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 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 provided 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 discontinued operations in our Consolidated Statements of Earnings. Refer to Note 3, Discontinued Operations.

We incurred $243 of charges related to the fiscal 2012 restructuring during fiscal 2012. Of the total charges, $23 related to our Domestic segment and consisted primarily of IT asset impairments and other related costs. The remaining $220 of charges related to our International segment and consisted primarily property and equipment impairments, facility closure and other costs, employee termination benefits and inventory write-downs.

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 Consolidated Statements of Earnings, whereas all restructuring charges from discontinued operations related to our fiscal 2012 restructuring activities are presented in Loss from discontinued operations in our Consolidated Statements of Earnings. The composition of the restructuring charges we incurred in fiscal 2012 for our fiscal 2012 restructuring activities was as follows:



	Domestic		International		Total
Continuing operations
Property and equipment impairments	$	17	$	15	$	32
Termination benefits	1		—		1
Facility closure and other costs	5		—		5
Total	23		15		38
Discontinued operations
Inventory write-downs	—		11		11
Property and equipment impairments	—		96		96
Termination benefits	—		16		16
Facility closure and other costs	—		82		82
Total	—		205		205
Total	$	23	$	220	$	243

The following table summarizes our restructuring accrual activity during fiscal 2012 related to termination benefits and facility closure and other costs associated with our fiscal 2012 restructuring activities:



	Termination Benefits		Facility Closure and Other Costs			Total
Balance at February 26, 2011	$	—	$	—		$	—
Charges	17		87			104
Cash payments	—		—			—
Changes in foreign currency exchange rates	—		(2		)	(2		)
Balance at March 3, 2012	$	17	$	85		$	102

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 Consolidated Statements of Earnings. Refer to Note 3, Discontinued Operations.

We incurred $222 of charges related to the fiscal 2011 restructuring during the fourth quarter of fiscal 2011. Of the total charges, $50 related to our Domestic segment, primarily for employee termination benefits, property and equipment impairments, intangible asset impairments and inventory write-downs. The remaining $172 of the charges impacted our International segment and related primarily to property and equipment impairments (including the IT assets), inventory write-downs, facility closure and other costs and employee termination benefits.

In fiscal 2012, we incurred an additional $44 of charges related to the fiscal 2011 restructuring activities. Of the total charge, $45 related to our Domestic segment, consisting primarily of property and equipment impairments (notably IT assets), employee termination benefits, intangible asset impairments and other costs associated with the exit from certain digital delivery services within our entertainment product category. Within our Domestic segment, we also incurred additional inventory write-downs as we completed the exit from certain distribution facilities associated with our entertainment product category at the end of fiscal 2012. We do not expect to incur further material restructuring charges related to our fiscal 2011 restructuring activities in fiscal 2013. However, subsequent to the end of fiscal 2012, we sold the previously impaired distribution facility and equipment. Therefore, we will record a reduction in restructuring charges in the first quarter of fiscal 2013 for the amount of gain on sale, thus reducing the cumulative charges under the fiscal 2011 restructuring. The $(1) of net charges in our International segment in fiscal 2012 was the result of employee termination benefits, offset by adjustments to facility closure and other costs from the completion of our exit from the Turkey market and exiting of lease locations in China.

For continuing operations, the inventory write-downs related to our fiscal 2011 restructuring activities are presented in Restructuring charges — cost of goods sold in our Consolidated Statements of Earnings, and the remainder of the restructuring charges are presented in Restructuring charges in our Consolidated Statements of Earnings. However, all restructuring charges from discontinued operations related to our fiscal 2011 restructuring activities are presented in Loss from discontinued operations in our Consolidated Statements of Earnings. The composition of the restructuring charges we incurred in fiscal 2012 and 2011, as well as the cumulative amount incurred through the end of fiscal 2012, for our fiscal 2011 restructuring activities, was as follows:



	Domestic							International							Total
	Fiscal 2012			Fiscal 2011		Cumulative Amount		Fiscal 2012			Fiscal 2011		Cumulative Amount		Fiscal 2012			Fiscal 2011		Cumulative Amount
Continuing operations
Inventory write-downs	$	19		$	9	$	28	$	—		$	—	$	—	$	19		$	9	$	28
Property and equipment impairments	—			15		15		—			107		107		—			122		122
Termination benefits	(3		)	16		13		—			—		—		(3		)	16		13
Facility closure and other costs	4			—		4		—			—		—		4			—		4
Total	20			40		60		—			107		107		20			147		167
Discontinued operations
Inventory write-downs	—			—		—		—			15		15		—			15		15
Property and equipment impairments	15			—		15		—			25		25		15			25		40
Termination benefits	4			—		4		7			12		19		11			12		23
Intangible asset impairments	3			10		13		—			—		—		3			10		13
Facility closure and other costs	3			—		3		(8		)	13		5		(5		)	13		8
Total	25			10		35		(1		)	65		64		24			75		99
Total	$	45		$	50	$	95	$	(1	)	$	172	$	171	$	44		$	222	$	266

The following table summarizes our restructuring accrual activity during fiscal 2012 and 2011 related to termination benefits associated with our fiscal 2011 restructuring activities:



	Termination Benefits			Facility Closure and Other Costs⁽¹⁾			Total
Balance at February 27, 2010	$	—		$	—		$	—
Charges	28			13			41
Cash payments	—			—			—
Balance at February 26, 2011	28			13			41
Charges	11			6			17
Cash payments	(33		)	(14		)	(47		)
Adjustments	(3		)	4			1
Balance at March 3, 2012	$	3		$	9		$	12


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

Fiscal 2010 Restructuring

In April 2009, we updated our Domestic store operating model, which included eliminating certain positions. In addition, in the first quarter of fiscal 2010, we incurred restructuring charges related to employee termination benefits and business reorganization costs at Best Buy Europe within our International segment. As a result of our restructuring efforts, we recorded charges of $52 in the first quarter of fiscal 2010.

All charges related to our fiscal 2010 restructuring activities are related to continuing operations and are presented in Restructuring charges in our Consolidated Statements of Earnings. The composition of the restructuring charges we incurred in fiscal 2010 for our fiscal 2010 restructuring activities was as follows:



	Domestic		International		Total
Termination benefits	$	25	$	26	$	51
Facility closure costs	—		1		1
Total	$	25	$	27	$	52

The following table summarizes our restructuring accrual activity during fiscal 2011 related to termination benefits and facility closure costs associated with our fiscal 2010 restructuring activities:



	Termination Benefits			Facility Closure Costs			Total
Balance at February 27, 2010	$	8		$	1		$	9
Charges	—			—			—
Cash payments	(8		)	(1		)	(9		)
Balance at February 26, 2011	$	—		$	—		$	—