments	—			34			34
Changes in foreign currency exchange rates	—			2			2
Balance at August 4, 2012	$	1		$	46		$	47


⁽¹⁾	Included within the adjustments to facility closure and other costs 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 $33 of charges related to the fiscal 2011 restructuring in the first six months 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 $28 of charges consisting primarily of termination benefits and facility closure costs related to actions taken to exit the Turkey market and restructure our Best Buy branded stores in China.

During the first six months of fiscal 2013, we recorded a net reduction to restructuring charges of $(10), which related primarily 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 segment.

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 six months ended August 4, 2012 and July 30, 2011, as well as the cumulative amount incurred through August 4, 2012, for our fiscal 2011 restructuring activities for both the Domestic and International segments was as follows:



	Domestic							International								Total
	Six Months Ended					Cumulative Amount through August 4, 2012		Six Months Ended						Cumulative Amount through August 4, 2012		Six Months Ended						Cumulative Amount through August 4, 2012
	August 4, 2012			July 30, 2011		Cumulative Amount through August 4, 2012		August 4, 2012			July 30, 2011			Cumulative Amount through August 4, 2012		August 4, 2012			July 30, 2011			Cumulative Amount through August 4, 2012
				(recast)							(recast)								(recast)
Continuing operations
Inventory write-downs	$	—		$	—	$	28	$	—		$	—		$	—	$	—		$	—		$	28
Property and equipment impairments	(12		)	—		3		—			(1		)	107		(12		)	(1		)	110
Termination benefits	—			—		13		—			—			—		—			—			13
Facility closure and other costs, net	—			5		4		—			—			—		—			5			4
Total	(12		)	5		48		—			(1		)	107		(12		)	4			155

Discontinued operations
Inventory write-downs	—			—		—		—			—			15		—			—			15
Property and equipment impairments	—			—		15		—			—			25		—			—			40
Termination benefits	—			—		4		—			18			19		—			18			23
Intangible asset impairments	—			—		13		—			—			—		—			—			13
Facility closure and other costs, net	3			—		3		(1		)	11			4		2			11			7
Total	3			—		35		(1		)	29			63		2			29			98
Total	$	(9	)	$	5	$	83	$	(1	)	$	28		$	170	$	(10	)	$	33		$	253

The following tables summarize our restructuring accrual activity during the five months ended August 4, 2012 and July 30, 2011, related to termination benefits and facility closure and other costs associated with our 2011 restructuring activities:



	Termination Benefits			Facility Closure and Other Costs⁽¹⁾			Total
Balance at February 26, 2011	$	28		$	13		$	41
Charges	6			—			6
Cash payments	(24		)	(8		)	(32		)
Adjustments	(3		)	8			5
Changes in foreign currency exchange rates	—			1			1
Balance at July 30, 2011 (recast)	$	7		$	14		$	21


⁽¹⁾	Included within the adjustments to facility closure and other costs 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 Condensed Consolidated Statements of Earnings and Comprehensive Income in the first quarter of fiscal 2012.



	Termination Benefits			Facility Closure and Other Costs			Total
Balance at March 3, 2012	$	3		$	9		$	12
Charges	—			—			—
Cash payments	(2		)	(3		)	(5		)
Adjustments	(1		)	(1		)	(2		)
Balance at August 4, 2012	$	—		$	5		$	5