Restructuring Charges

Summary

Restructuring charges incurred in the nine months ended November 3, 2012 and October 29, 2011 for our fiscal 2013, fiscal 2012 and fiscal 2011 restructuring activities were as follows:



	Nine Months Ended
	November 3, 2012			October 29, 2011
				(recast)
Continuing operations
Fiscal 2013 Europe restructuring	$	2		$	—
Fiscal 2013 U.S. restructuring	258			—
Fiscal 2012 restructuring	6			—
Fiscal 2011 restructuring	(12		)	4
Total	254			4
Discontinued operations
Fiscal 2012 restructuring	(5		)	—
Fiscal 2011 restructuring	2			48
Total (Note 3)	(3		)	48
Total	$	251		$	52

Fiscal 2013 Europe Restructuring

In the third quarter of fiscal 2013, we initiated a series of actions to restructure our Best Buy Europe operations in our International segment intended to improve operating performance. We preliminarily expect to incur pre-tax restructuring charges (primarily employee termination benefits, facility closure costs and property and equipment impairments) of between $40 and $60 related to this plan. We expect to substantially complete these restructuring activities in fiscal 2014. We incurred $2 of restructuring charges related to Europe termination benefits in the third quarter of fiscal 2013.

Fiscal 2013 U.S. 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 $34 of charges related to the fiscal 2013 U.S. restructuring in the third quarter of fiscal 2013, consisting primarily of facility closure and other costs related to our closure of six stores. In the first nine months of fiscal 2013, we incurred $258 of restructuring charges related to the fiscal 2013 U.S. restructuring consisting primarily of facility closure and other costs, termination benefits and property and equipment impairments.

We do not expect to incur further material restructuring charges related to our fiscal 2013 U.S. restructuring activities, with the exception of lease payments for vacated stores which will continue until the lease expires or we otherwise terminate the lease.

The majority of 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 nine months ended November 3, 2012 for our fiscal 2013 restructuring activities in the Domestic segment was as follows:



	Nine Months Ended November 3, 2012
Continuing operations
Property and equipment impairments	$	28
Termination benefits	83
Facility closure and other costs, net	147
Total	$	258

The following table summarizes our restructuring accrual activity during the eight months ended November 3, 2012 related to termination benefits and facility closure and other costs associated with our 2013 U.S. restructuring activities:



	Termination Benefits			Facility Closure and Other Costs			Total
Balance at March 3, 2012	$	—		$	—		$	—
Charges	109			145			254
Cash payments	(65		)	(18		)	(83		)
Adjustments	(31		)	(3		)	(34		)
Balance at November 3, 2012	$	13		$	124		$	137

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 (Gain) loss from discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income. Refer to Note 3, Discontinued Operations.

We incurred $1 of charges related to the fiscal 2012 restructuring in the first nine 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 offsetting $(5) gain in our International segment was primarily due to adjustments to estimated facility closure costs 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 Gain (loss) from discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income.

The composition of the restructuring charges we incurred in the nine months ended November 3, 2012, as well as the cumulative amount incurred through November 3, 2012, for our fiscal 2012 restructuring activities for both the Domestic and International segments was as follows:



	Domestic				International					Total
	Nine Months Ended November 3, 2012		Cumulative Amount through November 3, 2012		Nine Months Ended November 3, 2012			Cumulative Amount through November 3, 2012		Nine Months Ended November 3, 2012			Cumulative Amount through November 3, 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	—		—		(6		)	76		(6		)	76
Total	—		—		(5		)	200		(5		)	200
Total	$	6	$	23	$	(5	)	$	215	$	1		$	238



	Termination Benefits			Facility Closure and Other Costs⁽¹⁾			Total
Balance at March 3, 2012	$	17		$	85		$	102
Charges	1			2			3
Cash payments	(17		)	(81		)	(98		)
Adjustments	—			25			25
Changes in foreign currency exchange rates	—			3			3
Balance at November 3, 2012	$	1		$	34		$	35


⁽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 (Gain) loss from discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income. Refer to Note 3, Discontinued Operations.

During the first nine 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 incurred $52 of charges related to the fiscal 2011 restructuring in the first nine months of fiscal 2012. Of the total charges, $27 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 $25 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.

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 in the periods in which the charges occurred. 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 Gain (loss) from discontinued operations in our Condensed Consolidated Statements of Earnings and Comprehensive Income.

The composition of the restructuring charges we incurred in the nine months ended November 3, 2012 and October 29, 2011, as well as the cumulative amount incurred through November 3, 2012, for our fiscal 2011 restructuring activities for both the Domestic and International segments was as follows:



	Domestic								International								Total
	Nine Months Ended						Cumulative Amount through November 3, 2012		Nine Months Ended						Cumulative Amount through November 3, 2012		Nine Months Ended						Cumulative Amount through November 3, 2012
	November 3, 2012			October 29, 2011			Cumulative Amount through November 3, 2012		November 3, 2012			October 29, 2011			Cumulative Amount through November 3, 2012		November 3, 2012			October 29, 2011			Cumulative Amount through November 3, 2012
				(recast)								(recast)								(recast)
Continuing operations
Inventory write-downs	$	—		$	—		$	28	$	—		$	—		$	—	$	—		$	—		$	28
Property and equipment impairments⁽¹⁾	(12		)	1			3		—			(1		)	107		(12		)	—			110
Termination benefits	—			(1		)	14		—			—			—		—			(1		)	14
Facility closure and other costs, net	—			5			4		—			—			—		—			5			4
Total	(12		)	5			49		—			(1		)	107		(12		)	4			156

Discontinued operations
Inventory write-downs	—			—			—		—			—			15		—			—			15
Property and equipment impairments	—			15			15		—			—			25		—			15			40
Intangible asset impairments	—			3			13		—			—			—		—			3			13
Termination benefits	—			4			4		—			20			19		—			24			23
Facility closure and other costs, net	3			—			3		(1		)	6			4		2			6			7
Total	3			22			35		(1		)	26			63		2			48			98
Total	$	(9	)	$	27		$	84	$	(1	)	$	25		$	170	$	(10	)	$	52		$	254

⁽¹⁾Included within the property and equipment impairments is a gain on sale of previously impaired property and equipment.

The following tables summarize our restructuring accrual activity during the eight months ended November 3, 2012 and October 29, 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	11			—			11
Cash payments	(27		)	(12		)	(39		)
Adjustments	(3		)	4			1
Changes in foreign currency exchange rates	—			1			1
Balance at October 29, 2011 (recast)	$	9		$	6		$	15


⁽¹⁾	Included within the adjustments to facility closure and other costs 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 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 November 3, 2012	$	—		$	5		$	5