BBY (5/4/13) 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 4, 2013 

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 (§ 232.405 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 — 339,846,591 shares outstanding as of May 31, 2013.


Table of Contents

BEST BUY CO., INC.
FORM 10-Q FOR THE QUARTER ENDED MAY 4, 2013 
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2
Table of Contents

PART I — FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
 
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BEST BUY CO., INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
ASSETS 
($ in millions)
(Unaudited)
 
May 4, 2013
 
February 2, 2013
 
May 5, 2012
CURRENT ASSETS
 

 
 

 
 
Cash and cash equivalents
$
908

 
$
1,826

 
$
1,386

Receivables
937

 
2,704

 
1,846

Merchandise inventories
5,461

 
6,571

 
6,065

Other current assets
821

 
946

 
1,019

Current assets held for sale
1,879

 
—

 
—

Total current assets
10,006

 
12,047

 
10,316

 
 
 
 
 
 
PROPERTY AND EQUIPMENT, NET
2,830

 
3,270

 
3,407

 
 
 
 
 
 
GOODWILL
528

 
528

 
1,335

 
 
 
 
 
 
TRADENAMES, NET
105

 
131

 
130

 
 
 
 
 
 
CUSTOMER RELATIONSHIPS, NET
75

 
203

 
224

 
 
 
 
 
 
EQUITY AND OTHER INVESTMENTS
61

 
86

 
128

 
 
 
 
 
 
OTHER ASSETS
255

 
522

 
471

 
 
 
 
 
 
LONG-TERM ASSETS HELD FOR SALE
471

 
—

 
—

 
 
 
 
 
 
TOTAL ASSETS
$
14,331

 
$
16,787

 
$
16,011

 
NOTE:  The Consolidated Balance Sheet as of February 2, 2013, has been condensed from the audited consolidated financial statements.
 
See Notes to Condensed Consolidated Financial Statements.

3
Table of Contents

BEST BUY CO., INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
LIABILITIES AND EQUITY 
($ in millions)
(Unaudited)
 
May 4, 2013
 
February 2, 2013
 
May 5, 2012
CURRENT LIABILITIES
 

 
 

 
 

Accounts payable
$
4,776

 
$
6,951

 
$
5,731

Unredeemed gift card liabilities
373

 
428

 
416

Accrued compensation and related expenses
333

 
520

 
638

Accrued liabilities
1,142

 
1,639

 
1,595

Accrued income taxes
8

 
129

 
272

Short-term debt
—

 
596

 
306

Current portion of long-term debt
544

 
547

 
43

Current liabilities held for sale
1,385

 
—

 
—

Total current liabilities
8,561

 
10,810

 
9,001

 
 
 
 
 
 
LONG-TERM LIABILITIES
1,001

 
1,109

 
1,025

 
 
 
 
 
 
LONG-TERM DEBT
1,142

 
1,153

 
1,678

 
 
 
 
 
 
LONG-TERM LIABILITIES HELD FOR SALE
79

 
—

 
—

 
 
 
 
 
 
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 — 339,737,000, 338,276,000 and 342,247,000 shares, respectively
34

 
34

 
34

Additional paid-in capital
77

 
54

 
20

Retained earnings
2,723

 
2,861

 
3,520

Accumulated other comprehensive income
82

 
112

 
98

Total Best Buy Co., Inc. shareholders’ equity
2,916

 
3,061

 
3,672

Noncontrolling interests
632

 
654

 
635

Total equity
3,548

 
3,715

 
4,307

 
 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
$
14,331

 
$
16,787

 
$
16,011

 
NOTE:  The Consolidated Balance Sheet as of February 2, 2013, has been condensed from the audited consolidated financial statements.
 
See Notes to Condensed Consolidated Financial Statements.

4
Table of Contents

BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
 
Three Months Ended
 
May 4, 2013
 
May 5, 2012
Revenue
$
9,380

 
$
10,373

Cost of goods sold
7,210

 
7,789

Gross profit
2,170

 
2,584

Selling, general and administrative expenses
1,996

 
2,193

Restructuring charges
6

 
127

Operating income
168

 
264

Other income (expense)
 

 
 

Investment income and other
5

 
3

Interest expense
(27
)
 
(28
)
Earnings from continuing operations before income tax expense
146

 
239

Income tax expense
49

 
70

Net earnings from continuing operations
97

 
169

Loss from discontinued operations (Note 2), net of tax benefit (expense) of ($13) and $4
(170
)
 
(17
)
Net earnings (loss) including noncontrolling interests
(73
)
 
152

Net (earnings) loss from discontinued operations attributable to noncontrolling interests
(8
)
 
6

Net earnings (loss) attributable to Best Buy Co., Inc. shareholders
$
(81
)
 
$
158

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

 
 

Continuing operations
$
0.29

 
$
0.49

Discontinued operations
(0.53
)
 
(0.03
)
Basic earnings (loss) per share
$
(0.24
)
 
$
0.46

 
 
 
 
Diluted earnings (loss) per share attributable to Best Buy Co., Inc. shareholders
 
 
 
Continuing operations
$
0.29

 
$
0.49

Discontinued operations
(0.53
)
 
(0.03
)
Diluted earnings (loss) per share
$
(0.24
)
 
$
0.46

 
 
 
 
Dividends declared per common share
$
0.17

 
$
0.16

 
 
 
 
Weighted-average common shares outstanding (in millions)
 

 
 

Basic
339.0

 
342.2

Diluted
341.0

 
342.8

 
See Notes to Condensed Consolidated Financial Statements. 

5
Table of Contents

BEST BUY CO., INC. 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
($ in millions)
(Unaudited)
 
Three Months Ended
 
May 4, 2013
 
May 5, 2012
Net earnings (loss) including noncontrolling interests
$
(73
)
 
$
152

Foreign currency translation adjustments
(63
)
 
43

Unrealized gain on available-for-sale investments
3

 
1

Comprehensive income (loss) including noncontrolling interests
(133
)
 
196

Comprehensive (income) loss attributable to noncontrolling interests
22

 
(14
)
Comprehensive income (loss) attributable to Best Buy Co., Inc. shareholders
$
(111
)
 
$
182


See Notes to Condensed Consolidated Financial Statements. 


6
Table of Contents

BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 
FOR THE THREE MONTHS ENDED MAY 4, 2013, AND MAY 5, 2012 
($ 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 February 2, 2013
338

 
$
34

 
$
54

 
$
2,861

 
$
112

 
$
3,061

 
$
654

 
$
3,715

Net earnings (loss), three months ended May 4, 2013
—

 
—

 
—

 
(81
)
 
—

 
(81
)
 
8

 
(73
)
Foreign currency translation adjustments
—

 
—

 
—

 
—

 
(33
)
 
(33
)
 
(30
)
 
(63
)
Unrealized gains on available-for-sale investments
—

 
—

 
—

 
—

 
3

 
3

 
—

 
3

Stock-based compensation
—

 
—

 
23

 
—

 
—

 
23

 
—

 
23

Restricted stock vested and stock options exercised
1

 
—

 
2

 
—

 
—

 
2

 
—

 
2

Issuance of common stock under employee stock purchase plan
1

 
—

 
7

 
—

 
—

 
7

 
—

 
7

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

 
—

 
(9
)
 
—

 
—

 
(9
)
 
—

 
(9
)
Common stock dividends, $0.17 per share
—

 
—

 
—

 
(57
)
 
—

 
(57
)
 
—

 
(57
)
Balances at May 4, 2013
340

 
$
34

 
$
77

 
$
2,723

 
$
82

 
$
2,916

 
$
632

 
$
3,548

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at March 3, 2012
341

 
$
34

 
$
—

 
$
3,621

 
$
90

 
$
3,745

 
$
621

 
$
4,366

Adjustment for fiscal year-end change (Note 1)
5

 
—

 
—

 
(108
)
 
(16
)
 
(124
)
 
—

 
(124
)
Balances at January 28, 2012
346

 
34

 
—

 
3,513

 
74

 
3,621

 
621

 
4,242

Net earnings (loss), three months ended May 5, 2012
—

 
—

 
—

 
158

 
—

 
158

 
(6
)
 
152

Foreign currency translation adjustments
—

 
—

 
—

 
—

 
23

 
23

 
20

 
43

Unrealized gains 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


See Notes to Condensed Consolidated Financial Statements.

7
Table of Contents

BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions) 
(Unaudited)
 
Three Months Ended
 
May 4, 2013
 
May 5, 2012
OPERATING ACTIVITIES
 
 
 
Net earnings (loss) including noncontrolling interests
$
(73
)
 
$
152

Adjustments to reconcile net earnings (loss) including noncontrolling interests to total cash provided by (used in) operating activities:
 
 
 
Depreciation
200

 
227

Amortization of definite-lived intangible assets
10

 
10

Restructuring charges
59

 
133

Impairment of assets held for sale
175

 
—

Stock-based compensation
22

 
33

Realized gain on sale of subsidiary
(28
)
 
—

Deferred income taxes
(16
)
 
(98
)
Other, net
13

 
20

Changes in operating assets and liabilities
 
 
 
Receivables
473

 
623

Merchandise inventories
702

 
765

Other assets
26

 
(96
)
Accounts payable
(1,118
)
 
(1,153
)
Other liabilities
(362
)
 
(264
)
Income taxes
(88
)
 
27

Total cash provided by (used in) operating activities
(5
)
 
379

 
 
 
 
INVESTING ACTIVITIES
 

 
 

Additions to property and equipment
(174
)
 
(141
)
Purchases of investments
(1
)
 
(5
)
Sales of investments
12

 
17

Acquisition of businesses, net of cash acquired
—

 
(10
)
Proceeds from sale of business, net of cash transferred
26

 
25

Change in restricted assets
22

 
20

Other, net
(1
)
 
—

Total cash used in investing activities
(116
)
 
(94
)
 
 
 
 
FINANCING ACTIVITIES
 

 
 

Repurchase of common stock
—

 
(132
)
Borrowings of debt
293

 
221

Repayments of debt
(885
)
 
(416
)
Dividends paid
(58
)
 
—

Issuance of common stock under employee stock purchase plan and for the exercise of stock options
9

 
13

Other, net
—

 
9

Total cash used in financing activities
(641
)
 
(305
)
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
7

 
5

 
 
 
 
DECREASE IN CASH AND CASH EQUIVALENTS BEFORE ADJUSTMENT
(755
)
 
(15
)
 
 
 
 
ADJUSTMENT FOR FISCAL YEAR-END CHANGE (NOTE 1)
—

 
202

 
 
 
 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AFTER ADJUSTMENT
(755
)
 
187

 
 
 
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
1,826

 
1,199

 
 
 
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
1,071

 
1,386

 
 
 
 
LESS CASH AND CASH EQUIVALENTS HELD FOR SALE
163

 
—

 
 
 
 
CASH AND CASH EQUIVALENTS EXCLUDING HELD FOR SALE
$
908

 
$
1,386


See Notes to Condensed Consolidated Financial Statements.

8
Table of Contents

BEST BUY CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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 a large portion of our earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Europe, Canada and Mexico, 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 Transition Report on Form 10-K for the fiscal year ended February 2, 2013. The first quarter of fiscal 2014 included 13 weeks and the first quarter of fiscal 2013 included 14 weeks.
 
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 was an 11-month transition period ending on February 2, 2013. The results for the three months ended May 5, 2012 include our fiscal month ended March 3, 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 2, 2012, included in our fiscal 2012 Form 10-K. See Note 2, Fiscal Year-end Change, in the Notes to Consolidated Financial Statements included in our Transition Report on Form 10-K for the fiscal year ended February 2, 2013, for additional information regarding our fiscal year-end change.
 
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 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. Other than the sale of our Switzerland operations, as described in Note 2, Assets and Liabilities Held for Sale and Discontinued Operations, no such events were identified for this period.

The assets and liabilities of Best Buy Europe are reported as held for sale in the Condensed Consolidated Balance Sheets as of May 4, 2013, as a result of our agreement to sell our 50% interest in Best Buy Europe to Carphone Warehouse Group plc ("CPW"). Consistent with this presentation, the Notes to Condensed Consolidated Financial Statements exclude the assets and liabilities of Best Buy Europe as of May 4, 2013. The composition of the assets and liabilities held for sale is included in Note 2, Assets and Liabilities Held for Sale and Discontinued Operations.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from May 5, 2013 through the date the financial statements were issued, for material subsequent events requiring recognition or disclosure. No such events were identified for this period.

2.
Assets and Liabilities Held for Sale and Discontinued Operations

Assets and Liabilities Held for Sale

On April 29, 2013, we entered into a definitive agreement with CPW to sell our 50% ownership interest in Best Buy Europe to CPW in return for net proceeds of £471 million ($733 million based on the exchange rates in effect at May 4, 2013). Net proceeds represent a sale price of £500 million less £29 million of costs we have agreed to pay CPW in satisfaction of obligations under existing agreements, and will be in the form of cash, deferred cash and CPW ordinary shares. The transaction is subject to approval of CPW shareholders and certain European regulators. We expect the transaction to be completed in the second quarter of fiscal 2014. In connection with this transaction, we entered into a deal-contingent forward foreign currency contract to hedge the minimum value of the proceeds we will receive. Refer to Note 8, Derivative Instruments, for additional information regarding the deal-contingent forward contract. As a result of our commitment to sell Best Buy Europe, we also recognized a $175 million impairment (which is not tax deductible) to write down the book value of our investment in Best Buy Europe to fair value based on expected net proceeds. Proceeds from the sale of our interest in Best Buy Europe,

9
Table of Contents

denominated in British Pound Sterlings ("GBP"), are expected to exceed our GBP book value of Best Buy Europe. However, devaluation of GBP against the U.S. Dollar since the time of our original acquisition has led to significant accumulated foreign currency losses, which will be recognized on disposal of Best Buy Europe, and the aforementioned impairment reflects the impact of these foreign currency losses.

The assets and liabilities of Best Buy Europe as of May 4, 2013 are classified as held for sale in the Condensed Consolidated Balance Sheets and the results of Best Buy Europe are presented as discontinued operations in the Consolidated Statements of Earnings. The composition of assets and liabilities held for sale as of May 4, 2013 was as follows ($ in millions):
 
May 4, 2013
Cash and cash equivalents
$
163

Receivables
1,211

Merchandise inventories
385

Other current assets
120

Current assets held for sale
1,879

Net property and equipment
147

Other assets
324

Long-term assets held for sale
471

 
 
Accounts payable
965

Other current liabilities
420

Current liabilities held for sale
1,385

Long-term liabilities held for sale
79


Discontinued Operations

During the first quarter of fiscal 2014, and prior to the aforementioned sale agreement, Best Buy Europe sold its fixed-line business in Switzerland, which resulted in a gain of $28 million (with no tax impact).

Discontinued operations comprise: (i) Napster operations within our Domestic segment; (ii) large-format Best Buy branded store operations in China within our International segment; and (iii) Best Buy Europe operations (including the fixed-line business in Switzerland) within our International segment. The presentation of discontinued operations has been retrospectively applied to all prior periods presented.

The financial results of discontinued operations for the three months ended May 4, 2013 and May 5, 2012 were as follows ($ in millions):
 
Three Months Ended
 
May 4, 2013
 
May 5, 2012
Revenue
$
1,430

 
$
1,244

 
 
 
 
Restructuring charges(1)
53

 
6

 
 
 
 
Loss from discontinued operations before income tax benefit (expense)
(185
)
 
(19
)
Income tax benefit (expense)(2)
(13
)
 
4

Gain on sale of discontinued operations
28

 
—

Equity in loss of affiliates
—

 
(2
)
Net loss from discontinued operations, including noncontrolling interests
(170
)
 
(17
)
Net (earnings) loss from discontinued operations attributable to noncontrolling interests
(8
)
 
6

Net loss from discontinued operations attributable to Best Buy Co., Inc. shareholders
$
(178
)
 
$
(11
)
 
(1)  
See Note 6, Restructuring Charges, for further discussion of the restructuring charges associated with discontinued operations.
(2)  
The fiscal 2014 effective tax rate for discontinued operations differs from the statutory tax rate primarily due to the $53 million of restructuring charges and $175 million impairment of our investment in Best Buy Europe, which generally included no related tax benefit. The deferred tax assets related to the restructuring charges generally resulted in an increase in the valuation allowance in an equal amount, while the investment impairment is not tax deductible.

10
Table of Contents

3.
Investments
 
Investments were comprised of the following ($ in millions):
 
May 4, 2013
 
February 2, 2013
 
May 5, 2012
Equity and other investments
 

 
 

 
 

Debt securities (auction rate securities)
$
21

 
$
21

 
$
66

Marketable equity securities
3

 
27

 
3

Other investments
37

 
38

 
59

Total equity and other investments
$
61

 
$
86

 
$
128


Debt Securities
 
Our debt securities are comprised of auction rate securities (“ARS”). We classify our investments in ARS as available-for-sale and carry them at fair value. Due to persistent failed auctions and 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 as of May 4, 2013, February 2, 2013 and May 5, 2012. At May 4, 2013, our entire remaining ARS portfolio of six investments comprised primarily of student loan bonds with an aggregate par value of $23 million, was subject to failed auctions.
 
We sold $0 million of ARS at par during the first quarter of fiscal 2014. We do not intend to sell our remaining ARS until we can recover the full principal amount. 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 $23 million (par value) for impairment at May 4, 2013, based primarily on the methodology described in Note 4, Fair Value Measurements. As a result of this review, we determined that the fair value of our ARS portfolio at May 4, 2013 was $21 million. Accordingly, a $2 million pre-tax unrealized loss is recognized in accumulated other comprehensive income.
 
We had $1 million, $1 million and $3 million of unrealized loss, net of tax, recorded in accumulated other comprehensive income at May 4, 2013, February 2, 2013 and May 5, 2012, 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. Our investments in marketable equity securities were $3 million, $27 million and $3 million at May 4, 2013, February 2, 2013 and May 5, 2012, respectively.
  
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 $3 million, $3 million and $0 million at May 4, 2013, February 2, 2013 and May 5, 2012, respectively.
 
Other Investments
 
The aggregate carrying values of investments accounted for using either the cost method or the equity method at May 4, 2013, February 2, 2013 and May 5, 2012 were $37 million, $38 million and $59 million, respectively.


11
Table of Contents

4.
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.
 
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 where 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 4, 2013, February 2, 2013 and May 5, 2012, according to the valuation techniques we used to determine their fair values ($ in millions).
 
 
 
Fair Value Measurements
Using Inputs Considered as
 
Fair Value at
May 4, 2013
 
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
$
40

 
$
40

 
$
—

 
$
—

Equity and other investments
 

 
 

 
 

 
 

Auction rate securities
21

 
—

 
—

 
21

Marketable equity securities
3

 
3

 
—

 
—

 
 

 
 

 
 

 
 

LIABILITIES
 

 
 

 
 

 
 

Accrued liabilities
 
 
 
 
 
 
 
Foreign currency derivative instruments
5

 
—

 
5

 
—

 
 
 
 
 
 
 
 
ASSETS HELD FOR SALE
 
 
 
 
 
 
 
Short-term investments
 
 
 
 
 
 
 
Marketable equity securities
9

 
9

 
—

 
—

Other current assets
 
 
 
 
 
 
 
Money market funds (restricted assets)
34

 
34

 
—

 
—



12
Table of Contents

 
 
 
Fair Value Measurements
Using Inputs Considered as
 
Fair Value at
February 2, 2013
 
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
$
520

 
$
520

 
$
—

 
$
—

Other current assets
 

 
 

 
 

 
 

Foreign currency derivative instruments
1

 
—

 
1

 
—

Equity and other investments
 

 
 

 
 

 
 

Auction rate securities
21

 
—

 
—

 
21

Marketable equity securities
27

 
27

 
—

 
—

 
 
 
 
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 assets)
104

 
104

 
—

 
—

U.S. Treasury bills (restricted assets)
30

 
30

 
—

 
—

Equity and other investments
 

 
 

 
 

 
 

Auction rate securities
66

 
—

 
—

 
66

Marketable equity securities
3

 
3

 
—

 
—


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 three months ended May 4, 2013 and two months ended May 5, 2012 ($ in millions).
 
Debt securities-
Auction rate securities only
 
Student loan
bonds
 
Municipal
revenue bonds
 
Total
Balances at February 2, 2013
$
19

 
$
2

 
$
21

Changes in unrealized losses included in other comprehensive income
—

 
—

 
—

Sales
—

 
—

 
—

Balances at May 4, 2013
$
19

 
$
2

 
$
21

  
 
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



13
Table of Contents

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.

U.S. Treasury Bills.  Our U.S. Treasury bills were classified as Level 1 as they trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.
 
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 active markets.
 
Auction Rate Securities.  Our investments in ARS were classified as Level 3 as quoted prices were unavailable due to events described in Note 3, 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 of 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 active markets 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 intangible assets, which are remeasured when the 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 Consolidated Statements of Earnings.

With the exception of fixed asset impairments associated with our agreement to sell our interest in Best Buy Europe and our restructuring activities described in Note 6, Restructuring Charges, we had no significant remeasurements of such assets or liabilities to fair value during the three months ended May 4, 2013 and May 5, 2012.

The following table summarizes the fair value remeasurements recorded during the three months ended May 4, 2013 and May 5, 2012 ($ in millions):
 
Three Months Ended
 
Three Months Ended
 
May 4, 2013
 
May 5, 2012
 
Impairments
 
Remaining Net Carrying Value
 
Impairments
 
Remaining Net Carrying Value
Continuing operations
 
 
 
 
 
 
 
Property and equipment
$
1

 
$
—

 
$
26

 
$
—

Discontinued operations(1)
 
 
 
 
 
 
 
Property and equipment(2)
220

 
147

 
—

 
—

Tradename
4

 
22

 
—

 
—

Total discontinued operations
$
224

 
$
169

 
$
—

 
$
—

(1) 
Property and equipment and tradename impairments associated with discontinued operations are recorded within Loss from discontinued operations in our Consolidated Statements of Earnings.
(2) 
Includes the $175 million impairment to write down the book value of our investment in Best Buy Europe to fair value based on expected net proceeds as described in Note 2, Assets and Liabilities Held for Sale and Discontinued Operations. The impairment was calculated based on the fair value and foreign currency translation adjustment associated with the business and was applied to the fixed assets.

The fair value remeasurements included in the table above were based on significant unobservable inputs (Level 3). Fixed asset and tradename fair values were derived using a DCF model to estimate the present value of net cash flows that the asset or asset

14
Table of Contents

group was expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, sales proceeds, 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 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 7, Debt, for information about the fair value of our long-term debt.

5.
Goodwill and Intangible Assets
 
The changes in the carrying values of goodwill and indefinite-lived tradenames by segment were as follows in the three months ended May 4, 2013 and the two months ended May 5, 2012 ($ in millions):
 
Goodwill
 
Indefinite-lived Tradenames
 
Domestic
 
International
 
Total
 
Domestic
 
International
 
Total
Balances at February 2, 2013
$
528

 
$
—

 
$
528

 
$
19

 
$
112

 
$
131

Transfer of assets to held for sale
—

 
—

 
—

 
—

 
(22
)
 
(22
)
Impairments
—

 
—

 
—

 
—

 
(4
)
 
(4
)
Balances at May 4, 2013
$
528

 
$
—

 
$
528

 
$
19

 
$
86

 
$
105

 

 
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


The following table provides the gross carrying amount of goodwill and cumulative goodwill impairment losses ($ in millions):
 
May 4, 2013
 
February 2, 2013
 
May 5, 2012
 
Gross
Carrying
Amount(1)
 
Cumulative
Impairment(1)
 
Gross
Carrying
Amount
 
Cumulative
Impairment
 
Gross
Carrying
Amount
 
Cumulative
Impairment
Goodwill
$
1,412

 
$
(884
)
 
$
2,608

 
$
(2,080
)
 
$
2,596

 
$
(1,261
)
 (1) 
Excludes the gross carrying amount and cumulative impairment related to Best Buy Europe goodwill classified as held for sale.

The following table provides the gross carrying values and related accumulated amortization of definite-lived intangible assets ($ in millions):
 
May 4, 2013
 
February 2, 2013
 
May 5, 2012
 
Gross
Carrying
Amount(1)
 
Accumulated
Amortization(1)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Customer relationships
$
83

 
$
(8
)
 
$
475

 
$
(272
)
 
$
463

 
$
(239
)
(1) 
Excludes the gross carrying amount and cumulative impairment related to Best Buy Europe customer relationships classified as held for sale.


15
Table of Contents

Total amortization expense was $10 million for the three months ended May 4, 2013 and May 5, 2012, of which $8 million and $9 million, respectively, has been included in the results of discontinued operations. The estimated future amortization expense for identifiable intangible assets is as follows ($ in millions):
Fiscal Year
 
Remainder of fiscal 2014
$
5

2015
6

2016
6

2017
6

2018
6

Thereafter
46


6.
Restructuring Charges
 
Summary

Restructuring charges incurred in the three months ended May 4, 2013 and May 5, 2012 for our restructuring activities were as follows ($ in millions):
 
Three Months Ended
 
May 4, 2013
 
May 5, 2012
Continuing operations
 
 
 
Renew Blue
$
6

 
$
—

Fiscal 2013 U.S. restructuring
—

 
133

Fiscal 2012 restructuring
—

 
6

Fiscal 2011 restructuring
—

 
(12
)
Total
6

 
127

Discontinued operations
 
 
 
Fiscal 2013 Europe restructuring
53

 
—

Fiscal 2012 restructuring
—

 
3

Fiscal 2011 restructuring
—

 
3

Total (Note 2)
53

 
6

Total
$
59

 
$
133


Renew Blue

In the fourth quarter of fiscal 2013, we initiated our Renew Blue strategy, which includes six key priorities. Activities and initiatives intended to reduce costs and improve operating performance by focusing on core business activities, reducing headcount and optimizing our real estate portfolio represent a component of our Renew Blue priorities. We incurred $6 million of restructuring charges related to Renew Blue initiatives during the first quarter of fiscal 2014. We expect to continue to implement Renew Blue initiatives throughout fiscal 2014, as we further analyze our operations and strategies.

All restructuring charges related to this program are from continuing operations and are presented in Restructuring charges in our Consolidated Statements of Earnings. The composition of the restructuring charges we incurred for this program in the three months ended May 4, 2013, as well as the cumulative amount incurred through May 4, 2013, was as follows ($ in millions):

16
Table of Contents

 
Domestic
 
International
 
Total
 
Three Months Ended
May 4, 2013
 
Cumulative Amount through
May 4, 2013
 
Three Months Ended
May 4, 2013
 
Cumulative Amount through
May 4, 2013
 
Three Months Ended
May 4, 2013
 
Cumulative Amount through
May 4, 2013
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
Inventory write-downs
$
—

 
$
1

 
$
—

 
$
—

 
$
—

 
$
1

Property and equipment impairments
1

 
8

 
—

 
23

 
1

 
31

Termination benefits
—

 
46

 
4

 
13

 
4

 
59

Investment impairments
—

 
27

 
—

 
—

 
—

 
27

Facility closure and other costs
—

 
3

 
1

 
56

 
1

 
59

Total
$
1

 
$
85

 
$
5

 
$
92

 
$
6

 
$
177


The following table summarizes our restructuring accrual activity during the three months ended May 4, 2013 related to termination benefits and facility closure and other costs associated with this program ($ in millions):
 
Termination
Benefits
 
Facility
Closure and
Other Costs
 
Total
Balance at February 2, 2013
$
54

 
$
54

 
$
108

Charges
4

 
4

 
8

Cash payments
(35
)
 
(3
)
 
(38
)
Adjustments
(2
)
 
8

 
6

Changes in foreign currency exchange rates
—

 
(1
)
 
(1
)
Balance at May 4, 2013
$
21

 
$
62

 
$
83


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. All restructuring charges related to this program are presented in discontinued operations as a result of our agreement to sell our 50% ownership interest in Best Buy Europe, as described in Note 2, Assets and Liabilities Held for Sale and Discontinued Operations. We expect to incur additional restructuring charges under this program until the completion of the sale of Best Buy Europe, which is expected to occur in the second quarter of fiscal 2014.

The composition of the restructuring charges we incurred for this program in the three months ended May 4, 2013, as well as the cumulative amount incurred through May 4, 2013, was as follows ($ in millions):
 
Three Months Ended
May 4, 2013
 
Cumulative Amount through
May 4, 2013
Discontinued operations
 
 
 
Property and equipment impairments
$
45

 
$
57

Termination benefits
2

 
21

Tradename impairment
4

 
4

Facility closure and other costs
2

 
7

Total
$
53

 
$
89



17
Table of Contents

The following table summarizes our restructuring accrual activity during the three months ended May 4, 2013 related to termination benefits and facility closure and other costs associated with this program ($ in millions):
 
Termination
Benefits
 
Facility
Closure and
Other Costs
 
Total
Balance at February 2, 2013
$
—

 
$
5

 
$
5

Charges
2

 
2

 
4

Cash payments
(1
)
 
(4
)
 
(5
)
Adjustments
—

 
—

 
—

Balance at May 4, 2013
$
1

 
$
3

 
$
4


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 49 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 comprised facility closure costs, employee termination benefits and property and equipment (primarily store fixtures) impairments. We did not incur any significant charges related to this program in the first quarter of fiscal 2014. We incurred $133 million of charges related to the fiscal 2013 U.S. restructuring in the first quarter of fiscal 2013. We do not expect to incur further material restructuring charges related to this program, with the exception of lease payments for vacated stores which will continue until leases expire or are terminated.

The restructuring charges related to our fiscal 2013 restructuring activities are from continuing operations and are presented in Restructuring charges in our Consolidated Statements of Earnings. The composition of the restructuring charges we incurred for this program in the three months ended May 4, 2013 and May 5, 2012, as well as the cumulative amount incurred through May 4, 2013, was as follows ($ in millions):
 
Three Months Ended
 
Cumulative Amount through May 4, 2013
 
May 4, 2013
 
May 5, 2012
 
Continuing operations
 
 
 
 
 
Property and equipment impairments
$
—

 
$
25

 
$
29

Termination benefits
—

 
107

 
77

Facility closure and other costs, net
—

 
1

 
151

Total
$
—

 
$
133

 
$
257


The following table summarizes our restructuring accrual activity during the three months ended May 4, 2013, and the two months ended May 5, 2012, related to termination benefits and facility closure and other costs associated with this program ($ in millions):
 
Termination
Benefits
 
Facility
Closure and
Other Costs
 
Total
Balance at February 2, 2013
$
4

 
$
113

 
$
117

Charges
—

 
2

 
2

Cash payments
(2
)
 
(9
)
 
(11
)
Adjustments
(2
)
 
(4
)
 
(6
)
Balance at May 4, 2013
$
—

 
$
102

 
$
102

 
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


18
Table of Contents

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. In our International segment, we closed our large-format Best Buy branded stores in the U.K. and impaired certain information technology assets supporting the restructured operations. 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 Consolidated Statements of Earnings. Refer to Note 2, Assets and Liabilities Held for Sale and Discontinued Operations.

We did not incur any charges related to the fiscal 2012 restructuring in the first quarter of fiscal 2014. In the first quarter of fiscal 2013, we incurred $9 million of charges related to the fiscal 2012 restructuring. We do not expect to incur further material restructuring charges related to this program in either our Domestic or International segments, as we have substantially completed these restructuring activities.

All restructuring charges from continuing operations related to this program 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 for this program in the three months ended May 5, 2012, as well as the cumulative amount incurred through May 4, 2013, was as follows ($ in millions):
 
Domestic
 
International
 
Total
 
Three Months Ended
May 5, 2012
 
Cumulative Amount
through
May 4, 2013
 
Three Months Ended
May 5, 2012
 
Cumulative Amount through
May 4, 2013
 
Three Months Ended
May 5, 2012
 
Cumulative Amount through
May 4, 2013
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
Property and equipment impairments
$
1

 
$
17

 
$
—

 
$
15

 
$
1

 
$
32

Termination benefits
—

 
1

 
—

 
—

 
—

 
1

Facility closure and other costs
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
—

 
—

 
2

 
79

 
2

 
79

Total
—

 
—

 
3

 
203

 
3

 
203

Total
$
6

 
$
23

 
$
3

 
$
218

 
$
9

 
$
241


The following table summarizes our restructuring accrual activity during the three months ended May 4, 2013, and the two months ended May 5, 2012, related to termination benefits and facility closure and other costs associated with this program ($ in millions):
 
Termination
Benefits
 
Facility
Closure and
Other Costs(1)
 
Total
Balance at February 2, 2013
$
—

 
$
36

 
$
36

Charges
—

 
—

 
—

Cash payments
—

 
(29
)
 
(29
)
Adjustments
—

 
—

 
—

Changes in foreign currency exchange rates
—

 
(2
)
 
(2
)
Balance at May 4, 2013
$
—

 
$
5

 
$
5


19
Table of Contents

 
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 adjustments to facility closure and other costs is $34 million from the first quarter of fiscal 2013, representing an adjustment to exclude non-cash charges or benefits, which had no impact on our Consolidated Statements of Earnings 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. During the first quarter of fiscal 2013, we recorded a net reduction to restructuring charges of $9 million, 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 have completed activities under this plan.

7.    Debt
 
Short-Term Debt
 
Short-term debt consisted of the following ($ in millions):
 
May 4, 2013
 
February 2, 2013
 
May 5, 2012
U.S. revolving credit facility – 364-Day
$
—

 
$
—

 
$
—

U.S. revolving credit facility – 5-Year
—

 
—

 
—

Europe revolving credit facility
—

 
596

 
306

Canada revolving demand facility
—

 
—

 
—

China revolving demand facilities
—

 
—

 
—

   Total short-term debt
$
—

 
$
596

 
$
306

 
Long-Term Debt
 
Long-term debt consisted of the following ($ in millions):
 
May 4, 2013
 
February 2, 2013
 
May 5, 2012
2013 Notes
$
500

 
$
500

 
$
500

2016 Notes
349

 
349

 
349

2021 Notes
648

 
648

 
648

Financing lease obligations
116

 
122

 
145

Capital lease obligations
72

 
80