BEST BUY CO INC, 10-K filed on 4/25/2011
Annual Report
Consolidated Balance Sheets (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Current Assets
 
 
Cash and cash equivalents
$ 1,103 
$ 1,826 
Short-term investments
22 
90 
Receivables
2,348 
2,020 
Merchandise inventories
5,897 
5,486 
Other current assets
1,103 
1,144 
Total current assets
10,473 
10,566 
Property and Equipment
 
 
Land and buildings
766 
757 
Leasehold improvements
2,318 
2,154 
Fixtures and equipment
4,701 
4,447 
Property under capital lease
120 
95 
Gross property and equipment
7,905 
7,453 
Less accumulated depreciation
4,082 
3,383 
Net property and equipment
3,823 
4,070 
Goodwill
2,454 
2,452 
Tradenames, Net
133 
159 
Customer Relationships, Net
203 
279 
Equity and Other Investments
328 
324 
Other Assets
435 
452 
Total Assets
17,849 
18,302 
Current Liabilities
 
 
Accounts payable
4,894 
5,276 
Unredeemed gift card liabilities
474 
463 
Accrued compensation and related expenses
570 
544 
Accrued liabilities
1,471 
1,681 
Accrued income taxes
256 
316 
Current portion of long-term debt
441 
35 
Total current liabilities
8,663 
8,978 
Long-Term Liabilities
1,183 
1,256 
Long-Term Debt
711 
1,104 
Contingencies and Commitments (Note 13)
 
 
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 - 392,590,000 and 418,815,000 shares, respectively
39 
42 
Additional paid-in capital
18 
441 
Retained earnings
6,372 
5,797 
Accumulated other comprehensive income
173 
40 
Total Best Buy Co., Inc. shareholders' equity
6,602 
6,320 
Noncontrolling interests
690 
644 
Total equity
7,292 
6,964 
Total Liabilities and Equity
$ 17,849 
$ 18,302 
Consolidated Balance Sheets (Parenthetical) (USD $)
Feb. 26, 2011
Feb. 27, 2010
Consolidated Balance Sheets
 
 
Preferred stock, par value (in dollars per share)
$ 1 
$ 1 
Preferred stock, Authorized shares
400,000 
400,000 
Preferred stock, Issued shares
Preferred stock, outstanding shares
Common stock, par value (in dollars per share)
$ 0.10 
$ 0.10 
Common stock, Authorized shares
1,000,000,000 
1,000,000,000 
Common stock, Issued shares
392,590,000 
418,815,000 
Common stock, outstanding shares
392,590,000 
418,815,000 
Consolidated Statements of Earnings (USD $)
In Millions, except Per Share data
3 Months Ended
Feb. 26, 2011
3 Months Ended
Nov. 27, 2010
3 Months Ended
Aug. 28, 2010
3 Months Ended
May 29, 2010
3 Months Ended
Feb. 27, 2010
3 Months Ended
Nov. 28, 2009
3 Months Ended
Aug. 29, 2009
3 Months Ended
May 30, 2009
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Revenue
$ 16,256 
$ 11,890 
$ 11,339 
$ 10,787 
$ 16,553 
$ 12,024 
$ 11,022 
$ 10,095 
$ 50,272 
$ 49,694 
$ 45,015 
Cost of goods sold
 
 
 
 
 
 
 
 
37,611 
37,534 
34,017 
Restructuring charges - cost of goods sold
 
 
 
 
 
 
 
 
24 
 
 
Gross profit
3,943 
2,983 
2,918 
2,793 
3,977 
2,942 
2,684 
2,557 
12,637 
12,160 
10,998 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
10,325 
9,873 
8,984 
Restructuring charges
222 
 
 
 
 
 
 
52 
198 
52 
78 
Goodwill and tradename impairment
 
 
 
 
 
 
 
 
 
 
66 
Operating income
1,005 
385 
411 
313 
1,283 
376 
280 
296 
2,114 
2,235 
1,870 
Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
Investment income and other
 
 
 
 
 
 
 
 
51 
54 
35 
Investment impairment
 
 
 
 
 
 
 
 
 
 
(111)
Interest expense
 
 
 
 
 
 
 
 
(87)
(94)
(94)
Earnings before income tax expense and equity in income of affiliates
 
 
 
 
 
 
 
 
2,078 
2,195 
1,700 
Income tax expense
 
 
 
 
 
 
 
 
714 
802 
674 
Equity in income of affiliates
 
 
 
 
 
 
 
 
Net earnings including noncontrolling interests
688 
240 
257 
181 
810 
271 
157 
156 
1,366 
1,394 
1,033 
Net earnings attributable to noncontrolling interests
 
 
 
 
 
 
 
 
(89)
(77)
(30)
Net earnings attributable to Best Buy Co., Inc.
651 
217 
254 
155 
779 
227 
158 
153 
1,277 
1,317 
1,003 
Earnings per share attributable to Best Buy Co., Inc.
 
 
 
 
 
 
 
 
 
 
 
Basic (in dollars per share)
 
 
 
 
 
 
 
 
3.14 
3.16 
2.43 
Diluted (in dollars per share)
$ 1.62 
$ 0.54 
$ 0.60 
$ 0.36 
$ 1.82 
$ 0.53 
$ 0.37 
$ 0.36 
$ 3.08 
$ 3.10 
$ 2.39 
Weighted-average common shares outstanding (in millions)
 
 
 
 
 
 
 
 
 
 
 
Basic (in shares)
 
 
 
 
 
 
 
 
406 
417 
413 
Diluted (in shares)
 
 
 
 
 
 
 
 
417 
428 
423 
Consolidated Statements of Cash Flows (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Operating Activities
 
 
 
Net earnings including noncontrolling interests
$ 1,366 
$ 1,394 
$ 1,033 
Adjustments to reconcile net earnings to total cash provided by operating activities:
 
 
 
Depreciation
896 
838 
730 
Amortization of definite-lived intangible assets
82 
88 
63 
Asset impairments
10 
177 
Restructuring charges
222 
52 
78 
Stock-based compensation
121 
118 
110 
Deferred income taxes
(134)
(30)
(43)
Excess tax benefits from stock-based compensation
(11)
(7)
(6)
Other, net
(4)
12 
Changes in operating assets and liabilities, net of acquired assets and liabilities:
 
 
 
Receivables
(371)
(63)
(419)
Merchandise inventories
(400)
(609)
258 
Other assets
40 
(98)
(175)
Accounts payable
(443)
141 
139 
Other liabilities
(156)
279 
(75)
Income taxes
(33)
103 
(5)
Total cash provided by operating activities
1,190 
2,206 
1,877 
Investing Activities
 
 
 
Additions to property and equipment
(744)
(615)
(1,303)
Purchases of investments
(267)
(16)
(81)
Sales of investments
415 
56 
246 
Acquisition of businesses, net of cash acquired
 
(7)
(2,170)
Proceeds from sale of business, net of cash transferred
21 
 
 
Change in restricted assets
(2)
18 
(97)
Settlement of net investment hedges
12 
40 
 
Other, net
(4)
(16)
(22)
Total cash used in investing activities
(569)
(540)
(3,427)
Financing Activities
 
 
 
Repurchase of common stock
(1,193)
 
 
Issuance of common stock under employee stock purchase plan and for the exercise of stock options
179 
138 
83 
Dividends paid
(237)
(234)
(223)
Repayments of debt
(3,120)
(5,342)
(4,712)
Proceeds from issuance of debt
3,021 
5,132 
5,606 
Acquisition of noncontrolling interests
(21)
(34)
(146)
Excess tax benefits from stock-based compensation
11 
Other, net
(15)
(23)
Total cash (used in) provided by financing activities
(1,357)
(348)
591 
Effect of Exchange Rate Changes on Cash
13 
10 
19 
(Decrease) Increase in Cash and Cash Equivalents
(723)
1,328 
(940)
Cash and Cash Equivalents at Beginning of Year
1,826 
498 
1,438 
Cash and Cash Equivalents at End of Year
1,103 
1,826 
498 
Supplemental Disclosure of Cash Flow Information
 
 
 
Income taxes paid
882 
732 
766 
Interest paid
$ 68 
$ 78 
$ 83 
Consolidated Statements of Cash Flows (Parenthetical) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Consolidated Statements of Cash Flows
 
 
 
Non-cash capital expenditures
$ 81 
$ 9 
$ 42 
Consolidated Statements of Changes in Shareholders' Equity
In Millions
Total Best Buy Co., Inc. Shareholders' Equity
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Noncontrolling Interests
Comprehensive Income
Total
Balances at Mar. 01, 2008
4,484 
41 
3,933 
502 
40 
 
4,524 
Balances (in shares) at Mar. 01, 2008
 
411 
 
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
 
Net earnings
1,003 
 
 
1,003 
 
30 
1,033 
1,033 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
(830)
 
 
 
(830)
(175)
(1,005)
(1,005)
Unrealized gains (losses) on available-for-sale investments
(19)
 
 
 
(19)
 
(19)
(19)
Reclassification adjustment for impairment loss on available-for-sale security included in net earnings
30 
 
 
 
30 
 
30 
30 
Total comprehensive income (loss)
184 
 
 
 
 
(145)
39 
39 
Acquisition of business
 
 
 
 
 
666 
 
666 
Acquisition of noncontrolling interest
 
 
 
 
 
(48)
 
(48)
Stock options exercised
34 
 
34 
 
 
 
 
34 
Stock options exercised (in shares)
 
 
 
 
 
 
 
Tax benefit (loss) from stock options, restricted stock and employee stock purchase plan
 
 
 
 
 
Issuance of common stock under employee stock purchase plan
49 
 
49 
 
 
 
 
49 
Issuance of common stock under employee stock purchase plan (in shares)
 
 
 
 
 
 
 
Stock-based compensation
110 
 
110 
 
 
 
 
110 
Common stock dividends, $0.58, $0.56 and $0.54 per share for the year 2011, 2010 and 2009 respectively
(222)
 
 
(222)
 
 
 
(222)
Balances at Feb. 28, 2009
4,643 
41 
205 
4,714 
(317)
513 
 
5,156 
Balances (in shares) at Feb. 28, 2009
 
414 
 
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
 
Net earnings
1,317 
 
 
1,317 
 
77 
1,394 
1,394 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
329 
 
 
 
329 
76 
405 
405 
Unrealized gains (losses) on available-for-sale investments
28 
 
 
 
28 
 
28 
28 
Cash flow hedging instruments - unrealized gain (loss)
 
 
 
 
 
Total comprehensive income (loss)
1,674 
 
 
 
 
153 
1,827 
1,827 
Purchase accounting adjustments
 
 
 
 
 
(22)
 
(22)
Stock options exercised
96 
95 
 
 
 
 
96 
Stock options exercised (in shares)
 
 
 
 
 
 
 
Tax benefit (loss) from stock options, restricted stock and employee stock purchase plan
(19)
 
(19)
 
 
 
 
(19)
Issuance of common stock under employee stock purchase plan
42 
 
42 
 
 
 
 
42 
Issuance of common stock under employee stock purchase plan (in shares)
 
 
 
 
 
 
 
Stock-based compensation
118 
 
118 
 
 
 
 
118 
Common stock dividends, $0.58, $0.56 and $0.54 per share for the year 2011, 2010 and 2009 respectively
(234)
 
 
(234)
 
 
 
(234)
Balances at Feb. 27, 2010
6,320 
42 
441 
5,797 
40 
644 
 
6,964 
Balances (in shares) at Feb. 27, 2010
 
419 
 
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
 
Net earnings
1,277 
 
 
1,277 
 
89 
1,366 
1,366 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
76 
 
 
 
76 
(42)
34 
34 
Unrealized gains (losses) on available-for-sale investments
58 
 
 
 
58 
 
58 
58 
Cash flow hedging instruments - unrealized gain (loss)
(1)
 
 
 
(1)
(1)
(2)
(2)
Total comprehensive income (loss)
1,410 
 
 
 
 
46 
1,456 
1,456 
Stock options exercised
134 
 
134 
 
 
 
 
134 
Stock options exercised (in shares)
 
 
 
 
 
 
 
Vesting of restricted stock (in shares)
 
 
 
 
 
 
 
Tax benefit (loss) from stock options, restricted stock and employee stock purchase plan
 
 
 
 
 
Issuance of common stock under employee stock purchase plan
45 
 
45 
 
 
 
 
45 
Issuance of common stock under employee stock purchase plan (in shares)
 
 
 
 
 
 
 
Stock-based compensation
121 
 
121 
 
 
 
 
121 
Common stock dividends, $0.58, $0.56 and $0.54 per share for the year 2011, 2010 and 2009 respectively
(238)
 
 
(238)
 
 
 
(238)
Repurchase of common stock
(1,193)
(3)
(726)
(464)
 
 
 
(1,193)
Repurchase of common stock (in shares)
 
(32)
 
 
 
 
 
 
Balances at Feb. 26, 2011
6,602 
39 
18 
6,372 
173 
690 
 
7,292 
Balances (in shares) at Feb. 26, 2011
 
393 
 
 
 
 
 
 
Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) (USD $)
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Consolidated Statements of Changes in Shareholders' Equity
 
 
 
Common stock dividends per share (in dollars per share)
$ 0.58 
$ 0.56 
$ 0.54 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

1.   Summary of Significant Accounting Policies

Description of Business

Unless the context otherwise requires, the use of the terms "we," "us" and "our" in these notes to consolidated financial statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries. We are a multinational retailer of consumer electronics, home office products, entertainment products, appliances and related services.

We operate two reportable segments: Domestic and International. The Domestic segment is comprised of store, call center and online operations in all states, districts and territories of the U.S., operating under the brand names Best Buy, Best Buy Mobile, Geek Squad, Magnolia Audio Video, Napster and Pacific Sales. U.S. Best Buy stores offer a wide variety of consumer electronics, home office products, entertainment products, appliances and related services. Best Buy Mobile offers a wide selection of mobile phones, accessories and related services. Geek Squad provides residential and commercial computer repair, support and installation services. Magnolia Audio Video stores offer high-end audio and video products and related services. Napster is an online provider of digital music. Pacific Sales stores offer high-end home-improvement products including appliances, consumer electronics and related services.

The International segment is comprised of: (i) all Canada store, call center and online operations, operating under the brand names Best Buy, Best Buy Mobile, Cell Shop, Connect Pro, Future Shop and Geek Squad, (ii) all Europe store, call center and online operations, operating under the brand names Best Buy, The Carphone Warehouse, The Phone House and Geek Squad, (iii) all China store, call center and online operations, operating under the brand names Best Buy, Geek Squad and Five Star, (iv) all Mexico store operations operating under the brand names Best Buy and Geek Squad and (v) all Turkey store operations, operating under the brand names Best Buy and Geek Squad. Our International segment offers products and services similar to those of our U.S. Best Buy stores. However, Best Buy Canada stores do not carry appliances and Best Buy China and Five Star stores do not carry entertainment products. Further, our small-format stores and offerings in Europe are similar to our Best Buy Mobile format and offerings in the U.S., primarily offering mobile phones, voice and data service plans, and related accessories and services.

In support of our retail store operations, we also maintain Web sites for each of our brands including, but not limited to, BestBuy.com, BestBuy.ca, BestBuy.co.uk, BestBuyMobile.com, CarphoneWarehouse.com, Five-Star.cn, FutureShop.ca, Napster.com, and PhoneHouse.com.

Basis of Presentation

The consolidated financial statements include the accounts of Best Buy Co., Inc. and its consolidated subsidiaries. Investments in unconsolidated entities over which we exercise significant influence but do not have control are accounted for using the equity method. We have eliminated all intercompany accounts and transactions.

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, Mexico and Turkey operations on a two-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our consolidated financial statements. Except for our fiscal 2011 restructuring, for which we recorded the effects of certain restructuring charges, no significant intervening event occurred in these operations that would have materially affected our financial condition, results of operations, liquidity or other factors had it been recorded during fiscal 2011. Accordingly, the $171 of restructuring charges related to our International segment were included in our fiscal 2011 results. For further information about our fiscal 2011 restructuring and the nature of the charges we recorded, refer to Note 5, Restructuring Charges.

In preparing the accompanying consolidated financial statements, we evaluated the period from February 27, 2011 through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. Other than the issuance of $1,000 of long-term debt in March 2011, as described in Note 16, Subsequent Event, no such events were identified for this period.

Reclassifications

To maintain consistency and comparability, during fiscal 2010 certain amounts from previously reported consolidated financial statements were reclassified to conform to the fiscal 2010 presentation. As a result of our adoption of accounting guidance in fiscal 2010 related to the treatment of noncontrolling interests in consolidated financial statements, we:

  • reported as separate captions within our consolidated statements of earnings, net earnings including noncontrolling interests, net earnings attributable to noncontrolling interests, and net earnings attributable to Best Buy Co., Inc. of $1,033, $(30) and $1,003, respectively, for the fiscal year ended February 28, 2009;

    utilized net earnings including noncontrolling interests of $1,033 for the fiscal year ended February 28, 2009, as the starting point on our consolidated statements of cash flows in order to reconcile net earnings to cash flows from operating activities, rather than beginning with net earnings, which was previously exclusive of noncontrolling interests; and

    reclassified $(146) from acquisition of businesses, net of cash acquired within the investing activities section of our consolidated statements of cash flows to acquisition of noncontrolling interests within the financing activities section for the fiscal year ended February 28, 2009.

These reclassifications had no effect on previously reported consolidated operating income, net earnings attributable to Best Buy Co., Inc., or net cash flows from operating activities. Also, earnings per share continues to be based on net earnings attributable to Best Buy Co., Inc.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts in the consolidated balance sheets and statements of earnings, as well as the disclosure of contingent liabilities. Future results could be materially affected if actual results were to differ from these estimates and assumptions.

Fiscal Year

Our fiscal year ends on the Saturday nearest the end of February. Fiscal 2011, 2010 and 2009 each included 52 weeks.

Cash and Cash Equivalents

Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, U.S. Treasury bills, commercial paper and time deposits such as certificates of deposit with an original maturity of three months or less when purchased. The amounts of cash equivalents at February 26, 2011, and February 27, 2010, were $120 and $1,108, respectively, and the weighted-average interest rates were 0.3% and 0.1%, respectively.

Outstanding checks in excess of funds on deposit (book overdrafts) totaled $57 and $108 at February 26, 2011, and February 27, 2010, respectively, and are reflected as accounts payable in our consolidated balance sheets.

Receivables

Receivables consist principally of amounts due from mobile phone network operators for commissions earned; banks for customer credit card, certain debit card and electronic benefits transfer (EBT) transactions; and vendors for various vendor funding programs.

We establish allowances for uncollectible receivables based on historical collection trends and write-off history. Our allowances for uncollectible receivables were $107 and $101 at February 26, 2011, and February 27, 2010, respectively.

Merchandise Inventories

Merchandise inventories are recorded at the lower of cost using either the average cost or first-in first-out method, or market. In-bound freight-related costs from our vendors are included as part of the net cost of merchandise inventories. Also included in the cost of inventory are certain vendor allowances that are not a reimbursement of specific, incremental and identifiable costs to promote a vendor's products. Other costs associated with acquiring, storing and transporting merchandise inventories to our retail stores are expensed as incurred and included in cost of goods sold.

Our inventory valuation reflects adjustments for anticipated physical inventory losses (e.g., theft) that have occurred since the last physical inventory. Physical inventory counts are taken on a regular basis to ensure that the inventory reported in our consolidated financial statements is properly stated.

Our inventory valuation also reflects markdowns for the excess of the cost over the amount we expect to realize from the ultimate sale or other disposal of the inventory. Markdowns establish a new cost basis for our inventory. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in that newly established cost basis.

Restricted Assets

Restricted cash and investments in debt securities totaled $490 and $496, at February 26, 2011, and February 27, 2010, respectively, and are included in other current assets or equity and other investments in our consolidated balance sheets. Such balances are pledged as collateral or restricted to use for vendor payables, general liability insurance, workers' compensation insurance and warranty programs.

Property and Equipment

Property and equipment are recorded at cost. We compute depreciation using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the period from the date the assets are placed in service to the end of the initial lease term. Leasehold improvements made significantly after the initial lease term are depreciated over the shorter of their estimated useful lives or the remaining lease term, including renewal periods, if reasonably assured. Accelerated depreciation methods are generally used for income tax purposes.

When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and any resulting gain or loss is reflected in our consolidated statements of earnings.

Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated.

Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the expected useful life of the software, from three to seven years. A subsequent addition, modification or upgrade to internal-use software is capitalized to the extent that it enhances the software's functionality or extends its useful life. Capitalized software is included in fixtures and equipment. Software maintenance and training costs are expensed in the period incurred.

Property under capital lease is comprised of buildings and equipment used in our retail operations and corporate support functions. The related depreciation for capital lease assets is included in depreciation expense. The carrying value of property under capital lease was $74 and $54 at February 26, 2011, and February 27, 2010, respectively, net of accumulated depreciation of $45 and $41, respectively.

Estimated useful lives by major asset category are as follows:

Asset
  Life
(in years)

 
   

Buildings

    25-50  

Leasehold improvements

    3-25  

Fixtures and equipment

    3-20  

Property under capital lease

    2-20  

Impairment of Long-Lived Assets and Costs Associated With Exit Activities

Long-lived assets, such as property and equipment, are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not limited to, significant underperformance relative to historical or planned operating results, significant changes in the manner of use of the assets or significant changes in our business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on quoted market prices or other valuation techniques (e.g., discounted cash flow analysis).

The present value of costs associated with location closings, primarily future lease costs (net of expected sublease income), are charged to earnings when we have ceased using the specific location. We accelerate depreciation on property and equipment we expect to retire when a decision is made to abandon a location.

At February 26, 2011, and February 27, 2010, the obligation associated with location closings was $76 and $78, respectively, and is included within accrued liabilities and long-term liabilities in our consolidated balance sheets. The obligation associated with location closings at February 26, 2011, included amounts associated with our fiscal 2011 restructuring activities.

Leases

We conduct the majority of our retail and distribution operations from leased locations. The leases require payment of real estate taxes, insurance and common area maintenance, in addition to rent. The terms of our lease agreements generally range from 10 to 20 years. Most of the leases contain renewal options and escalation clauses, and certain store leases require contingent rents based on factors such as specified percentages of revenue or the consumer price index.

For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference between the straight-line rent amounts and amounts payable under the leases as part of deferred rent, in accrued liabilities or long-term liabilities, as appropriate.

Cash or lease incentives received upon entering into certain store leases ("tenant allowances") are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. We record the unamortized portion of tenant allowances as a part of deferred rent, in accrued liabilities or long-term liabilities, as appropriate.

At February 26, 2011, and February 27, 2010, deferred rent included in accrued liabilities in our consolidated balance sheets was $34 and $38, respectively, and deferred rent included in long-term liabilities in our consolidated balance sheets was $343 and $309, respectively.

We also lease certain equipment under noncancelable operating and capital leases. In addition, we have financing leases for which the gross cost of constructing the asset is included in property and equipment, and amounts reimbursed from the landlord are recorded as financing obligations. Assets acquired under capital and financing leases are depreciated over the shorter of the useful life of the asset or the lease term, including renewal periods, if reasonably assured.

Goodwill and Intangible Assets

Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We do not amortize goodwill but test it for impairment annually in the fiscal fourth quarter, or when indications of potential impairment exist. We monitor the existence of potential impairment indicators throughout the fiscal year.

Tradenames and Customer Relationships

We have indefinite-lived intangible assets related to our Pacific Sales and Napster tradenames, which are included in our Domestic segment. We also have indefinite-lived intangible assets related to our Future Shop and Five Star tradenames and definite-lived intangible assets related to our The Carphone Warehouse and The Phone House tradenames, which are included in our International segment. Additionally, we have definite-lived intangible assets related to customer relationships acquired as part of our acquisition of Best Buy Europe, which are also included in our International segment.

Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the time of acquisition, using income and market approaches to determine fair value. We test our indefinite-lived tradenames annually for impairment, or when indications of potential impairment exist.

Our tradenames and customer relationships were as follows:

 
  February 26, 2011   February 27, 2010  
 
  Tradenames
  Customer
Relationships

  Tradenames
  Customer
Relationships

 
   

Indefinite-lived

  $ 105   $   $ 112   $  

Definite-lived

    28     203     47     279  
                   

Total

  $ 133   $ 203   $ 159   $ 279  
                   

Goodwill Impairment Testing

We test for goodwill impairment at the reporting unit level. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management.

The impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, then we conclude that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit's goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

We carry forward the detailed determination of the fair value of a reporting unit in our annual goodwill impairment analysis if three criteria are met: (1) the assets and liabilities that make up the reporting unit have not changed significantly since the most recent fair value determination; (2) the most recent fair value determination resulted in an amount that exceeded the carrying amount of the reporting unit by a substantial margin; and (3) based on an analysis of events that have occurred since the most recent fair value determination, the likelihood that a current fair value determination would be less than the current carrying amount of the reporting unit is remote. For all other reporting units, we perform a detailed determination of fair value of the reporting unit.

Our detailed impairment analysis involves the use of a discounted cash flow model. Significant management judgment is necessary to evaluate the impact of operating and macroeconomic changes on each reporting unit. Critical assumptions include projected comparable store sales growth, store count, gross profit rates, selling, general and administrative expense ("SG&A") rates, working capital fluctuations, capital expenditures and terminal growth rates, as well as an appropriate discount rate. Discount rates are determined separately for each reporting unit using the capital asset pricing model, and for fiscal 2011 ranged from 8.5% to 12.5%. We also use comparable market earnings multiple data and our company's market capitalization to corroborate our reporting unit valuations.

In fiscal 2009, we recorded a goodwill impairment charge of $62 relating to our former Speakeasy business. The decline in the fair value of Speakeasy was primarily the result of revenue forecasts that were lower than what we originally anticipated, which was partly due to lower-than-expected synergies with our other businesses. There were no goodwill impairments for any of our other reporting units in fiscal 2009.

In fiscal 2010, we identified no goodwill impairments. We determined that the fair value of the Speakeasy business, which had a remaining goodwill carrying value of $12, approximated its carrying value. For all of our other reporting units, we determined that the excess of fair value over carrying value was substantial.

In fiscal 2011, we identified no goodwill impairments. For all of our reporting units, we determined that the excess of fair value over carrying value was substantial. As a result of the sale of our Speakeasy business in the second quarter of fiscal 2011, we wrote off the carrying value of the goodwill associated with such business as of the date of sale. See Note 14, Sale of Business, for additional information regarding the sale.

Indefinite-Lived Tradename Impairment Testing

We utilize the relief from royalty method to determine the fair value of each our indefinite-lived tradenames. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess. Significant management judgment is necessary to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates. Royalty rates used are consistent with those assumed for original purchase accounting. Other assumptions are consistent with those we use for goodwill impairment testing purposes.

In fiscal 2009, we recorded an impairment charge of $4 relating to our Speakeasy tradename. The primary cause of the decline in the fair value of the tradename was the lower revenue forecasts discussed above. In fiscal 2010, we identified no indefinite-lived tradename impairments. As a result of the sale of our Speakeasy business in the second quarter of fiscal 2011, we wrote off the carrying value of the indefinite-lived tradename associated with such business as of the date of sale. See Note 14, Sale of Business, for additional information regarding the sale. Furthermore, as part of our fiscal 2011 restructuring, we recorded an impairment charge of $10 related to certain indefinite-lived tradenames in our Domestic segment. See Note 5, Restructuring Charges, for additional information regarding the restructuring.

The changes in the carrying amount of goodwill and indefinite-lived tradenames by segment were as follows in fiscal 2011, 2010 and 2009:

 
  Goodwill   Indefinite-Lived Tradenames  
 
  Domestic
  International
  Total
  Domestic
  International
  Total
 
   

Balances at March 1, 2008

  $ 450   $ 638   $ 1,088   $ 23   $ 74   $ 97  
 

Acquisitions

    46     1,641     1,687     13     8     21  
 

Tax adjustment(1)

        17     17              
 

Impairments

    (62 )       (62 )   (4 )       (4 )
 

Changes in foreign currency exchange rates

        (527 )   (527 )       (10 )   (10 )
                           

Balances at February 28, 2009

    434     1,769     2,203     32     72     104  
 

Purchase accounting adjustments(1)

        48     48              
 

Changes in foreign currency exchange rates

        201     201         8     8  
                           

Balances at February 27, 2010

    434     2,018     2,452     32     80     112  
 

Acquisitions

        5     5              
 

Impairments

                (10 )       (10 )
 

Sale of business

    (12 )       (12 )   (1 )       (1 )
 

Changes in foreign currency exchange rates

        9     9         4     4  
                           

Balances at February 26, 2011

  $ 422   $ 2,032   $ 2,454   $ 21   $ 84   $ 105  
                           
(1)
The adjustment in fiscal 2009 related to the resolution of certain tax matters associated with our acquisitions of Future Shop and Five Star, and in fiscal 2010, the finalization of the purchase price allocations from our acquisitions of Best Buy Europe and Five Star (see Note 2, Acquisitions).

The following table provides the gross carrying amount of goodwill and cumulative goodwill impairment losses:

 
  February 26, 2011   February 27, 2010  
 
  Gross Carrying
Amount

  Cumulative
Impairment

  Gross Carrying
Amount

  Cumulative
Impairment

 
   

Goodwill

  $ 2,519   $ (65 ) $ 2,578   $ (126 )
                   

Definite-Lived Intangible Assets

The following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets:

 
  February 26, 2011   February 27, 2010  
 
  Gross Carrying
Amount

  Cumulative
Impairment

  Gross Carrying
Amount

  Cumulative
Impairment

 
   

Tradenames

  $ 73   $ (45 ) $ 75   $ (28 )

Customer relationships

    383     (180 )   401     (122 )
                   

Total

  $ 456   $ (225 ) $ 476   $ (150 )
                   

Total amortization expense was $82, $88, and $63 in fiscal 2011, 2010, and 2009, respectively. At February 26, 2011, future amortization expense for identifiable intangible assets for the next five fiscal years was expected to be:

Fiscal Year
   
 
   

2012

  $ 60  

2013

    44  

2014

    39  

2015

    35  

2016

    35  

Thereafter

    18  

Lease Rights

Lease rights represent costs incurred to acquire the lease of a specific commercial property. Lease rights are recorded at cost and are amortized to rent expense over the remaining lease term, including renewal periods, if reasonably assured. Amortization periods range up to 15 years, beginning with the date we take possession of the property.

The following table provides the gross carrying amount and related accumulated amortization of lease rights:

 
  February 26, 2011   February 27, 2010  
 
  Gross Carrying
Amount

  Accumulated
Amortization

  Gross Carrying
Amount

  Accumulated
Amortization

 
   

Lease rights

  $ 131   $ (57 ) $ 137   $ (46 )

Lease rights amortization expense was $14, $18 and $9 in fiscal 2011, 2010 and 2009, respectively. We expect current lease rights amortization expense to be approximately $9 for each of the next five fiscal years.

Investments

Debt Securities

Our long-term investments in debt securities are comprised of auction-rate securities ("ARS"). In accordance with accounting guidance for the treatment of certain investments in debt and equity securities, and based on our ability to market and sell these instruments, we classify ARS as available-for-sale and carry them at fair value. ARS were intended to behave like short-term debt instruments because their interest rates reset periodically through an auction process, typically at intervals of seven, 28 and 35 days. Investments in these securities can be sold for cash at par value on the auction date if the auction is successful. The majority of our ARS are AAA/Aaa-rated and collateralized by student loans, which are guaranteed 95% to 100% by the U.S. government. We also hold ARS that are in the form of municipal revenue bonds, which are AA/Aa-rated and insured by bond insurers. We do not have any investments in securities that are collateralized by assets that include mortgages or subprime debt. Our intent with these investments is not to hold these securities to maturity, but to use the periodic auction feature to provide liquidity as needed. See Note 3, Investments, for further information.

In accordance with our investment policy, we place our investments in debt securities with issuers who have high-quality credit and limit the amount of investment exposure to any one issuer. The primary objective of our investment activities is to preserve principal and maintain a desired level of liquidity to meet working capital needs. We seek to preserve principal and minimize exposure to interest rate fluctuations by limiting default risk, market risk and reinvestment risk.

Marketable Equity Securities

We also invest in marketable equity securities and classify them as available-for-sale. Investments in marketable equity securities are included in equity and other investments in our consolidated balance sheets, and are reported at fair value based on quoted market prices. All unrealized holding gains and losses are reflected net of tax in accumulated other comprehensive income in shareholders' equity.

Other Investments

We also have investments that are accounted for on either the cost method or the equity method that we include in equity and other investments in our consolidated balance sheets.

We review the key characteristics of our debt, marketable equity securities and other investments portfolio and their classification in accordance with GAAP on an annual basis, or when indications of potential impairment exist. If a decline in the fair value of a security is deemed by management to be other-than-temporary, we write down the cost basis of the investment to fair value, and the amount of the write-down is included in net earnings.

Insurance

We are self-insured for certain losses related to health, workers' compensation and general liability claims, as well as customer warranty and insurance programs, although we obtain third-party insurance coverage to limit our exposure to these claims. A portion of these self-insured losses are managed through wholly-owned insurance captives. We estimate our self-insured liabilities using a number of factors, including historical claims experience, an estimate of incurred but not reported claims, demographic factors and severity factors, and utilizing valuations provided by independent third-party actuaries. Our self-insured liabilities included in the consolidated balance sheets were as follows:

 
  February 26,
2011

  February 27,
2010

 
   

Accrued liabilities

  $ 81   $ 64  

Long-term liabilities

    49     46  
           

Total

  $ 130   $ 110  
           

Income Taxes

We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured pursuant to tax laws using rates we expect to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We recognize the effect of a change in income tax rates on deferred tax assets and liabilities in our consolidated statement of earnings in the period that includes the enactment date. We record a valuation allowance to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

In determining our provision for income taxes, we use an annual effective income tax rate based on annual income, permanent differences between book and tax income, and statutory income tax rates. The effective income tax rate also reflects our assessment of the ultimate outcome of tax audits. We adjust our annual effective income tax rate as additional information on outcomes or events becomes available. Discrete events such as audit settlements or changes in tax laws are recognized in the period in which they occur.

Our income tax returns, like those of most companies, are periodically audited by U.S. federal, state and local and foreign tax authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. At any one time, multiple tax years are subject to audit by the various tax authorities. In evaluating the tax benefits associated with our various tax filing positions, we record a tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. A number of years may elapse before a particular matter, for which we have established a liability, is audited and effectively settled. We adjust our liability for unrecognized tax benefits in the period in which we determine the issue is effectively settled with the tax authorities, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. We include our liability for unrecognized tax benefits, including accrued penalties and interest, in accrued income taxes and other long-term liabilities on our consolidated balance sheets and in income tax expense in our consolidated statements of earnings.

Accrued Liabilities

The major components of accrued liabilities at February 26, 2011, and February 27, 2010, were deferred revenue, state and local tax liabilities, rent-related liabilities including accrued real estate taxes, loyalty program liabilities and self-insurance reserves.

Long-Term Liabilities

The major components of long-term liabilities at February 26, 2011, and February 27, 2010, were unrecognized tax benefits, rent-related liabilities, deferred revenue, deferred income tax liabilities, deferred compensation plan liabilities and self-insurance reserves.

Foreign Currency

Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our consolidated balance sheet date. For operations reported on a two-month lag, we use the exchange rates in effect two months prior to our consolidated balance sheet date. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders' equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A, have not been significant.

Revenue Recognition

Our revenue arises primarily from sales of merchandise and services. We also record revenue from sales of extended warranties and other service contracts, commissions earned from various customer subscriptions, fees earned from private label and co-branded credit card agreements and amounts billed to customers for shipping and handling. Revenue excludes sales taxes collected.

We recognize revenue when the sales price is fixed or determinable, collectability is reasonably assured and the customer takes possession of the merchandise, or in the case of services, at the time the service is provided. Revenue is recognized for store sales when the customer receives and pays for the merchandise. For online sales, we defer revenue and the related product costs for shipments that are in-transit to the customer, and recognize revenue at the time the customer receives the product. Online customers typically receive goods within a few days of shipment. Revenue from merchandise sales and services is reported net of sales returns, including an estimate of future returns based on historical return rates. Our sales returns reserve, which represents the gross profit effect of our sales returns, was $15 and $17, at February 26, 2011, and February 27, 2010, respectively.

We sell extended warranties and other service contracts that typically have terms ranging from three months to four years. We also receive commissions for customer subscriptions with various third parties, notably from mobile phone network operators. In instances where we are deemed to be the obligor on the service contract or subscription, the service and commission revenue is deferred and recognized ratably over the term of the service contract or subscription period. In instances where we are not deemed to be the obligor on the service contract or subscription, commissions are recognized in revenue when such commission has been earned, primarily driven by customer activation. Commissions from the sale of extended warranties represented 2.0%, 2.0% and 2.0% of revenue in fiscal 2011, 2010 and 2009, respectively.

For revenue transactions that involve multiple deliverables, we defer the revenue associated with any undelivered elements. The amount of revenue deferred in connection with the undelivered elements is determined using the relative fair value of each element, which is generally based on each element's relative retail price.

At February 26, 2011, and February 27, 2010, deferred revenue included within accrued liabilities and long-term liabilities in our consolidated balance sheets was $499 and $451, respectively.

For additional information related to our credit card arrangements, see Credit Services and Financing, below.

For additional information regarding our customer loyalty programs, see Sales Incentives, below.

Gift Cards

We sell gift cards to our customers in our retail stores, through our Web sites and through selected third parties. We do not charge administrative fees on unused gift cards, and our gift cards do not have an expiration date. We recognize revenue from gift cards when: (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote ("gift card breakage"), and we determine that we do not have a legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions. We determine our gift card breakage rate based upon historical redemption patterns. Based on our historical information, the likelihood of a gift card remaining unredeemed can be determined 24 months after the gift card is issued. At that time, we recognize breakage income for those cards for which the likelihood of redemption is deemed remote and we do not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdictions. Gift card breakage income is included in revenue in our consolidated statements of earnings.

Gift card breakage income was as follows in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Gift card breakage income

  $ 53   $ 43   $ 38  
               

Credit Services and Financing

In the U.S., we have private-label and co-branded credit card agreements with banks for the issuance of promotional financing and customer loyalty credit cards bearing the Best Buy brand. Under the agreements, the banks manage and directly extend credit to our customers. Cardholders who choose a private-label credit card can receive low- or zero-interest promotional financing on qualifying purchases.

The banks are the sole owner of the accounts receivable generated under the programs and absorb losses associated with non-payment by the cardholders and fraudulent usage of the accounts. Accordingly, sales generated through our private-label and co-branded credit cards are not reflected in our receivables. We earn revenue from fees the banks pay to us based on the number of credit card accounts activated and card usage. In accordance with accounting guidance for revenue arrangements with multiple deliverables, we defer revenue received from cardholder account activations and recognize revenue on a straight-line basis over the remaining term of the applicable agreement. The banks may also reimburse us for certain costs such as tender costs and Reward Zone points associated with our programs. We pay financing fees, which are recognized as a reduction of revenue, to the banks, and these fees are variable based on certain factors such as the London Interbank Offered Rate ("LIBOR"), charge volume and/or the types of promotional financing offers.

We also have similar agreements for the issuance of private-label and/or co-branded credit cards with banks for our businesses in Canada, China and Mexico, which we account for consistent with the U.S. credit card agreements.

In addition to our private-label and co-branded credit cards, we also accept Visa®, MasterCard®, Discover®, JCB® and American Express® credit cards, as well as debit cards from all major international networks.

Sales Incentives

We frequently offer sales incentives that entitle our customers to receive a reduction in the price of a product or service. Sales incentives include discounts, coupons and other offers that entitle a customer to receive a reduction in the price of a product or service either at the point of sale or by submitting a claim for a refund or rebate. For sales incentives issued to a customer in conjunction with a sale of merchandise or services, for which we are the obligor, the reduction in revenue is recognized at the time of sale, based on the retail value of the incentive expected to be redeemed.

Customer Loyalty Programs

We have customer loyalty programs which allow members to earn points for each qualifying purchase. Points earned enable members to receive a certificate that may be redeemed on future purchases at our Best Buy branded stores. There are two ways that members may participate and earn loyalty points.

First, we have customer loyalty programs where members earn points for each purchase completed at our Best Buy branded stores or through our related Web sites in the U.S. and Canada. Depending on the customer's membership level within our loyalty program, certificates expire either three or six months from the date of issuance. The retail value of points earned by our loyalty program members is included in accrued liabilities and recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed.

Second, under our co-branded credit card agreements with banks, we have a customer loyalty credit card bearing the Best Buy brand. Cardholders earn points for purchases made at our Best Buy branded stores and related Web sites in the U.S. and Canada, as well as purchases at other merchants. Points earned enable cardholders to receive certificates that may be redeemed on future purchases at our Best Buy branded stores and related Web sites. Certificates expire six months from the date of issuance. The retail value of points earned by our cardholders is included in accrued liabilities and recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed.

We recognize revenue when: (i) a certificate is redeemed by the customer, (ii) a certificate expires or (iii) the likelihood of a certificate being redeemed by a customer is remote ("certificate breakage"). We determine our certificate breakage rate based upon historical redemption patterns.

Cost of Goods Sold and Selling, General and Administrative Expenses

The following table illustrates the primary costs classified in each major expense category:

Cost of Goods Sold
  Total cost of products sold including:
      Freight expenses associated with moving merchandise inventories from our vendors to our distribution centers;
      Vendor allowances that are not a reimbursement of specific, incremental and identifiable costs to promote a vendor's products; and
      Cash discounts on payments to merchandise vendors;
  Cost of services provided including:
      Payroll and benefits costs for services employees; and
      Cost of replacement parts and related freight expenses;
  Physical inventory losses;
  Markdowns;
  Customer shipping and handling expenses;
  Costs associated with operating our distribution network, including payroll and benefit costs, occupancy costs, and depreciation; and
  Freight expenses associated with moving merchandise inventories from our distribution centers to our retail stores.

SG&A
  Payroll and benefit costs for retail and corporate employees;
  Occupancy and maintenance costs of retail, services and corporate facilities;
  Depreciation and amortization related to retail, services and corporate assets;
  Advertising costs;
  Vendor allowances that are a reimbursement of specific, incremental and identifiable costs to promote a vendor's products;
  Tender costs, including bank charges and costs associated with credit and debit card interchange fees;
  Charitable contributions;
  Outside and outsourced service fees;
  Long-lived asset impairment charges; and
  Other administrative costs, such as supplies, and travel and lodging.

Vendor Allowances

We receive funds from vendors for various programs, primarily as reimbursements for costs such as markdowns, margin protection, advertising and sales incentives.

Vendor allowances provided as a reimbursement of specific, incremental and identifiable costs incurred to promote a vendor's products are included as an expense reduction when the cost is incurred. All other vendor allowances are generally in the form of receipt-based funds or sell-through credits. Receipt-based funds are generally determined based on our level of inventory purchases and initially deferred and recorded as a reduction of merchandise inventories. The deferred amounts are then included as a reduction of cost of goods sold when the related product is sold. Sell-through credits are generally based on the number of units we sell over a specified period and are recognized when the related product is sold.

Vendor allowances included in SG&A for reimbursement of specific, incremental and identifiable costs to promote and sell a vendor's products were $69, $139 and $161 in fiscal 2011, 2010 and 2009, respectively. The decrease for fiscal 2011 was due to a change in the form of vendor contracts that led to a higher proportion of vendor allowances being classified within cost of goods sold.

Advertising Costs

Advertising costs, which are included in SG&A, are expensed the first time the advertisement runs. Advertising costs consist primarily of print and television advertisements as well as promotional events. Net advertising expenses were $901, $740 and $765 in fiscal 2011, 2010 and 2009, respectively. Allowances received from vendors for advertising of $98 and $117, in fiscal 2010 and 2009, respectively, were classified as reductions of advertising expenses. As a result of a change in the form of vendor contracts, we received no allowances from vendors for advertising expenses that were deemed specific, incremental and identifiable in fiscal 2011.

Pre-Opening Costs

Non-capital expenditures associated with opening new stores are expensed as incurred.

Stock-Based Compensation

We apply the fair value recognition provisions of accounting guidance as they relate to our stock-based compensation, which require us to recognize expense for the fair value of our stock-based compensation awards. We elected the modified prospective transition method as permitted by the share-based payment accounting guidance. Under this transition method, stock-based compensation expense in fiscal 2011, 2010 and 2009 included: (i) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of February 26, 2005, based on the grant date fair value estimated in accordance with the prior accounting guidance for the treatment of stock-based compensation; and (ii) compensation expense for all stock-based compensation awards granted subsequent to February 26, 2005, based on the grant-date fair value estimated in accordance with the provisions of the revised guidance. We recognize compensation expense on a straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if earlier). In accordance with the modified prospective transition method, financial results for prior periods have not been restated.

New Accounting Standards

Consolidation of Variable Interest Entities — In June 2009, the Financial Accounting Standards Board ("FASB") issued new guidance on the treatment of a consolidation of variable interest entities ("VIE") in response to concerns about the application of certain key provisions of pre-existing guidance, including those regarding the transparency of an involvement with a VIE. Specifically, this new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. In addition, this new guidance requires additional disclosures about an involvement with a VIE and any significant changes in risk exposure due to that involvement. This new guidance is effective for fiscal years beginning after November 15, 2009. As such, we adopted the new guidance on February 28, 2010 and determined that it did not have an impact on our consolidated financial position or results of operations.

Transfers of Financial Assets — In June 2009, the FASB issued new guidance on the treatment of transfers of financial assets which eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity's continuing involvement in and exposure to the risks related to transferred financial assets. This new guidance is effective for fiscal years beginning after November 15, 2009. As such, we adopted the new guidance on February 28, 2010 and determined that it did not have an impact on our consolidated financial position or results of operations.

Acquisitions
Acquisitions

2.    Acquisitions

Five Star

We acquired a 75% interest in Jiangsu Five Star Appliance Co., Ltd. ("Five Star") in June 2006, for $184, which included a working capital injection of $122. At the time of the acquisition, we also entered into an agreement with Five Star's minority shareholders to acquire the remaining 25% interest in Five Star within four years, subject to Chinese government approval.

In February 2009, we acquired the remaining 25% interest in Five Star, which converted Five Star into a wholly-owned foreign enterprise. The $196 purchase price for the remaining 25% interest was primarily based on a previously agreed-upon pricing formula, consisting of a base purchase price and an earn-out for the remaining Five Star shareholders. At the time of the initial purchase, we agreed to pay an amount in excess of the fair value of the net assets acquired to further our international growth plans and accelerate the integration of Best Buy and Five Star stores in China.

The acquisition of the remaining 25% interest in Five Star for $196 was accounted for using the purchase method. We recorded the net assets acquired at their estimated fair values. We included Five Star's operating results, which are reported on a two-month lag, from the date of acquisition as part of our International segment. The allocation of the purchase price to the acquired assets and liabilities was finalized in the fourth quarter of fiscal 2010, with no material adjustments made to the preliminary allocation. None of the goodwill is deductible for tax purposes.

The final purchase price allocation for the remaining 25% interest in Five Star was as follows:

Net assets of noncontrolling interests

  $ 48  

Tradename

    8  

Goodwill

    142  
       

Total assets

    198  
       

Long-term liabilities

    (2 )
       

Purchase price allocated to assets and liabilities acquired

  $ 196  
       

Napster

In October 2008, we acquired Napster, Inc. ("Napster") for $122 (or $101 net of cash acquired), pursuant to a cash tender offer whereby all issued and outstanding shares of Napster common stock, and all stock purchase rights associated with such shares, were acquired by us at a price of $2.65 per share. Of the $122 purchase price, $4 represented our previous ownership interest in Napster common shares. The effective acquisition date for accounting purposes was the close of business on October 31, 2008, the end of Napster's fiscal October.

We entered into this transaction as we believe Napster has one of the most comprehensive and easy-to-use digital music offerings in the industry. The amount we paid in excess of the fair value of the net assets acquired was to obtain Napster's capabilities and digital subscriber base to reach new customers with an enhanced experience for exploring and selecting music and other digital entertainment products over an increasing array of devices, such as bundling the sale of hardware with digital services. We believe the combined capabilities of our two companies allows us to build stronger relationships with customers and expand the number of subscribers.

We have consolidated Napster in our financial results as part of our Domestic segment from the date of acquisition. We recorded the net assets acquired at their estimated fair values and allocated the purchase price on a preliminary basis using information then available. The allocation of the purchase price to the acquired assets and liabilities was finalized in the third quarter of fiscal 2010, with no material adjustments made to the preliminary allocation. None of the goodwill is deductible for tax purposes.

The final purchase price allocation was as follows:

Cash and cash equivalents

  $ 21  

Short-term investments

    28  

Receivables

    2  

Other current assets

    3  

Property and equipment

    10  

Goodwill

    32  

Tradenames

    13  

Customer relationships

    3  

Equity and other investments

    3  

Other assets (deferred tax assets)

    48  
       

Total assets

    163  
       

Accounts payable

   
(3

)

Other current liabilities

    (38 )
       

Total liabilities

    (41 )
       

Purchase price allocated to assets and liabilities acquired

  $ 122  
       

Best Buy Europe

In May 2008, we entered into a sale and purchase agreement, as amended, with The Carphone Warehouse Group PLC ("CPW"). All conditions to closing were satisfied, and the transaction was consummated on June 30, 2008. The effective acquisition date for accounting purposes was the close of business on June 28, 2008, the end of CPW's fiscal first quarter. Pursuant to the transaction, CPW contributed certain assets and liabilities into a newly-formed company, Best Buy Europe Distributions Limited ("Best Buy Europe"), in exchange for all of the ordinary shares of Best Buy Europe, and our wholly-owned subsidiary, Best Buy Distributions Limited, purchased 50% of such ordinary shares of Best Buy Europe from CPW for a purchase price of $2,167. In addition to the purchase price paid to CPW, we incurred $29 of transaction costs for an aggregate purchase price of $2,196.

Pursuant to our June 2008 shareholders' agreement, as amended, with CPW, our designees to the Best Buy Europe board of directors have ultimate approval rights over select Best Buy Europe senior management positions and the annual capital and operating budgets of Best Buy Europe.

The assets and liabilities contributed to Best Buy Europe by CPW included CPW's retail and distribution business, consisting of retail stores and online offerings; mobile airtime reselling operations; device insurance operations; fixed line telecommunications businesses in Spain and Switzerland; facilities management business, under which it bills and manages the customers of mobile phone network operators in the U.K.; dealer business, under which it acts as a wholesale distributor of handsets and airtime vouchers; and economic interests in pre-existing commercial arrangements with us (Best Buy Mobile in the U.S. and Geek Squad in the U.K. and Spain).

The portion of the purchase price we paid in excess of the fair value of the net assets acquired was primarily for (i) the expected future cash flows derived from the existing business and infrastructure contributed to Best Buy Europe by CPW, which included over 2,400 retail stores, (ii) immediate access to the European market with a management team that is experienced in both retailing and wireless service technologies in this marketplace, and (iii) the expected synergies our management believes the venture will generate, which include benefits from joint purchasing, sourcing and merchandising. In addition, Best Buy Europe introduced new product and service offerings in its retail stores in fiscal 2010 and, during fiscal 2011, launched large-format Best Buy branded stores in the U.K. and a related online channel in the European market.

We have consolidated Best Buy Europe in our financial results as part of our International segment from the date of acquisition. We consolidate the financial results of Best Buy Europe on a two-month lag to align with CPW's quarterly reporting periods.

We recorded the net assets acquired at their estimated fair values and allocated the purchase price on a preliminary basis using information then available. The allocation of the purchase price to the acquired assets and liabilities was finalized in the second quarter of fiscal 2010, with no material adjustments made to the preliminary allocation. None of the goodwill is deductible for tax purposes.

The final purchase price allocation was as follows:

Cash and cash equivalents

  $ 124  

Restricted cash

    112  

Receivables

    1,190  

Merchandise inventories

    535  

Other current assets

    114  

Property and equipment

    500  

Goodwill

    1,546  

Tradenames

    93  

Customer relationships

    484  

Other assets

    184  
       

Total assets

    4,882  
       

Accounts payable

    (803 )

Other current liabilities

    (695 )

Short-term debt

    (299 )

Long-term liabilities

    (246 )
       

Total liabilities

    (2,043 )
       

Noncontrolling interest(1)

    (643 )
       

Purchase price allocated to assets and liabilities acquired

  $ 2,196  
       
(1)
We recorded the fair value adjustments only in respect of the 50% of net assets acquired, with the remaining 50% of the net assets of Best Buy Europe being consolidated and recorded at their historical cost basis. This also resulted in a $643 noncontrolling interest being reflected in our consolidated balance sheet in respect of the 50% owned by CPW.

The valuation of the identifiable intangible assets acquired was based on management's estimates, available information and reasonable and supportable assumptions. The valuation was generally based on the fair value of these assets using income and market approaches. The amortizable intangible assets are being amortized using a straight-line method over their respective estimated useful lives. The following table summarizes the identified intangible asset categories and their respective weighted-average amortization periods based on the purchase price allocation finalized in the second quarter of fiscal 2010:

 
  Weighted-Average
Amortization Period
(in years)

  Fair
Value

 
   

Customer relationships

    6.8   $ 484  

Tradenames

    4.2     93  
             

Total

    6.4   $ 577  
             

We recorded an estimate for costs to terminate certain activities associated with Best Buy Europe operations. A restructuring accrual of $20 was recorded during the second quarter of fiscal 2009 and reflects the accrued restructuring costs incurred at the date of acquisition, primarily for store closure costs and agreement termination fees.

On March 26, 2010, CPW demerged into two new holding companies: TalkTalk Telecom Group PLC ("TalkTalk"), which is the holding company for the fixed line voice and broadband telecommunications business of the former CPW, and Carphone Warehouse Group plc ("Carphone Warehouse"), which includes the former CPW's 50% ownership interest in Best Buy Europe. Accordingly, the sale and purchase and shareholders' agreements between the former CPW and us that govern the Best Buy Europe venture were assigned from the former CPW to Carphone Warehouse.

Our interest in Best Buy Europe is separate from our investment in the common stock of the former CPW, now TalkTalk and Carphone Warehouse, as discussed in Note 3, Investments.

Pro Forma Financial Results

Our pro forma condensed consolidated financial results of operations are presented in the following table as if the acquisitions described above had been completed at the beginning of the period presented:

Fiscal Year
  2009
 
   

Pro forma revenue

  $ 48,021  

Pro forma net earnings

    998  

Pro forma earnings per common share

       
 

Basic

  $ 2.42  
 

Diluted

    2.38  

Weighted-average common shares outstanding

       
 

Basic

    412.5  
 

Diluted

    422.9  

These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on acquisition debt, foregone interest income and amortization related to acquired customer relationships and tradenames. They have not been adjusted for the effect of costs or synergies that would have been expected to result from the integration of these acquisitions or for costs that are not expected to recur as a result of the acquisitions. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred at the beginning of each period presented, or of future results of the consolidated entities.

Investments
Investments

3.    Investments

Investments were comprised of the following:

 
  February 26,
2011

  February 27,
2010

 
   

Short-term investments

             
 

Money market fund

  $ 2   $ 2  
 

U.S. Treasury bills

    20      
 

Debt securities (auction rate securities)

        88  
           

Total short-term investments

  $ 22   $ 90  
           

Equity and other investments

             
 

Debt securities (auction rate securities)

  $ 110   $ 192  
 

Marketable equity securities

    146     77  
 

Other investments

    72     55  
           

Total equity and other investments

  $ 328   $ 324  
           

Debt Securities

Our debt securities are comprised of ARS. ARS were intended to behave like short-term debt instruments because their interest rates reset periodically through an auction process, most commonly at intervals of seven, 28 and 35 days. The auction process had historically provided a means by which we could rollover the investment or sell these securities at par in order to provide us with liquidity as needed. As a result, we classify our investments in ARS as available-for-sale and carry them at fair value.

In February 2008, auctions began to fail due to insufficient buyers, as the amount of securities submitted for sale in auctions exceeded the aggregate amount of the bids. For each failed auction, the interest rate on the security moves to a maximum rate specified for each security, and generally resets at a level higher than specified short-term interest rate benchmarks. To date, we have collected all interest due on our ARS and expect to continue to do so in the future. 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 consolidated balance sheet at February 26, 2011.

In October 2008, we accepted a settlement with UBS AG and its affiliates (collectively, "UBS") pursuant to which UBS issued to us Series C-2 Auction Rate Securities Rights ("ARS Rights"). The ARS Rights provided us the right to receive the full par value of our UBS-brokered ARS plus accrued but unpaid interest at any time between June 30, 2010, and July 2, 2012.

During fiscal 2011, we sold $170 of ARS at par, including all, or $88, of the UBS-brokered ARS discussed above. At February 26, 2011, our entire remaining ARS portfolio, consisting of 22 investments in ARS having an aggregate par value of $115, was subject to failed auctions. Subsequent to February 26, 2011, and through April 20, 2011, we sold $14 of ARS at par.

Our ARS portfolio consisted of the following, at fair value:

Description
  Nature of collateral or guarantee
  February 26,
2011

  February 27,
2010

 
   
Student loan bonds   Student loans guaranteed 95% to 100% by the U.S. government   $ 108   $ 261  
Municipal revenue bonds   100% insured by AAA/Aaa-rated bond insurers at February 26, 2011     2     19  
               
Total fair value plus accrued interest(1)       $ 110   $ 280  
               
(1)
The par value and weighted-average interest rates (taxable equivalent) of our ARS were $115 and $285 and 0.8% and 1.1%, respectively, at February 26, 2011, and February 27, 2010, respectively.

At February 26, 2011, our ARS portfolio was 73% AAA/Aaa-rated, 2% AA/Aa-rated and 25% A/A-rated.

The investment principal associated with failed auctions will not be accessible until successful auctions occur, a buyer is found outside of the auction process, the issuers establish a different form of financing to replace these securities, or final payments are due according to the contractual maturities of the debt issuances, which range from five to 32 years. We intend to hold our ARS until we can recover the full principal amount through one of the means described above, and have the ability to do so based on our other sources of liquidity.

We evaluated our entire ARS portfolio of $115 (par value) for impairment at February 26, 2011, 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 February 26, 2011, was $110. Accordingly, a $5 pre-tax unrealized loss is recognized in accumulated other comprehensive income. This unrealized loss reflects a temporary impairment on all of our investments in ARS. The estimated fair value of our ARS portfolio could change significantly based on future market conditions. We will continue to assess the fair value of our ARS portfolio for substantive changes in relevant market conditions, changes in our financial condition or other changes that may alter our estimates described above.

We may be required to record an additional unrealized holding loss or an impairment charge to earnings if we determine that our ARS portfolio has incurred a further decline in fair value that is temporary or other-than-temporary, respectively. Factors that we consider when assessing our ARS portfolio for other-than-temporary impairment include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the nature of the collateral or guarantees in place, as well as our intent and ability to hold an investment.

We had $(3) unrealized loss, net of tax, recorded in accumulated other comprehensive income at February 26, 2011, and February 27, 2010, 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 consolidated balance sheets, and are reported at fair value based on quoted market prices.

Our investments in marketable equity securities were as follows:

 
  February 26,
2011

  February 27,
2010

 
   

Common stock of The Carphone Warehouse Group PLC

  $   $ 74  

Common stock of TalkTalk Telecom Group PLC

    62      

Common stock of Carphone Warehouse Group plc

    84      

Other

        3  
           

Total

  $ 146   $ 77  
           

We purchased shares of CPW's common stock in fiscal 2008 for $183, representing nearly 3% of CPW's then outstanding shares. In the third quarter of fiscal 2009, we recorded a $111 other-than-temporary impairment charge. In March 2010, CPW demerged into two new holding companies: TalkTalk and Carphone Warehouse. Accordingly, our investment in CPW was exchanged for equivalent levels of investment in TalkTalk and Carphone Warehouse. An $87 pre-tax unrealized gain is recorded in accumulated other comprehensive income related to these investments at February 26, 2011.

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, we write down the cost basis of the investment 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. Net unrealized gain, net of tax, included in accumulated other comprehensive income was $75 and $17 at February 26, 2011, and February 27, 2010, respectively.

Other Investments

The aggregate carrying values of investments accounted for using either the cost method or the equity method at February 26, 2011, and February 27, 2010, were $72 and $55, respectively.

Fair Value Measurements
Fair Value Measurements

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 that are Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances in which 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 February 26, 2011, and February 27, 2010, according to the valuation techniques we used to determine their fair values.

 
   
  Fair Value Measurements Using Inputs Considered as  
 
  Fair Value at
February 26, 2011

  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

  $ 70   $ 70   $   $  
 

Short-term investments

                         
   

Money market fund

    2         2      
   

U.S. Treasury bills

    20     20          
 

Other current assets

                         
   

Money market funds (restricted assets)

    63     63          
   

U.S. Treasury bills (restricted assets)

    105     105          
   

Foreign currency derivative instruments

    2         2      
 

Equity and other investments

                         
   

Auction rate securities

    110             110  
   

Marketable equity securities

    146     146          
 

Other assets

                         
   

Marketable securities that fund deferred compensation

    83     83          

Liabilities

                         
 

Accrued liabilities

                         
   

Foreign currency derivative instruments

    1         1      
 

Long-term liabilities

                         
   

Deferred compensation

    64     64          
   

Foreign currency derivative instruments

    2         2      


 

 
   
  Fair Value Measurements Using Inputs Considered as  
 
  Fair Value at
February 27, 2010

  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

  $ 752   $ 752   $   $  
   

U.S. Treasury bills

    300     300          
 

Short-term investments

                         
   

Money market fund

    2         2      
   

Auction rate securities

    88             88  
 

Other current assets

                         
   

Money market funds (restricted assets)

    123     123          
   

U.S. Treasury bills (restricted assets)

    25     25          
   

Foreign currency derivative instruments

    4         4      
 

Equity and other investments

                         
   

Auction rate securities

    192             192  
   

Marketable equity securities

    77     77          
 

Other assets

                         
   

Marketable securities that fund deferred compensation

    75     75          

Liabilities

                         
 

Long-term liabilities

                         
   

Deferred compensation

    61     61          

The following table provides 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).

 
  Debt securities — Auction rate securities only  
 
  Student
loan
bonds

  Municipal
revenue
bonds

  Auction
preferred
securities

  Total
 
   

Balances at February 28, 2009

  $ 276   $ 24   $ 14   $ 314  
 

Changes in unrealized losses in other comprehensive income

    8     1     1     10  
 

Sales

    (22 )   (6 )   (15 )   (43 )
 

Interest received

    (1 )           (1 )
                   

Balances at February 27, 2010

  $ 261   $ 19   $   $ 280  
 

Changes in unrealized losses in other comprehensive income

    (1 )   1          
 

Sales

    (152 )   (18 )       (170 )
                   

Balances at February 26, 2011

  $ 108   $ 2   $   $ 110  
                   

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 on an active market were measured at fair value using quoted market prices, and therefore were classified as Level 1. Our money market fund investments not trading on a regular basis or in an active market, and for which we have been unable to obtain pricing information on an ongoing basis, were measured using inputs other than quoted prices that are observable for the investment, and therefore were classified as Level 2.

U.S. Treasury Bills.    Our U.S. Treasury notes 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 an active market.

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 assumptions 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.

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 an active market for which closing stock prices are readily available.

Deferred Compensation.    Our deferred compensation liabilities and the assets that fund our deferred compensation consist of investments in mutual funds. These investments were classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.

Assets and Liabilities that are 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 other intangible assets, which are remeasured when the derived fair value is below carrying value on our 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 the fixed asset and tradename impairments associated with our fiscal 2011 restructuring described in Note 5, Restructuring Charges, we had no significant remeasurements of such assets or liabilities to fair value during fiscal 2011 and 2010. The following table summarizes the fair value remeasurments recorded for fiscal 2011:

 
  Impairments
  Remaining Net
Carrying Value

 
   

Property and equipment

  $ 147   $ 51  

Tradename

    10     3  
           

Total

  $ 157   $ 54  
           

All of the fair value remeasurments included in the table above were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived using a DCF model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate. For the tradename, fair value was derived using the relief from royalty method, as described in Note 1, Summary of Significant Accounting Policies.

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. 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 6, Debt, for information about the fair value of our long-term debt.

Restructuring Charges
Restructuring Charges

5.    Restructuring Charges

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 restructuring actions 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 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 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 $222 of charges related to the restructuring in the fourth quarter of fiscal 2011. Of the total charges, $51 related to our Domestic segment, primarily for inventory write-downs, property and equipment impairments, employee termination benefits and intangible asset impairments. The remaining $171 of the charges impacted our International segment, related to inventory write-downs, property and equipment impairments, employee termination benefits, and facility closure and other costs primarily associated with stores and corporate offices in Turkey and China. Property and equipment impairments in our International segment included IT asset impairments.

We expect further restructuring charges related to these actions to impact both our Domestic and International segments in fiscal 2012. We expect to incur approximately $5 of restructuring charges in our Domestic segment in fiscal 2012, related to facility closure costs. In addition, we expect to incur between $10 and $15 of restructuring charges in our International segment in fiscal 2012, primarily related to employee termination benefits and facility closure and other costs. We expect to be substantially complete with these restructuring activities in fiscal 2012.

The inventory write-downs related to our fiscal 2011 restructuring are presented in the restructuring charges — cost of goods sold line item in our consolidated statements of earnings, and the remainder of the restructuring charges are included in the restructuring charges line item in our consolidated statements of earnings. The composition of the restructuring charges we incurred in fiscal 2011 for fiscal 2011 restructuring activities, for both the Domestic and International segments, were as follows:

 
  Domestic
  International
  Total
 
   

Inventory write-downs

  $ 10   $ 14   $ 24  

Property and equipment impairments

    15     132     147  

Termination benefits

    16     12     28  

Intangible asset impairments

    10         10  

Facility closure and other costs

        13     13  
               

Total

  $ 51   $ 171   $ 222  
               

The following table summarizes our restructuring accrual activity during fiscal 2011, related to termination benefits and facility closure and other costs:

 
  Termination Benefits
  Facility
Closure and
Other Costs

  Total
 
   

Balance at February 27, 2010

  $   $   $  
 

Charges

    28     13     41  
 

Cash payments

             
 

Changes in foreign currency exchange rates

             
               

Balance at February 26, 2011

  $ 28   $ 13   $ 41  
               

Fiscal 2010 and 2009 Restructurings

In April 2009, we notified our U.S. Best Buy store employees of our intention to update our 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. We believe we are substantially complete with our announced restructuring activities related to these specific restructurings.

In the fourth quarter of fiscal 2009, we implemented a restructuring plan for our domestic and international businesses to support our fiscal 2010 strategy and long-term growth plans. We believe these changes provided an operating structure that supports a more effective and efficient use of our resources and provides a platform from which key strategic initiatives can progress despite changing economic conditions. In the fourth quarter of fiscal 2009, we recorded charges of $78, related primarily to voluntary and involuntary separation plans at our corporate headquarters.

All charges related to our fiscal 2010 and 2009 restructuring activities were presented as restructuring charges in our consolidated statements of earnings. The composition of the restructuring charges we incurred in fiscal 2011, 2010 and 2009, as well as the cumulative amount incurred through the end of fiscal 2011, for our fiscal 2010 and 2009 restructuring activities for both the Domestic and International segments, were as follows:

 
  Domestic   International   Total  
 
  Fiscal
2011

  Fiscal
2010

  Fiscal
2009

  Cumulative
Amount

  Fiscal
2011

  Fiscal
2010

  Fiscal
2009

  Cumulative
Amount

  Fiscal
2011

  Fiscal
2010

  Fiscal
2009

  Cumulative
Amount

 
   

Termination benefits

  $   $ 25   $ 69   $ 94   $   $ 26   $ 6   $ 32   $   $ 51   $ 75   $ 126  

Facility closure costs

            1     1         1         1         1     1     2  

Property and equipment write-downs

            2     2                             2     2  
                                                   

Total

  $   $ 25   $ 72   $ 97   $   $ 27   $ 6   $ 33   $   $ 52   $ 78   $ 130  
                                                   

The following table summarizes our restructuring accrual activity during fiscal 2011 and 2010, related to termination benefits and facility closure costs associated with our fiscal 2010 and 2009 restructuring activities:

 
  Termination
Benefits

  Facility
Closure Costs

  Total
 
   

Balance at February 28, 2009

  $ 73   $ 1   $ 74  
 

Charges

    51     1     52  
 

Cash payments

    (119 )   (1 )   (120 )
 

Changes in foreign currency exchange rates

    3         3  
               

Balance at February 27, 2010

    8     1     9  
 

Charges

             
 

Cash payments

    8     1     9  
 

Changes in foreign currency exchange rates

             
               

Balance at February 26, 2011

  $   $   $  
               
Debt
Debt

6.    Debt

Short-Term Debt

Short-term debt consisted of the following:

 
  February 26, 2011   February 27, 2010
 
  Principal
Balance

  Interest
Rate

  Principal
Balance

  Interest
Rate

 

JPMorgan revolving credit facility

  $     $  

ARS revolving credit line

           

Europe receivables financing facility

    455   3.7%     442   3.6%

Europe revolving credit facility

    98   3.6%     206   1.4%

Canada revolving demand facility

           

China revolving demand facilities

    4   4.8%     15   4.4%
                 

Total short-term debt

  $ 557       $ 663    
                 

 

Fiscal Year
  2011
  2010
 
   

Maximum month-end outstanding during the year

  $ 690   $ 1,262  

Average amount outstanding during the year

  $ 383   $ 881  

Weighted-average interest rate at year-end

    3.7%     2.1%  

JPMorgan Revolving Credit Facility

We have a $2.3 billion five-year unsecured revolving credit facility, as amended (the "Credit Facility"), with a syndicate of banks, including JPMorgan Chase Bank, N.A., acting as administrative agent. Amounts outstanding under letters of credit, if any, reduce amounts available under the Credit Facility. The Credit Facility expires in September 2012. At February 26, 2011, there were no borrowings outstanding and $2.3 billion was available under the Credit Facility. At April 20, 2011, we had no borrowings outstanding under the Credit Facility.

Interest rates under the Credit Facility are variable and are determined at our option at: (i) the greater of the federal funds rate plus 0.5% or JPMorgan's prime rate, or (ii) the LIBOR plus an applicable LIBOR margin. A facility fee is assessed on the commitment amount. Both the LIBOR margin and the facility fee were set based upon our then current senior unsecured debt rating. The LIBOR margin ranges from 0.32% to 0.60%, and the facility fee ranges from 0.08% to 0.15%.

The Credit Facility is guaranteed by certain of our subsidiaries and contains customary affirmative and negative covenants. Among other things, these covenants restrict or prohibit our ability to incur certain types or amounts of indebtedness, incur liens on certain assets, make material changes to our corporate structure or the nature of our business, dispose of material assets, allow non-material subsidiaries to make guarantees, engage in a change in control transaction, or engage in certain transactions with our affiliates. The Credit Facility also contains covenants that require us to maintain a maximum quarterly cash flow leverage ratio and a minimum quarterly interest coverage ratio. We were in compliance with all such covenants at February 26, 2011.

ARS Revolving Credit Line

We previously had a revolving credit line with UBS secured by the par value of our UBS-brokered ARS. However, pursuant to the settlement described in Note 3, Investments, the revolving credit line expired by its terms during the second quarter of fiscal 2011 when UBS bought back all of our UBS-brokered ARS.

Europe Receivables Financing Facility

A subsidiary of Best Buy Europe has a £350 ($548) receivables financing facility (the "ERF") with a syndication of banks, including Barclays Bank PLC acting as administrative agent, to finance the working capital needs of Best Buy Europe. The ERF is secured by certain mobile phone network operator receivables of subsidiaries of Best Buy Europe, which are included within receivables in our consolidated balance sheets. Availability on the ERF is based on a percentage of the available acceptable receivables, as defined in the ERF agreement, and was £323 ($506) at February 26, 2011. Of the amount available, we had drawn £291 ($455) at February 26, 2011. The ERF expires on July 3, 2012.

Interest rates under the ERF are variable, based on the three-month LIBOR plus a margin of 3.0%, with a commitment fee of 1.5% on unused available capacity. The ERF also required an initial commitment fee of 2.75%.

The ERF is not guaranteed by Best Buy Co., Inc., or any of our subsidiaries, nor does it provide for any recourse to Best Buy Co., Inc. The ERF contains customary affirmative and negative covenants. Among other things, these covenants restrict or prohibit Best Buy Europe's ability to incur certain types or amounts of indebtedness, incur additional encumbrances on its receivables, make material changes in the nature of its business, dispose of material assets, make guarantees, or engage in a change in control transaction. The ERF also contains covenants that require Best Buy Europe to comply with a maximum annual leverage ratio, a minimum annual interest coverage ratio and a minimum fixed charges coverage ratio.

Europe Revolving Credit Facility

In connection with a £475 revolving credit facility available to Best Buy Europe, with CPW as lender, Best Buy Co., Inc. was named as guarantor, for up to 50% of the amount outstanding. Concurrent with entering into the ERF, we amended the revolving credit facility to decrease the amount available by the amount available under the ERF. The corresponding guarantee by Best Buy Co., Inc. was similarly reduced.

In fiscal 2011, Best Buy Europe entered into a new £125 ($196) revolving credit facility (the "New RCF") with one of our subsidiaries and Carphone Warehouse as lenders. Concurrent with the execution of the New RCF agreement, the £475 revolving credit facility was terminated. Amounts borrowed under the New RCF are provided for equally by us via intercompany transactions and by Carphone Warehouse. The New RCF expires in March 2013. The New RCF is not guaranteed by Best Buy Co., Inc., or any of our subsidiaries, nor does it provide for any recourse to Best Buy Co., Inc. The full amount available under the New RCF, or £125 ($196), was borrowed by Best Buy Europe at February 26, 2011, for which Carphone Warehouse's proportionate and equal share of £63 ($98) was outstanding.

Interest rates under the New RCF are variable, based on the applicable LIBOR plus a margin of 3.0%. A commitment fee of 1.5% on unused available capacity also applies.

Canada Revolving Demand Facility

We have a $51 revolving demand facility available to our Canada operations including an additional seasonal facility of $51 that is available from September through December of each year. There were no borrowings outstanding under the facility at February 26, 2011. There is no set expiration date for the facility. All borrowings under the facility are made available at the sole discretion of the lender and are payable on demand. Borrowings under the facility bear interest at rates specified in the credit agreement for the facility. Borrowings are secured by a guarantee of Best Buy Co., Inc.

China Revolving Demand Facilities

We have $159 in revolving demand facilities available to our China operations, of which $4 was outstanding at February 26, 2011. The facilities are renewed annually with the respective banks. All borrowings under these facilities bear interest at rates specified in the related credit agreements, are made available at the sole discretion of the respective lenders and are payable on demand. Certain of these facilities are secured by a guarantee of Best Buy Co., Inc.

Long-Term Debt

Long-term debt consisted of the following:

 
  February 26,
2011

  February 27,
2010

 
   

2013 Notes

  $ 500   $ 500  

Convertible debentures

    402     402  

Financing lease obligations, due 2011 to 2025, interest rates ranging from 3.0% to 8.1%

    170     186  

Capital lease obligations, due 2011 to 2035, interest rates ranging from 2.1% to 8.3%

    79     49  

Other debt, due 2018 to 2022, interest rates ranging from 2.6% to 6.7%

    1     2  
           

Total long-term debt

  $ 1,152   $ 1,139  

Less: current portion(1)

    (441 )   (35 )
           

Total long-term debt, less current portion

  $ 711   $ 1,104  
           
(1)
Since holders of our convertible debentures may require us to purchase all or a portion of the debentures on January 15, 2012, we have classified the $402 for such debentures in the current portion of long-term debt at February 26, 2011.

2013 Notes

In June 2008, we sold $500 principal amount of notes due July 15, 2013 (the "2013 Notes"). The 2013 Notes bear interest at a fixed rate of 6.75% per year, payable semi-annually on January 15 and July 15 of each year, beginning January 15, 2009. The interest payable on the 2013 Notes is subject to adjustment if either Moody's Investors Service, Inc. or Standard & Poor's Ratings Services downgrades the rating assigned to the 2013 Notes to below investment grade. Net proceeds from the sale of the 2013 Notes were $496, after an initial issuance discount of $1 and other transaction costs.

We may redeem some or all of the 2013 Notes at any time, at a price equal to 100% of the principal amount of the 2013 Notes redeemed plus accrued and unpaid interest to the redemption date and an applicable make-whole amount as described in the indenture relating to the 2013 Notes.

The 2013 Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated debt. The 2013 Notes contain covenants that, among other things, limit our ability and the ability of our North American subsidiaries to incur debt secured by liens, enter into sale and lease-back transactions and, in the case of such subsidiaries, incur unsecured debt.

Convertible Debentures

In January 2002, we sold convertible subordinated debentures having an aggregate principal amount of $402. The proceeds from the offering, net of $6 in offering expenses, were $396. On January 15, 2007, the debentures became callable at par, at our option, for cash. The debentures mature in 2022.

Holders may require us to purchase all or a portion of the debentures on January 15, 2012, and again on January 15, 2017 if not previously redeemed, at a purchase price equal to 100% of the principal amount of the debentures plus accrued and unpaid interest up to but not including the date of purchase. We have the option to settle the purchase price in cash, stock, or a combination of cash and stock. Since holders may require us to purchase all or a portion of the debentures on January 15, 2012, we classified the debentures in the current portion of long-term debt at February 26, 2011.

The debentures become convertible into shares of our common stock at a conversion rate of 21.7391 shares per one thousand dollars principal amount of debentures, equivalent to an initial conversion price of $46.00 per share, if the closing price of our common stock exceeds a specified price for 20 consecutive trading days in a 30-trading day period preceding the date of conversion, if our credit rating falls below specified levels, if the debentures are called for redemption or if certain specified corporate transactions occur. The debentures were not convertible at February 26, 2011, and have not been convertible through April 20, 2011.

The debentures have an interest rate of 2.25% per annum. The interest rate may be reset, but not below 2.25% or above 3.25%, on July 15, 2011, and July 15, 2016. One of our subsidiaries has guaranteed the debentures.

Other

The fair value of long-term debt approximated $1,210 at both February 26, 2011, and February 27, 2010, based primarily on the ask prices quoted from external sources, compared to carrying values of $1,152 and $1,139, respectively.

At February 26, 2011, the future maturities of long-term debt, including capitalized leases, consisted of the following:

Fiscal Year
   
 
   

2012(1)

  $ 441  

2013

    37  

2014

    537  

2015

    36  

2016

    29  

Thereafter

    72  
       

Total long-term debt

  $ 1,152  
       
(1)
Holders of our convertible debentures may require us to purchase all or a portion of their debentures on January 15, 2012. The table above assumes that all holders exercise their redemption right on that date.
Derivative Instruments
Derivative Instruments

7.    Derivative Instruments

We manage our economic and transaction exposure to certain market-based risks through the use of foreign currency derivative instruments. Our objective in holding derivatives is to reduce the volatility of net earnings and cash flows associated with changes in foreign currency exchange rates. We do not hold or issue derivative financial instruments for trading or speculative purposes.

We record all foreign currency derivative instruments on our consolidated balance sheets at fair value and evaluate hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting treatment. We formally document all hedging relationships at inception for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. In addition, we have derivatives which are not designated as hedging instruments. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by engaging with major financial institutions as our counterparties.

Cash Flow Hedges

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on certain revenue streams denominated in non-functional currencies. The contracts have terms of up to two years. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and it is subsequently reclassified into net earnings in the period in which the hedged transaction affects net earnings or the forecasted transaction is no longer probable of occurring. We discontinued certain cash flow hedges and reclassified $5 into net earnings during the fourth quarter of fiscal 2011, as the forecasted transactions were no longer probable of occurring. We report the ineffective portion, if any, of the gain or loss in net earnings.

Net Investment Hedges

Previously, we entered into foreign exchange swap contracts to hedge against the effect of euro and Swiss franc exchange rate fluctuations on net investments of certain foreign operations. For a net investment hedge, we recognized changes in the fair value of the derivative as a component of foreign currency translation within other comprehensive income to offset a portion of the change in the translated value of the net investment being hedged, until the investment was sold or liquidated. During fiscal 2011, we discontinued this hedging strategy and no longer have contracts that hedge net investments of foreign operations.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include foreign exchange forward contracts used to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies and on certain forecasted inventory purchases denominated in non-functional currencies. The contracts have terms of up to six months. These derivative instruments are not designated in hedging relationships and, therefore, we record gains and losses on these contracts directly in net earnings.

Summary of Derivative Balances

The following table presents the gross fair values for derivative instruments and the corresponding classification at February 26, 2011 and February 27, 2010:

 
  February 26, 2011   February 27, 2010  
Contract Type
  Assets
  Liabilities
  Assets
  Liabilities
 
   

Cash flow hedges (foreign exchange forward contracts)

  $ 1   $ (2 ) $ 2   $ (1 )

Net investment hedges (foreign exchange swap contracts)

            4      
                   

Total derivatives designated as hedging instruments

  $ 1   $ (2 ) $ 6   $ (1 )
                   

No hedge designation (foreign exchange forward contracts)

    2     (2 )   1     (2 )
                   

Total

  $ 3   $ (4 ) $ 7   $ (3 )
                   

The following tables present the effects of derivative instruments on other comprehensive income ("OCI") and on our consolidated statements of earnings for fiscal 2011 and 2010:

 
  2011   2010  
Contract Type
  Pre-tax Gain(Loss) Recognized in OCI(1)
  Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)(2)
  Pre-tax Gain(Loss) Recognized in OCI(1)
  Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)(2)
 
   

Cash flow hedges (foreign exchange forward contracts)

  $ 9   $ 12   $ 1   $ 4  

Net investment hedges (foreign exchange swap contracts)

    8         45      
                   

Total

  $ 17   $ 12   $ 46   $ 4  
                   
(1)
Reflects the amount recognized in OCI prior to the reclassification of 50% to noncontrolling interests for the cash flow and net investment hedges, respectively.

(2)
Gain reclassified from accumulated OCI is included within SG&A in our consolidated statements of earnings.

The following table presents the effects of derivatives not designated as hedging instruments on our consolidated statements of earnings for fiscal 2011 and 2010:

 
  Gain (Loss) Recognized within SG&A  
Contract Type
  2011
  2010
 
   

No hedge designation (foreign exchange forward contracts)

  $ 13   $ (5 )
           

The following table presents the notional amounts of our foreign currency exchange contracts at February 26, 2011 and February 27, 2010:

 
  Notional Amount  
Contract Type
  February 26,
2011

  February 27,
2010

 
   

Derivatives designated as cash flow hedging instruments

  $ 264   $ 203  

Derivatives designated as net investment hedging instruments

        608  

Derivatives not designated as hedging instruments

    493     240  
           

Total

  $ 757   $ 1,051  
           
Shareholders' Equity
Shareholders' Equity

8.    Shareholders' Equity

Stock Compensation Plans

Our 2004 Omnibus Stock and Incentive Plan, as amended (the "Omnibus Plan"), authorizes us to grant or issue non-qualified stock options, incentive stock options, share awards and other equity awards up to a total of 52 million shares. We have not granted incentive stock options under the Omnibus Plan. Under the terms of the Omnibus Plan, awards may be granted to our employees, officers, advisors, consultants and directors. Awards issued under the Omnibus Plan vest as determined by the Compensation and Human Resources Committee of our Board of Directors at the time of grant. At February 26, 2011, a total of 3.4 million shares were available for future grants under the Omnibus Plan.

Upon adoption and approval of the Omnibus Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continued to vest in accordance with the original vesting schedule and will expire at the end of their original term.

Our outstanding stock options have a 10-year term. Outstanding stock options issued to employees generally vest over a four-year period, and outstanding stock options issued to directors vest immediately upon grant. Share awards vest based either upon attainment of established goals or upon continued employment ("time-based"). Outstanding share awards that are not time-based typically vest at the end of a three-year incentive period based either upon our total shareholder return ("TSR") compared to the TSR of companies that comprise Standard & Poor's 500 Index or growth in our common stock price ("market-based"), or upon the achievement of company or personal performance goals ("performance-based"). We have time-based share awards that vest in their entirety at the end of three- and four-year periods and time-based share awards where 25% of the award vests on the date of grant and 25% vests on each of the three anniversary dates thereafter.

Our 2003 Employee Stock Purchase Plan permitted and our 2008 Employee Stock Purchase Plan permits our employees to purchase our common stock at 85% of the market price of the stock at the beginning or at the end of a semi-annual purchase period, whichever is less.

Stock-based compensation expense was as follows in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Stock options

  $ 90   $ 85   $ 77  

Share awards

                   
 

Market-based

    4     8     13  
 

Performance-based

    (1 )   1     2  
 

Time-based

    16     10     4  

Employee stock purchase plans

    12     14     14  
               

Total

  $ 121   $ 118   $ 110  
               

Stock Options

Stock option activity was as follows in fiscal 2011:

 
  Stock
Options

  Weighted-
Average
Exercise Price
per Share

  Weighted-
Average
Remaining
Contractual
Term (in years)

  Aggregate
Intrinsic Value

 
   

Outstanding at February 27, 2010

    36,588,000   $ 38.18              
 

Granted

    4,924,000     38.85              
 

Exercised

    (4,355,000 )   30.83              
 

Forfeited/Canceled

    (1,570,000 )   42.88              
                         

Outstanding at February 26, 2011

    35,587,000   $ 38.97     6.4   $ 41  
                         

Vested or expected to vest at February 26, 2011

    32,438,000   $ 39.21     6.2   $ 39  
                         

Exercisable at February 26, 2011

    21,717,000   $ 40.14     5.1   $ 30  
                         

The weighted-average grant-date fair value of stock options granted during fiscal 2011, 2010 and 2009 was $11.97, $12.69 and $13.04, respectively, per share. The aggregate intrinsic value of our stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised during fiscal 2011, 2010 and 2009, was $52, $28 and $26, respectively. At February 26, 2011, there was $127 of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 1.7 years.

Net cash proceeds from the exercise of stock options were $134, $96 and $34 in fiscal 2011, 2010 and 2009, respectively.

The actual income tax benefit realized from stock option exercises was $19, $10 and $7, in fiscal 2011, 2010 and 2009, respectively.

In fiscal 2011, 2010 and 2009, we estimated the fair value of each stock option on the date of grant using a lattice model with the following assumptions:

Valuation Assumptions(1)
  2011
  2010
  2009
 
   

Risk-free interest rate(2)

    0.2% - 3.9%     0.2% - 3.8%     0.9% - 4.0%  

Expected dividend yield

    1.5%     1.6%     1.6%  

Expected stock price volatility(3)

    36%     42%     45%  

Expected life of stock options (in years)(4)

    6.1     6.1     6.1  
(1)
Forfeitures are estimated using historical experience and projected employee turnover.

(2)
Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of our stock options.

(3)
We use an outside valuation advisor to assist us in projecting expected stock price volatility. We consider both the historical volatility of our stock price as well as implied volatilities from exchange-traded options on our stock.

(4)
We estimate the expected life of stock options based upon historical experience.

Market-Based Share Awards

The fair value of market-based share awards is determined based on generally accepted valuation techniques and the closing market price of our stock on the date of grant. A summary of the status of our nonvested market-based share awards at February 26, 2011, and changes during fiscal 2011, is as follows:

Market-Based Share Awards
  Shares
  Weighted-
Average
Fair Value
per Share

 
   

Outstanding at February 27, 2010

    633,000   $ 42.97  
 

Granted

         
 

Vested

    (200,000 )   38.65  
 

Forfeited/Canceled

    (240,000 )   39.14  
             

Outstanding at February 26, 2011

    193,000   $ 52.19  
             

We recognize expense for market-based share awards on a straight-line basis over the requisite service period (or to an employee's eligible retirement date, if earlier). At February 26, 2011, compensation expense had been fully recognized.

Performance-Based Share Awards

The fair value of performance-based share awards is determined based on the closing market price of our stock on the date of grant. A summary of the status of our nonvested performance-based share awards at February 26, 2011, and changes during fiscal 2011, is as follows:

Performance-Based Share Awards
  Shares
  Weighted-Average Fair Value per Share
 
   

Outstanding at February 27, 2010

    2,343,000   $ 42.11  
 

Granted

    6,000     44.20  
 

Vested

    (64,000 )   54.13  
 

Forfeited/Canceled

    (106,000 )   44.58  
             

Outstanding at February 26, 2011

    2,179,000   $ 41.64  
             

At February 26, 2011, there was no compensation expense related to nonvested performance-based share awards that we expect to recognize.

Time-Based Share Awards

The fair value of time-based share awards is determined based on the closing market price of our stock on the date of grant. A summary of the status of our nonvested time-based share awards at February 26, 2011, and changes during fiscal 2011, is as follows:

Time-Based Share Awards
  Shares
  Weighted-Average Fair Value per Share
 
   

Outstanding at February 27, 2010

    1,332,000   $ 34.06  
 

Granted

    1,321,000     38.40  
 

Vested

    (380,000 )   34.17  
 

Forfeited/Canceled

    (102,000 )   35.93  
             

Outstanding at February 26, 2011

    2,171,000   $ 36.60  
             

At February 26, 2011, there was $53 of unrecognized compensation expense related to nonvested time-based share awards that we expect to recognize over a weighted-average period of 3.0 years.

Employee Stock Purchase Plans

In fiscal 2011, 2010 and 2009, we estimated the fair value of stock-based compensation expense associated with our employee stock purchase plans on the purchase date using the Black-Scholes option-pricing valuation model, with the following assumptions:

Valuation Assumptions
  2011
  2010
  2009
 
   

Risk-free interest rate(1)

    0.2%     0.3%     1.3%  

Expected dividend yield

    1.4%     1.5%     1.4%  

Expected stock price volatility(2)

    29%     53%     42%  

Expected life of employee stock purchase plan options (in months)(3)

    6     6     6  
(1)
Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of employee stock purchase plan shares.
(2)
We consider both the historical volatility of our stock price as well as implied volatilities from exchange-traded options on our stock.

(3)
Based on semi-annual purchase period.

In fiscal 2011, 2010 and 2009, 1.3 million, 1.2 million and 1.4 million shares, respectively, were purchased through our employee stock purchase plans. The weighted-average fair values of shares purchased pursuant to the plans during fiscal 2011, 2010 and 2009, were $9.54, $11.34 and $10.32, respectively. At February 26, 2011, and February 27, 2010, plan participants had accumulated $19 and $18, respectively, to purchase our common stock pursuant to these plans.

Earnings per Share

We compute our basic earnings per share based on the weighted-average number of common shares outstanding, and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive shares of common stock include stock options, nonvested share awards and shares issuable under our employee stock purchase plan, as well as common shares that would have resulted from the assumed conversion of our convertible debentures (see Note 6, Debt). Since the potentially dilutive shares related to the convertible debentures are included in the computation, the related interest expense, net of tax, is added back to net earnings, as the interest would not have been paid if the convertible debentures had been converted to common stock. Nonvested market-based share awards and nonvested performance-based share awards are included in the average diluted shares outstanding each period if established market or performance criteria have been met at the end of the respective periods.

At February 26, 2011, options to purchase 35.6 million shares of common stock were outstanding as follows (shares in millions):

 
  Exercisable   Unexercisable   Total  
 
  Shares
  %
  Weighted-
Average
Price
per Share

  Shares
  %
  Weighted-
Average
Price
per Share

  Shares
  %
  Weighted-
Average
Price
per Share

 
   

In-the-money

    9.0     41   $ 30.61     8.5     61   $ 33.59     17.5     49   $ 32.06  

Out-of-the-money

    12.7     59     46.83     5.4     39     42.78     18.1     51     45.63  
                                             

Total

    21.7     100   $ 40.14     13.9     100   $ 37.13     35.6     100   $ 38.97  
                                             

The computation of dilutive shares outstanding excludes the out-of-the-money stock options because such outstanding options' exercise prices were greater than the average market price of our common shares and, therefore, the effect would be antidilutive (i.e., including such options would result in higher earnings per share).

The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Numerator:

                   
 

Net earnings attributable to Best Buy Co., Inc., basic

  $ 1,277   $ 1,317   $ 1,003  
 

Adjustment for assumed dilution:

                   
   

Interest on convertible debentures due in 2022, net of tax

    6     6     6  
               
 

Net earnings attributable to Best Buy Co., Inc., diluted

  $ 1,283   $ 1,323   $ 1,009  
               

Denominator (in millions):

                   
 

Weighted-average common shares outstanding

    406.1     416.8     412.5  
 

Effect of potentially dilutive securities:

                   
   

Shares from assumed conversion of convertible debentures

    8.8     8.8     8.8  
   

Stock options and other

    1.6     1.9     1.6  
               
 

Weighted-average common shares outstanding, assuming dilution

    416.5     427.5     422.9  
               

Net earnings per share attributable to Best Buy Co., Inc.

                   
 

Basic

  $ 3.14   $ 3.16   $ 2.43  
 

Diluted

  $ 3.08   $ 3.10   $ 2.39  

Repurchase of Common Stock

In June 2007, our Board of Directors authorized up to $5,500 in share repurchases, a program that terminated and replaced our prior $1,500 share repurchase program authorized in June 2006. There is no expiration date governing the period over which we can repurchase shares under the June 2007 share repurchase program. At February 26, 2011, $1,307 remains available for future purchases under the June 2007 share repurchase program. Repurchased shares have been retired and constitute authorized but unissued shares.

Open Market Repurchases

The following table presents open market share repurchases in fiscal 2011, 2010 and 2009 (shares in millions):

 
  2011
  2010
  2009
 
   

Total number of shares repurchased

    32.6          

Total cost of shares repurchased

  $ 1,193   $   $  

Comprehensive Income

Comprehensive income is computed as net earnings plus certain other items that are recorded directly to shareholders' equity. In addition to net earnings, the significant components of comprehensive income include foreign currency translation adjustments and unrealized gains and losses, net of tax, on available-for-sale marketable equity securities and on derivative instruments. Foreign currency translation adjustments do not include a provision for income tax expense when earnings from foreign operations are considered to be indefinitely reinvested outside the U.S.

Comprehensive income attributable to Best Buy Co., Inc. was $1,410, $1,674 and $184 in fiscal 2011, 2010 and 2009, respectively.

The components of accumulated other comprehensive income, net of tax, were as follows:

 
  February 26,
2011

  February 27,
2010

 
   

Foreign currency translation

  $ 102   $ 26  

Unrealized gains on available-for-sale investments

    72     14  

Unrealized losses on derivative instruments (cash flow hedges)

    (1 )    
           

Total

  $ 173   $ 40  
           
Leases
Leases

9.    Leases

The composition of net rent expense for all operating leases, including leases of property and equipment, was as follows in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Minimum rentals

  $ 1,176   $ 1,145   $ 962  

Contingent rentals

    2     2     1  
               

Total rent expense

    1,178     1,147     963  

Less: sublease income

    (19 )   (20 )   (23 )
               

Net rent expense

  $ 1,159   $ 1,127   $ 940  
               

The future minimum lease payments under our capital, financing and operating leases by fiscal year (not including contingent rentals) at February 26, 2011, were as follows:

Fiscal Year
  Capital
Leases

  Financing
Leases

  Operating
Leases

 
   

2012

  $ 18   $ 34   $ 1,208  

2013

    16     32     1,166  

2014

    16     30     1,079  

2015

    14     29     992  

2016

    8     25     872  

Thereafter

    25     60     2,930  
               

Subtotal

    97     210   $ 8,247  
                   

Less: imputed interest

    (18 )   (40 )      
                 

Present value

  $ 79   $ 170        
                 

Total minimum lease payments have not been reduced by minimum sublease rent income of approximately $124 due under future noncancelable subleases.

During fiscal 2011 and 2010, we entered into agreements totaling $52 and $9, respectively, related to various IT equipment leases.

Benefit Plans
Benefit Plans

10.    Benefit Plans

We sponsor retirement savings plans for employees meeting certain eligibility requirements. Participants may choose from various investment options including a fund comprised of our company stock. Participants can contribute up to 50% of their eligible compensation annually as defined by the plan document, subject to Internal Revenue Service ("IRS") limitations. We match 100% of the first 3% of participating employees' contributions and 50% of the next 2%. Employer contributions vest immediately. The total employer contributions were $69, $62 and $58 in fiscal 2011, 2010 and 2009, respectively.

We have a non-qualified, unfunded deferred compensation plan for highly compensated employees and members of our Board of Directors. Amounts contributed and deferred under our deferred compensation plan are credited or charged with the performance of investment options offered under the plan and elected by the participants. In the event of bankruptcy, the assets of the plan are available to satisfy the claims of general creditors. The liability for compensation deferred under the plan was $64 and $61 at February 26, 2011, and February 27, 2010, respectively, and is included in long-term liabilities. We manage the risk of changes in the fair value of the liability for deferred compensation by electing to match our liability under the plan with investment vehicles that offset a substantial portion of our exposure. The cash value of the investment vehicles, which includes funding for future deferrals, was $83 and $75 at February 26, 2011, and February 27, 2010, respectively, and is included in other assets. Both the asset and the liability are carried at fair value.

Income Taxes
Income Taxes

11.    Income Taxes

The following is a reconciliation of the federal statutory income tax rate to income tax expense in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Federal income tax at the statutory rate

  $ 727   $ 768   $ 595  

State income taxes, net of federal benefit

    42     66     49  

Benefit from foreign operations

    (50 )   (41 )   (30 )

Non-taxable interest income

        (1 )   (3 )

Other

    (5 )   10     16  

Impairments(1)

            47  
               

Income tax expense

  $ 714   $ 802   $ 674  
               

Effective income tax rate

    34.4%     36.5%     39.6%  
(1)
Tax impact of the other-than-temporary impairment of our investment in the common stock of CPW and the non-deductibility of our goodwill impairment charge.

Earnings before income tax expense and equity in income of affiliates by jurisdiction was as follows in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

United States

  $ 1,629   $ 1,870   $ 1,540  

Outside the United States

    449     325     160  
               

Earnings before income tax expense and equity in income of affiliates

  $ 2,078   $ 2,195   $ 1,700  
               

Income tax expense was comprised of the following in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Current:

                   
 

Federal

  $ 689   $ 666   $ 573  
 

State

    67     113     78  
 

Foreign

    92     53     66  
               

 

    848     832     717  
               

Deferred:

                   
 

Federal

    (113 )   (13 )   (7 )
 

State

    (2 )   (11 )   1  
 

Foreign

    (19 )   (6 )   (37 )
               

 

    (134 )   (30 )   (43 )
               

Income tax expense

  $ 714   $ 802   $ 674  
               

Deferred taxes are the result of differences between the bases of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities were comprised of the following:

 
  February 26,
2011

  February 27,
2010

 
   

Accrued property expenses

  $ 154   $ 149  

Other accrued expenses

    122     126  

Deferred revenue

    141     150  

Compensation and benefits

    86     64  

Stock-based compensation

    137     125  

Net operating loss carryforwards

    247     211  

Other

    181     60  
           
 

Total deferred tax assets

    1,068     885  

Valuation allowance

    (212 )   (151 )
           
 

Total deferred tax assets after valuation allowance

    856     734  
           

Property and equipment

    (316 )   (381 )

Convertible debt

    (79 )   (71 )

Goodwill and intangibles

    (123 )   (125 )

Other

    (47 )   (31 )
           
 

Total deferred tax liabilities

    (565 )   (608 )
           

Net deferred tax assets

  $ 291   $ 126  
           

Deferred tax assets and liabilities included in our consolidated balance sheets were as follows:

 
  February 26,
2011

  February 27,
2010

 
   

Other current assets

  $ 261   $ 244  

Other assets

    98     19  

Other long-term liabilities

    (68 )   (137 )
           

Net deferred tax assets

  $ 291   $ 126  
           

At February 26, 2011, we had total net operating loss carryforwards from international operations of $218, of which $93 will expire in various years through 2021 and the remaining amounts have no expiration. Additionally, we had acquired U.S. federal net operating loss carryforwards of $29 which expire between 2025 and 2028, and U.S. federal foreign tax credits of $58 which expire between 2015 and 2021.

At February 26, 2011, a valuation allowance of $212 had been established against certain international net operating loss carryforwards and other international deferred tax assets. The $61 increase from February 27, 2010, is primarily due to valuation allowances that arose in fiscal 2011.

We have not provided deferred taxes on unremitted earnings attributable to foreign operations that have been considered to be reinvested indefinitely. These earnings relate to ongoing operations and were $1,764 at February 26, 2011. It is not practicable to determine the income tax liability that would be payable if such earnings were not indefinitely reinvested.

The following table provides a reconciliation of changes in unrecognized tax benefits for fiscal 2011 and 2010:

Balance at February 28, 2009

  $ 349  
 

Gross increases related to prior period tax positions

    96  
 

Gross decreases related to prior period tax positions

    (72 )
 

Gross increases related to current period tax positions

    50  
 

Settlements with taxing authorities

    (24 )
 

Lapse of statute of limitations

    (6 )
       

Balance at February 27, 2010

  $ 393  
 

Gross increases related to prior period tax positions

    36  
 

Gross decreases related to prior period tax positions

    (90 )
 

Gross increases related to current period tax positions

    40  
 

Settlements with taxing authorities

     
 

Lapse of statute of limitations

    (20 )
       

Balance at February 26, 2011

  $ 359  
       

At February 26, 2011, and February 27, 2010, $233 and $195, respectively, of unrecognized tax benefits would favorably impact the effective tax rate if recognized.

We recognize interest and penalties (not included in the "unrecognized tax benefits" above), as well as interest received from favorable tax settlements, as components of income tax expense. Interest expense of $1 and penalties benefit of $4 were recognized as a component of income tax expense in fiscal 2011. At February 26, 2011, and February 27, 2010, we had accrued interest of $84 and $78, respectively, along with accrued penalties of $0 and $4 at February 26, 2011 and February 27, 2010, respectively.

We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before fiscal 2003.

Because existing tax positions will continue to generate increased liabilities for us for unrecognized tax benefits over the next 12 months, and since we are routinely under audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months. An estimate of the amount or range of such change cannot be made at this time. However, we do not expect the change, if any, to have a material effect on our consolidated financial condition or results of operations within the next 12 months.

Segment and Geographic Information
Segment and Geographic Information

12.    Segment and Geographic Information

Segment Information

We have organized our operations into two segments: Domestic and International. These segments are the primary areas of measurement and decision-making by our chief operating decision maker. The Domestic reportable segment is comprised of all operations within the U.S. and its territories. The International reportable segment is comprised of all operations outside the U.S. and its territories. We rely on an internal management reporting process that provides segment information to the operating income level for purposes of making financial decisions and allocating resources. The accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies.

The following tables present our business segment information in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Revenue

                   

Domestic

  $ 37,186   $ 37,314   $ 35,070  

International

    13,086     12,380     9,945  
               

Total revenue

  $ 50,272   $ 49,694   $ 45,015  
               

Percentage of revenue, by revenue category

                   

Domestic:

                   
 

Consumer electronics

    37%     39%     39%  
 

Home office

    37%     34%     31%  
 

Entertainment

    14%     16%     19%  
 

Appliances

    5%     4%     5%  
 

Services

    6%     6%     6%  
 

Other

    1%     1%     < 1%  
               

Total

    100%     100%     100%  
               

International:

                   
 

Consumer electronics

    21%     20%     26%  
 

Home office

    55%     53%     45%  
 

Entertainment

    6%     7%     9%  
 

Appliances

    9%     8%     10%  
 

Services

    9%     12%     10%  
 

Other

    < 1%     < 1%     < 1%  
               

Total

    100%     100%     100%  
               

 

 
  2011
  2010
  2009
 
   

Operating income

                   

Domestic

  $ 2,031   $ 2,071   $ 1,758  

International

    83     164     112  
               

Total operating income

    2,114     2,235     1,870  

Other income (expense)

                   
 

Investment income and other

    51     54     35  
 

Investment impairment

            (111 )
 

Interest expense

    (87 )   (94 )   (94 )
               

Earnings from operations before income tax expense and equity in income of affiliates

  $ 2,078   $ 2,195   $ 1,700  
               

Assets

                   

Domestic

  $ 9,610   $ 10,431   $ 9,059  

International

    8,239     7,871     6,767  
               

Total assets

  $ 17,849   $ 18,302   $ 15,826  
               

Capital expenditures

                   

Domestic

  $ 481   $ 385   $ 971  

International

    263     230     332  
               

Total capital expenditures

  $ 744   $ 615   $ 1,303  
               

Depreciation

                   

Domestic

  $ 623   $ 585   $ 550  

International

    273     253     180  
               

Total depreciation

  $ 896   $ 838   $ 730  
               

Geographic Information

The following tables present our geographic information in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Net sales to customers

                   

United States

  $ 37,186   $ 37,315   $ 35,070  

Europe

    5,511     5,591     3,205  

Canada

    5,468     5,065     5,174  

China

    1,952     1,677     1,558  

Other

    155     46     8  
               

Total revenue

  $ 50,272   $ 49,694   $ 45,015  
               

Long-lived assets

                   

United States

  $ 2,741   $ 2,960   $ 3,155  

Europe

    438     464     439  

Canada

    474     462     408  

China

    147     152     161  

Other

    23     32     11  
               

Total long-lived assets

  $ 3,823   $ 4,070   $ 4,174  
               
Contingencies and Commitments
Contingencies and Commitments

13.    Contingencies and Commitments

Contingencies

In December 2005, a purported class action lawsuit captioned, Jasmen Holloway, et al. v. Best Buy Co., Inc., was filed against us in the U.S. District Court for the Northern District of California. This federal court action alleges that we discriminate against women and minority individuals on the basis of gender, race, color and/or national origin in our stores with respect to our employment policies and practices. The action seeks an end to alleged discriminatory policies and practices, an award of back and front pay, punitive damages and injunctive relief, including rightful place relief for all class members. The plaintiffs have filed a class certification motion which we have opposed. All proceedings have been stayed pending a decision by the U.S. Supreme Court in Dukes, et al. v. Wal-Mart Stores, Inc., a gender discrimination class action lawsuit.

In February 2011, a purported class action lawsuit captioned, IBEW Local 98 Pension Fund, individually and on behalf of all others similarly situated v. Best Buy Co., Inc., et al., was filed against us and certain of our executive officers in the U.S. District Court for the District of Minnesota. This federal court action alleges, among other things, that we and those officers violated Sections 10(b) and 20A of the Exchange Act and Rule 10b-5 under the Exchange Act in connection with press releases and other statements relating to our fiscal 2011 earnings guidance that had been made available to the public. Additionally, in March 2011, a similar purported class action was filed by a single shareholder, Rene LeBlanc, against us and certain of our executive officers in the same court.

The plaintiffs in the above actions seek damages, including interest, equitable relief and reimbursement of the costs and expenses they incurred in the lawsuits. We believe the above allegations are without merit, and we intend to defend these actions vigorously. Based on our assessment of the facts underlying the claims in the above actions, their respective procedural litigation history (including the status of class certification in the Holloway lawsuit), and the degree to which we intend to defend our company in these matters, we are unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial position or results of operations.

We are involved in various other legal proceedings arising in the normal course of conducting business. We believe the amounts provided in our consolidated financial statements are adequate in light of the probable and estimable liabilities. The resolution of those other proceedings is not expected to have a material effect on our results of operations or financial condition.

Commitments

We engage Accenture LLP ("Accenture") to assist us with improving our operational capabilities and reducing our costs in the information systems, procurement and human resources areas. We expect our future contractual obligations to Accenture to range from $165 to $215 per year through 2016, the end of the periods under contract.

We had outstanding letters of credit and bankers' acceptances for purchase obligations with an aggregate fair value of $516 at February 26, 2011.

At February 26, 2011, we had commitments for the purchase and construction of facilities valued at approximately $32. Also, at February 26, 2011, we had entered into lease commitments for land and buildings for 27 future locations. These lease commitments with real estate developers provide for minimum rentals ranging from 3 to 20 years, which if consummated based on current cost estimates, will approximate $15 annually over the initial lease terms. These minimum rentals are reported in the future minimum lease payments included in Note 9, Leases.

Sale of Business
Sale of Business

14.    Sale of Business

During the second quarter of fiscal 2011, we completed the sale of our Speakeasy business to Covad Communications Group, Inc. ("Covad"). Prior to this sale, Covad had merged with Megapath Inc. The three combined businesses operate under the Megapath name. Upon closing of the Speakeasy sale, we received cash consideration and a minority equity interest in the combined company. Based upon the fair value of the consideration received and the carrying value of Speakeasy at closing, we recorded a pre-tax gain on sale of $7 in the second quarter of fiscal 2011, which is included within investment income and other in our consolidated statements of earnings.

Related Party Transactions
Related Party Transactions

15.    Related Party Transactions

Best Buy Europe had the following related party transactions and balances with CPW and Carphone Warehouse in fiscal 2011, 2010 and 2009:

 
  2011
  2010
  2009
 
   

Revenue earned (primarily commission revenue and fees for information technology services provided to CPW and Carphone Warehouse)

  $ 6   $ 63   $ 12  

SG&A incurred (primarily for rent and other payroll-related costs paid to CPW and Carphone Warehouse)

    8     6     29  

Interest expense incurred on credit facility with CPW and Carphone Warehouse as lender

    1     4     15  

Accounts payable to CPW and Carphone Warehouse at the end of the fiscal year

        4     108  

Accounts receivable from CPW and Carphone Warehouse at the end of the fiscal year

    2     31     60  

Balance outstanding on credit facility from CPW and Carphone Warehouse at the end of the fiscal year (see Note 6, Debt)

    98     206     584  
Subsequent Event
Subsequent Event

16.    Subsequent Event

In March 2011, we sold $350 principal amount of notes due March 15, 2016 (the "2016 Notes") and $650 principal amount of notes due March 15, 2021 (the "2021 Notes", and together with the 2016 Notes, the "Notes"). The 2016 Notes bear interest at a fixed rate of 3.75% per year, while the 2021 Notes bear interest at a fixed rate of 5.50% per year. Interest on the Notes is payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2011. The Notes were issued at a slight discount to par, which when coupled with underwriting discounts of $6, resulted in net proceeds from the sale of the Notes of $990.

We may redeem some or all of the Notes at any time at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes redeemed and (ii) the sum of the present values of each remaining scheduled payment of principal and interest on the Notes redeemed discounted to the redemption date on a semiannual basis, plus accrued and unpaid interest on the principal amount of the Notes to the redemption date as described in the indenture (including the supplemental indenture) relating to the Notes. Furthermore, if a change of control triggering event occurs, unless we have previously exercised our option to redeem the Notes, we will be required to offer to purchase the Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to the purchase date.

The Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated debt. The Notes contain covenants that, among other things, limit our ability and the ability of our North American subsidiaries to incur debt secured by liens or to enter into sale and lease-back transactions.

Condensed Consolidating Financial Information
Condensed Consolidating Financial Information

17.    Condensed Consolidating Financial Information

The rules of the U.S. Securities and Exchange Commission require that condensed consolidating financial information be provided for a subsidiary that has guaranteed the debt of a registrant issued in a public offering, where the guarantee is full and unconditional and where the voting interest of the subsidiary is 100% owned by the registrant. Our convertible debentures, which had an aggregate principal balance and carrying amount of $402 at February 26, 2011, are jointly and severally guaranteed by our 100%-owned indirect subsidiary Best Buy Stores, L.P. ("Guarantor Subsidiary"). Investments in subsidiaries of Best Buy Stores, L.P., which have not guaranteed the convertible debentures ("Non-Guarantor Subsidiaries"), are required to be presented under the equity method, even though all such subsidiaries meet the requirements to be consolidated under GAAP.

Set forth below are condensed consolidating financial statements presenting the financial position, results of operations, and cash flows of (i) Best Buy Co., Inc., (ii) the Guarantor Subsidiary, (iii) the Non-Guarantor Subsidiaries, and (iv) the eliminations necessary to arrive at consolidated information for our company. The statement of earnings eliminations relate primarily to the sale of inventory from a Non-Guarantor Subsidiary to the Guarantor Subsidiary. The balance sheet eliminations relate primarily to the elimination of intercompany profit in inventory held by the Guarantor Subsidiary and consolidating entries to eliminate intercompany receivables, payables and subsidiary investment accounts.

We file a consolidated U.S. federal income tax return. Income taxes are allocated in accordance with our tax allocation agreement. U.S. affiliates receive no tax benefit for taxable losses, but are allocated taxes at the required effective income tax rate if they have taxable income.

The following tables present condensed consolidating balance sheets as of February 26, 2011, and February 27, 2010, and condensed consolidating statements of earnings and cash flows for the fiscal years ended February 26, 2011, February 27, 2010, and February 28, 2009, and should be read in conjunction with the consolidated financial statements herein.

Condensed Consolidating Balance Sheets

At February 26, 2011

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Assets

                               

Current Assets

                               
 

Cash and cash equivalents

  $ 282   $ 51   $ 770   $   $ 1,103  
 

Short-term investments

    20         2         22  
 

Receivables

    3     738     1,607         2,348  
 

Merchandise inventories

        3,973     1,999     (75 )   5,897  
 

Other current assets

    234     117     752         1,103  
 

Intercompany receivable

            9,300     (9,300 )    
 

Intercompany note receivable

    854         91     (945 )    
                       
   

Total current assets

    1,393     4,879     14,521     (10,320 )   10,473  

Net Property and Equipment

    200     1,803     1,820         3,823  

Goodwill

        6     2,448         2,454  

Tradenames, Net

            133         133  

Customer Relationships, Net

            203         203  

Equity and Other Investments

    162         166         328  

Other Assets

    181     36     273     (55 )   435  

Investments in Subsidiaries

    14,030     229     2,444     (16,703 )    
                       

Total Assets

  $ 15,966   $ 6,953   $ 22,008   $ (27,078 ) $ 17,849  
                       

Liabilities and Equity

                               

Current Liabilities

                               
 

Accounts payable

  $ 361   $ 101   $ 4,432   $   $ 4,894  
 

Unredeemed gift card liabilities

        404     70         474  
 

Accrued compensation and related expenses

        200     370         570  
 

Accrued liabilities

    13     625     833         1,471  
 

Accrued income taxes

    256                 256  
 

Short-term debt

            557         557  
 

Current portion of long-term debt

    402     23     16         441  
 

Intercompany payable

    7,497     1,665     138     (9,300 )    
 

Intercompany note payable

    103     500     342     (945 )    
                       
   

Total current liabilities

    8,632     3,518     6,758     (10,245 )   8,663  

Long-Term Liabilities

    160     863     447     (287 )   1,183  

Long-Term Debt

    500     128     83         711  

Equity

                               
 

Shareholders' equity

    6,674     2,444     14,030     (16,546 )   6,602  
 

Noncontrolling interests

            690         690  
                       
   

Total equity

    6,674     2,444     14,720     (16,546 )   7,292  
                       

Total Liabilities and Equity

  $ 15,966   $ 6,953   $ 22,008   $ (27,078 ) $ 17,849  
                       

Condensed Consolidating Balance Sheets

At February 27, 2010

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Assets

                               

Current Assets

                               
 

Cash and cash equivalents

  $ 1,170   $ 53   $ 603   $   $ 1,826  
 

Short-term investments

    88         2         90  
 

Receivables

        485     1,535         2,020  
 

Merchandise inventories

        3,662     1,873     (49 )   5,486  
 

Other current assets

    221     149     775     (1 )   1,144  
 

Intercompany receivable

            7,983     (7,983 )    
 

Intercompany note receivable

    833             (833 )    
                       
   

Total current assets

    2,312     4,349     12,771     (8,866 )   10,566  

Net Property and Equipment

    214     1,864     1,992         4,070  

Goodwill

        6     2,446         2,452  

Tradenames, Net

            159         159  

Customer Relationships, Net

            279         279  

Equity and Other Investments

    216         108         324  

Other Assets

    103     34     362     (47 )   452  

Investments in Subsidiaries

    12,246     287     2,296     (14,829 )    
                       

Total Assets

  $ 15,091   $ 6,540   $ 20,413   $ (23,742 ) $ 18,302  
                       

Liabilities and Equity

                               

Current Liabilities

                               
 

Accounts payable

  $ 414   $ 26   $ 4,836   $   $ 5,276  
 

Unredeemed gift card liabilities

        401     62         463  
 

Accrued compensation and related expenses

    4     218     322         544  
 

Accrued liabilities

    25     652     1,004         1,681  
 

Accrued income taxes

    316                 316  
 

Short-term debt

            663         663  
 

Current portion of long-term debt

    1     21     13         35  
 

Intercompany payable

    6,816     1,167         (7,983 )    
 

Intercompany note payable

        500     333     (833 )    
                       
   

Total current liabilities

    7,576     2,985     7,233     (8,816 )   8,978  

Long-Term Liabilities

    247     1,123     224     (338 )   1,256  

Long-Term Debt

    902     136     66         1,104  

Equity

                               
 

Shareholders' equity

    6,366     2,296     12,246     (14,588 )   6,320  
 

Noncontrolling interests

            644         644  
                       
   

Total equity

    6,366     2,296     12,890     (14,588 )   6,964  
                       

Total Liabilities and Equity

  $ 15,091   $ 6,540   $ 20,413   $ (23,742 ) $ 18,302  
                       

Condensed Consolidating Statements of Earnings

Fiscal Year Ended February 26, 2011

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Revenue

  $ 16   $ 33,924   $ 45,843   $ (29,511 ) $ 50,272  

Cost of goods sold

        25,140     39,022     (26,551 )   37,611  

Restructuring charges — cost of goods sold

        9     15         24  
                       

Gross profit

    16     8,775     6,806     (2,960 )   12,637  

Selling, general and administrative expenses

    169     8,439     4,895     (3,178 )   10,325  

Restructuring charges

        9     189         198  
                       

Operating (loss) income

    (153 )   327     1,722     218     2,114  

Other income (expense)

                               
 

Investment income and other

    20         43     (12 )   51  
 

Interest expense

    (47 )   (15 )   (37 )   12     (87 )

Equity in earnings of subsidiaries

    1,189     49     194     (1,432 )    
                       

Earnings before income tax (benefit) expense and equity in income of affiliates

    1,009     361     1,922     (1,214 )   2,078  

Income tax (benefit) expense

    (50 )   118     646         714  

Equity in income of affiliates

            2         2  
                       

Net earnings including noncontrolling interests

    1,059     243     1,278     (1,214 )   1,366  

Net earnings attributable to noncontrolling interests

            (89 )       (89 )
                       

Net earnings attributable to Best Buy Co., Inc.

  $ 1,059   $ 243   $ 1,189   $ (1,214 ) $ 1,277  
                       

Condensed Consolidating Statements of Earnings

Fiscal Year Ended February 27, 2010

 
  Best Buy
Co., Inc.

  Guarantor Subsidiary
  Non-Guarantor Subsidiaries
  Eliminations
  Consolidated
 
   

Revenue

  $ 16   $ 34,347   $ 43,743   $ (28,412 ) $ 49,694  

Cost of goods sold

        25,809     39,292     (27,567 )   37,534  
                       

Gross profit

    16     8,538     4,451     (845 )   12,160  

Selling, general and administrative expenses

    166     8,170     4,705     (3,168 )   9,873  

Restructuring charges

        25     27         52  
                       

Operating (loss) income

    (150 )   343     (281 )   2,323     2,235  

Other income (expense)

                               
 

Investment income and other

    10     1     66     (23 )   54  
 

Interest expense

    (59 )   (21 )   (37 )   23     (94 )

Equity in (loss) earnings of subsidiaries

    (335 )   (3 )   202     136      
                       

(Loss) earnings before income tax expense and equity in income of affiliates

    (534 )   320     (50 )   2,459     2,195  

Income tax expense

    471     122     209         802  

Equity in income of affiliates

            1         1  
                       

Net (loss) earnings including noncontrolling interests

    (1,005 )   198     (258 )   2,459     1,394  

Net earnings attributable to noncontrolling interests

            (77 )       (77 )
                       

Net (loss) earnings attributable to Best Buy Co., Inc.

  $ (1,005 ) $ 198   $ (335 ) $ 2,459   $ 1,317  
                       

Condensed Consolidating Statements of Earnings

Fiscal Year Ended February 28, 2009

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Revenue

  $ 16   $ 32,407   $ 47,925   $ (35,333 ) $ 45,015  

Cost of goods sold

        26,793     42,316     (35,092 )   34,017  
                       

Gross profit

    16     5,614     5,609     (241 )   10,998  

Selling, general and administrative expenses

    150     5,317     3,499     18     8,984  

Restructuring charges

        43     35         78  

Goodwill and tradename impairment

            66         66  
                       

Operating (loss) income

    (134 )   254     2,009     (259 )   1,870  

Other income (expense)

                               
 

Investment income and other

    12         206     (183 )   35  
 

Investment impairment

            (111 )       (111 )
 

Interest expense

    (211 )   (47 )   (19 )   183     (94 )

Equity in earnings (loss) of subsidiaries

    1,293     (146 )   108     (1,255 )    
                       

Earnings before income tax expense and equity in income of affiliates

    960     61     2,193     (1,514 )   1,700  

Income tax (benefit) expense

    (302 )   99     877         674  

Equity in income of affiliates

            7         7  
                       

Net earnings (loss) including noncontrolling interests

    1,262     (38 )   1,323     (1,514 )   1,033  

Net earnings attributable to noncontrolling interests

            (30 )       (30 )
                       

Net earnings (loss) attributable to Best Buy Co., Inc.

  $ 1,262   $ (38 ) $ 1,293   $ (1,514 ) $ 1,003  
                       

Condensed Consolidating Statements of Cash Flows

Fiscal Year Ended February 26, 2011

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Total cash (used in) provided by operating activities

  $ (288 ) $ (171 ) $ 1,649   $   $ 1,190  
                       

Investing Activities

                               
 

Additions to property and equipment

        (319 )   (425 )       (744 )
 

Purchases of investments

    (267 )               (267 )
 

Sales of investments

    397         18         415  
 

Proceeds from sale of business, net of cash transferred

            21         21  
 

Change in restricted assets

            (2 )       (2 )
 

Settlement of net investment hedges

            12         12  
 

Other, net

            (4 )       (4 )
                       
   

Total cash provided by (used in) investing activities

    130     (319 )   (380 )       (569 )
                       

Financing Activities

                               
 

Repurchase of common stock

    (1,193 )               (1,193 )
 

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

    179                 179  
 

Dividends paid

    (237 )               (237 )
 

Repayments of debt

    (886 )   (13 )   (2,221 )       (3,120 )
 

Proceeds from issuance of debt

    885         2,136         3,021  
 

Acquisition of noncontrolling interests

            (21 )       (21 )
 

Excess tax benefits from stock-based compensation

    11                 11  
 

Other, net

            3         3  
 

Change in intercompany receivable/payable

    511     501     (1,012 )        
                       
   

Total cash (used in) provided by financing activities

    (730 )   488     (1,115 )       (1,357 )
                       

Effect of Exchange Rate Changes on Cash

            13         13  
                       

(Decrease) Increase in Cash and Cash Equivalents

    (888 )   (2 )   167         (723 )

Cash and Cash Equivalents at Beginning of Year

    1,170     53     603         1,826  
                       

Cash and Cash Equivalents at End of Year

  $ 282   $ 51   $ 770   $   $ 1,103  
                       

Condensed Consolidating Statements of Cash Flows

Fiscal Year Ended February 27, 2010

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Total cash (used in) provided by operating activities

  $ (1,351 ) $ 2,957   $ 600   $   $ 2,206  
                       

Investing Activities

                               
 

Additions to property and equipment

        (165 )   (450 )       (615 )
 

Purchases of investments

    (16 )               (16 )
 

Sales of investments

    45         11         56  
 

Acquisition of businesses, net of cash acquired

        (3 )   (4 )       (7 )
 

Change in restricted assets

    (5 )       23         18  
 

Settlement of net investment hedges

            40         40  
 

Other, net

        (12 )   (4 )       (16 )
                       
   

Total cash provided by (used in) investing activities

    24     (180 )   (384 )       (540 )
                       

Financing Activities

                               
 

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

    138                 138  
 

Dividends paid

    (234 )               (234 )
 

Repayments of debt

    (3,035 )   (27 )   (2,280 )       (5,342 )
 

Proceeds from issuance of debt

    2,870         2,262         5,132  
 

Acquisition of noncontrolling interests

            (34 )       (34 )
 

Excess tax benefits from stock-based compensation

    7                 7  
 

Other, net

            (15 )       (15 )
 

Change in intercompany receivable/payable

    2,601     (2,745 )   144          
                       
   

Total cash provided by (used in) financing activities

    2,347     (2,772 )   77         (348 )
                       

Effect of Exchange Rate Changes on Cash

            10         10  
                       

Increase in Cash and Cash Equivalents

    1,020     5     303         1,328  

Cash and Cash Equivalents at Beginning of Year

    150     48     300         498  
                       

Cash and Cash Equivalents at End of Year

  $ 1,170   $ 53   $ 603   $   $ 1,826  
                       

Condensed Consolidating Statements of Cash Flows

Fiscal Year Ended February 28, 2009

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Total cash (used in) provided by operating activities

  $ (1,281 ) $ 616   $ 2,542   $   $ 1,877  
                       

Investing Activities

                               
 

Additions to property and equipment

        (641 )   (662 )       (1,303 )
 

Purchases of investments

    (28 )       (53 )       (81 )
 

Sales of investments

    91         155         246  
 

Acquisition of businesses, net of cash acquired

        2     (2,172 )       (2,170 )
 

Change in restricted assets

            (97 )       (97 )
 

Other, net

        (17 )   (5 )       (22 )
                       
   

Total cash provided by (used in) investing activities

    63     (656 )   (2,834 )       (3,427 )
                       

Financing Activities

                               
 

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

    83                 83  
 

Dividends paid

    (223 )               (223 )
 

Repayments of debt

    (3,249 )   (19 )   (1,444 )       (4,712 )
 

Proceeds from issuance of debt

    3,795     37     1,774         5,606  
 

Acquisition of noncontrolling interests

            (146 )       (146 )
 

Excess tax benefits from stock-based compensation

    6                 6  
 

Other, net

    (5 )       (18 )       (23 )
 

Change in intercompany receivable/payable

    790         (790 )        
                       
   

Total cash provided by (used in) financing activities

    1,197     18     (624 )       591  
                       

Effect of Exchange Rate Changes on Cash

            19         19  
                       

Decrease in Cash and Cash Equivalents

    (21 )   (22 )   (897 )       (940 )

Cash and Cash Equivalents at Beginning of Year

    171     70     1,197         1,438  
                       

Cash and Cash Equivalents at End of Year

  $ 150   $ 48   $ 300   $   $ 498  
                       
Supplementary Financial Information (Unaudited)
Supplementary Financial Information (Unaudited)

18.    Supplementary Financial Information (Unaudited)

The following tables show selected operating results for each quarter and full year of fiscal 2011 and 2010 (unaudited):

 
  Quarter    
 
 
  Fiscal
Year

 
 
  1st
  2nd
  3rd
  4th
 
   

Fiscal 2011

                               

Revenue

  $ 10,787   $ 11,339   $ 11,890   $ 16,256   $ 50,272  

Comparable store sales % change(1)

    2.8%     (0.1 )%   (3.3 )%   (4.6 )%   (1.8 )%

Gross profit

  $ 2,793   $ 2,918   $ 2,983   $ 3,943   $ 12,637  

Operating income(2)

    313     411     385     1,005     2,114  

Net earnings including noncontrolling interests

    181     257     240     688     1,366  

Net earnings attributable to Best Buy Co., Inc.

    155     254     217     651     1,277  

Diluted earnings per share(3)

    0.36     0.60     0.54     1.62     3.08  

 

 
  Quarter    
 
 
  Fiscal
Year

 
 
  1st
  2nd
  3rd
  4th
 
   

Fiscal 2010

                               

Revenue

  $ 10,095   $ 11,022   $ 12,024   $ 16,553   $ 49,694  

Comparable store sales % change(1)

    (6.2 )%   (3.9 )%   1.7%     7.0%     0.6%  

Gross profit

  $ 2,557   $ 2,684   $ 2,942   $ 3,977   $ 12,160  

Operating income(4)

    296     280     376     1,283     2,235  

Net earnings including noncontrolling interests

    156     157     271     810     1,394  

Net earnings attributable to Best Buy Co., Inc.

    153     158     227     779     1,317  

Diluted earnings per share(3)

    0.36     0.37     0.53     1.82     3.10  

Note: Certain fiscal year totals may not add due to rounding.

(1)
Comprised of revenue from stores operating for at least 14 full months as well as revenue related to call centers, Web sites and our other comparable sales channels. Revenue we earn from sales of merchandise to wholesalers or dealers is not included within our comparable store sales calculation. Relocated, remodeled and expanded stores are excluded from our comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in our comparable store sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The portion of our calculation of the comparable store sales percentage change attributable to our International segment excludes the effect of fluctuations in foreign currency exchange rates. The method of calculating comparable store sales varies across the retail industry. As a result, our method of calculating comparable store sales may not be the same as other retailers' methods.

(2)
Includes $222 of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our businesses.

(3)
The sum of our quarterly diluted earnings per share does not equal our annual diluted earnings per share due to the impact of the timing of the repurchases of common stock and stock option exercises on quarterly and annual weighted-average shares outstanding.

(4)
Includes $52 of restructuring charges recorded in the fiscal first quarter related to measures we took to restructure our businesses.
Valuation and Qualifying Accounts
Valuation and Qualifying Accounts

Schedule II

Valuation and Qualifying Accounts
($ in millions)

 
  Balance at
Beginning
of Period

  Charged to
Expenses or
Other Accounts

  Other(1)
  Balance at
End of
Period

 
   

Year ended February 26, 2011

                         
 

Allowance for doubtful accounts

  $ 101   $ 46   $ (40 ) $ 107  

Year ended February 27, 2010

                         
 

Allowance for doubtful accounts

  $ 97   $ 48   $ (44 ) $ 101  

Year ended February 28, 2009

                         
 

Allowance for doubtful accounts

  $ 24   $ (5 ) $ 78   $ 97  
(1)
Includes bad debt write-offs and recoveries, acquisitions and the effect of foreign currency fluctuations.
Summary of Significant Accounting Policies (Policies)

Unless the context otherwise requires, the use of the terms "we," "us" and "our" in these notes to consolidated financial statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries. We are a multinational retailer of consumer electronics, home office products, entertainment products, appliances and related services.

We operate two reportable segments: Domestic and International. The Domestic segment is comprised of store, call center and online operations in all states, districts and territories of the U.S., operating under the brand names Best Buy, Best Buy Mobile, Geek Squad, Magnolia Audio Video, Napster and Pacific Sales. U.S. Best Buy stores offer a wide variety of consumer electronics, home office products, entertainment products, appliances and related services. Best Buy Mobile offers a wide selection of mobile phones, accessories and related services. Geek Squad provides residential and commercial computer repair, support and installation services. Magnolia Audio Video stores offer high-end audio and video products and related services. Napster is an online provider of digital music. Pacific Sales stores offer high-end home-improvement products including appliances, consumer electronics and related services.

The International segment is comprised of: (i) all Canada store, call center and online operations, operating under the brand names Best Buy, Best Buy Mobile, Cell Shop, Connect Pro, Future Shop and Geek Squad, (ii) all Europe store, call center and online operations, operating under the brand names Best Buy, The Carphone Warehouse, The Phone House and Geek Squad, (iii) all China store, call center and online operations, operating under the brand names Best Buy, Geek Squad and Five Star, (iv) all Mexico store operations operating under the brand names Best Buy and Geek Squad and (v) all Turkey store operations, operating under the brand names Best Buy and Geek Squad. Our International segment offers products and services similar to those of our U.S. Best Buy stores. However, Best Buy Canada stores do not carry appliances and Best Buy China and Five Star stores do not carry entertainment products. Further, our small-format stores and offerings in Europe are similar to our Best Buy Mobile format and offerings in the U.S., primarily offering mobile phones, voice and data service plans, and related accessories and services.

In support of our retail store operations, we also maintain Web sites for each of our brands including, but not limited to, BestBuy.com, BestBuy.ca, BestBuy.co.uk, BestBuyMobile.com, CarphoneWarehouse.com, Five-Star.cn, FutureShop.ca, Napster.com, and PhoneHouse.com.

The consolidated financial statements include the accounts of Best Buy Co., Inc. and its consolidated subsidiaries. Investments in unconsolidated entities over which we exercise significant influence but do not have control are accounted for using the equity method. We have eliminated all intercompany accounts and transactions.

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, Mexico and Turkey operations on a two-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our consolidated financial statements. Except for our fiscal 2011 restructuring, for which we recorded the effects of certain restructuring charges, no significant intervening event occurred in these operations that would have materially affected our financial condition, results of operations, liquidity or other factors had it been recorded during fiscal 2011. Accordingly, the $171 of restructuring charges related to our International segment were included in our fiscal 2011 results. For further information about our fiscal 2011 restructuring and the nature of the charges we recorded, refer to Note 5, Restructuring Charges.

In preparing the accompanying consolidated financial statements, we evaluated the period from February 27, 2011 through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. Other than the issuance of $1,000 of long-term debt in March 2011, as described in Note 16, Subsequent Event, no such events were identified for this period.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts in the consolidated balance sheets and statements of earnings, as well as the disclosure of contingent liabilities. Future results could be materially affected if actual results were to differ from these estimates and assumptions.

Our fiscal year ends on the Saturday nearest the end of February. Fiscal 2011, 2010 and 2009 each included 52 weeks.

Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, U.S. Treasury bills, commercial paper and time deposits such as certificates of deposit with an original maturity of three months or less when purchased. The amounts of cash equivalents at February 26, 2011, and February 27, 2010, were $120 and $1,108, respectively, and the weighted-average interest rates were 0.3% and 0.1%, respectively.

Outstanding checks in excess of funds on deposit (book overdrafts) totaled $57 and $108 at February 26, 2011, and February 27, 2010, respectively, and are reflected as accounts payable in our consolidated balance sheets.

Receivables consist principally of amounts due from mobile phone network operators for commissions earned; banks for customer credit card, certain debit card and electronic benefits transfer (EBT) transactions; and vendors for various vendor funding programs.

We establish allowances for uncollectible receivables based on historical collection trends and write-off history. Our allowances for uncollectible receivables were $107 and $101 at February 26, 2011, and February 27, 2010, respectively.

Merchandise inventories are recorded at the lower of cost using either the average cost or first-in first-out method, or market. In-bound freight-related costs from our vendors are included as part of the net cost of merchandise inventories. Also included in the cost of inventory are certain vendor allowances that are not a reimbursement of specific, incremental and identifiable costs to promote a vendor's products. Other costs associated with acquiring, storing and transporting merchandise inventories to our retail stores are expensed as incurred and included in cost of goods sold.

Our inventory valuation reflects adjustments for anticipated physical inventory losses (e.g., theft) that have occurred since the last physical inventory. Physical inventory counts are taken on a regular basis to ensure that the inventory reported in our consolidated financial statements is properly stated.

Our inventory valuation also reflects markdowns for the excess of the cost over the amount we expect to realize from the ultimate sale or other disposal of the inventory. Markdowns establish a new cost basis for our inventory. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in that newly established cost basis.

Restricted cash and investments in debt securities totaled $490 and $496, at February 26, 2011, and February 27, 2010, respectively, and are included in other current assets or equity and other investments in our consolidated balance sheets. Such balances are pledged as collateral or restricted to use for vendor payables, general liability insurance, workers' compensation insurance and warranty programs.

Property and equipment are recorded at cost. We compute depreciation using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the period from the date the assets are placed in service to the end of the initial lease term. Leasehold improvements made significantly after the initial lease term are depreciated over the shorter of their estimated useful lives or the remaining lease term, including renewal periods, if reasonably assured. Accelerated depreciation methods are generally used for income tax purposes.

When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and any resulting gain or loss is reflected in our consolidated statements of earnings.

Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated.

Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the expected useful life of the software, from three to seven years. A subsequent addition, modification or upgrade to internal-use software is capitalized to the extent that it enhances the software's functionality or extends its useful life. Capitalized software is included in fixtures and equipment. Software maintenance and training costs are expensed in the period incurred.

Estimated useful lives by major asset category are as follows:

Asset
  Life
(in years)

 
   

Buildings

    25-50  

Leasehold improvements

    3-25  

Fixtures and equipment

    3-20  

Property under capital lease

    2-20  

Long-lived assets, such as property and equipment, are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not limited to, significant underperformance relative to historical or planned operating results, significant changes in the manner of use of the assets or significant changes in our business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on quoted market prices or other valuation techniques (e.g., discounted cash flow analysis).

The present value of costs associated with location closings, primarily future lease costs (net of expected sublease income), are charged to earnings when we have ceased using the specific location. We accelerate depreciation on property and equipment we expect to retire when a decision is made to abandon a location.

At February 26, 2011, and February 27, 2010, the obligation associated with location closings was $76 and $78, respectively, and is included within accrued liabilities and long-term liabilities in our consolidated balance sheets. The obligation associated with location closings at February 26, 2011, included amounts associated with our fiscal 2011 restructuring activities.

We conduct the majority of our retail and distribution operations from leased locations. The leases require payment of real estate taxes, insurance and common area maintenance, in addition to rent. The terms of our lease agreements generally range from 10 to 20 years. Most of the leases contain renewal options and escalation clauses, and certain store leases require contingent rents based on factors such as specified percentages of revenue or the consumer price index.

For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference between the straight-line rent amounts and amounts payable under the leases as part of deferred rent, in accrued liabilities or long-term liabilities, as appropriate.

Cash or lease incentives received upon entering into certain store leases ("tenant allowances") are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. We record the unamortized portion of tenant allowances as a part of deferred rent, in accrued liabilities or long-term liabilities, as appropriate.

At February 26, 2011, and February 27, 2010, deferred rent included in accrued liabilities in our consolidated balance sheets was $34 and $38, respectively, and deferred rent included in long-term liabilities in our consolidated balance sheets was $343 and $309, respectively.

We also lease certain equipment under noncancelable operating and capital leases. In addition, we have financing leases for which the gross cost of constructing the asset is included in property and equipment, and amounts reimbursed from the landlord are recorded as financing obligations. Assets acquired under capital and financing leases are depreciated over the shorter of the useful life of the asset or the lease term, including renewal periods, if reasonably assured.

Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We do not amortize goodwill but test it for impairment annually in the fiscal fourth quarter, or when indications of potential impairment exist. We monitor the existence of potential impairment indicators throughout the fiscal year.

Tradenames and Customer Relationships

We have indefinite-lived intangible assets related to our Pacific Sales and Napster tradenames, which are included in our Domestic segment. We also have indefinite-lived intangible assets related to our Future Shop and Five Star tradenames and definite-lived intangible assets related to our The Carphone Warehouse and The Phone House tradenames, which are included in our International segment. Additionally, we have definite-lived intangible assets related to customer relationships acquired as part of our acquisition of Best Buy Europe, which are also included in our International segment.

Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the time of acquisition, using income and market approaches to determine fair value. We test our indefinite-lived tradenames annually for impairment, or when indications of potential impairment exist.

Goodwill Impairment Testing

We test for goodwill impairment at the reporting unit level. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management.

The impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, then we conclude that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit's goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

We carry forward the detailed determination of the fair value of a reporting unit in our annual goodwill impairment analysis if three criteria are met: (1) the assets and liabilities that make up the reporting unit have not changed significantly since the most recent fair value determination; (2) the most recent fair value determination resulted in an amount that exceeded the carrying amount of the reporting unit by a substantial margin; and (3) based on an analysis of events that have occurred since the most recent fair value determination, the likelihood that a current fair value determination would be less than the current carrying amount of the reporting unit is remote. For all other reporting units, we perform a detailed determination of fair value of the reporting unit.

Our detailed impairment analysis involves the use of a discounted cash flow model. Significant management judgment is necessary to evaluate the impact of operating and macroeconomic changes on each reporting unit. Critical assumptions include projected comparable store sales growth, store count, gross profit rates, selling, general and administrative expense ("SG&A") rates, working capital fluctuations, capital expenditures and terminal growth rates, as well as an appropriate discount rate. Discount rates are determined separately for each reporting unit using the capital asset pricing model, and for fiscal 2011 ranged from 8.5% to 12.5%. We also use comparable market earnings multiple data and our company's market capitalization to corroborate our reporting unit valuations.

In fiscal 2009, we recorded a goodwill impairment charge of $62 relating to our former Speakeasy business. The decline in the fair value of Speakeasy was primarily the result of revenue forecasts that were lower than what we originally anticipated, which was partly due to lower-than-expected synergies with our other businesses. There were no goodwill impairments for any of our other reporting units in fiscal 2009.

In fiscal 2010, we identified no goodwill impairments. We determined that the fair value of the Speakeasy business, which had a remaining goodwill carrying value of $12, approximated its carrying value. For all of our other reporting units, we determined that the excess of fair value over carrying value was substantial.

In fiscal 2011, we identified no goodwill impairments. For all of our reporting units, we determined that the excess of fair value over carrying value was substantial. As a result of the sale of our Speakeasy business in the second quarter of fiscal 2011, we wrote off the carrying value of the goodwill associated with such business as of the date of sale. See Note 14, Sale of Business, for additional information regarding the sale.

Indefinite-Lived Tradename Impairment Testing

We utilize the relief from royalty method to determine the fair value of each our indefinite-lived tradenames. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess. Significant management judgment is necessary to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates. Royalty rates used are consistent with those assumed for original purchase accounting. Other assumptions are consistent with those we use for goodwill impairment testing purposes.

In fiscal 2009, we recorded an impairment charge of $4 relating to our Speakeasy tradename. The primary cause of the decline in the fair value of the tradename was the lower revenue forecasts discussed above. In fiscal 2010, we identified no indefinite-lived tradename impairments. As a result of the sale of our Speakeasy business in the second quarter of fiscal 2011, we wrote off the carrying value of the indefinite-lived tradename associated with such business as of the date of sale. See Note 14, Sale of Business, for additional information regarding the sale. Furthermore, as part of our fiscal 2011 restructuring, we recorded an impairment charge of $10 related to certain indefinite-lived tradenames in our Domestic segment. See Note 5, Restructuring Charges, for additional information regarding the restructuring.

Lease Rights

Lease rights represent costs incurred to acquire the lease of a specific commercial property. Lease rights are recorded at cost and are amortized to rent expense over the remaining lease term, including renewal periods, if reasonably assured. Amortization periods range up to 15 years, beginning with the date we take possession of the property.

Debt Securities

Our long-term investments in debt securities are comprised of auction-rate securities ("ARS"). In accordance with accounting guidance for the treatment of certain investments in debt and equity securities, and based on our ability to market and sell these instruments, we classify ARS as available-for-sale and carry them at fair value. ARS were intended to behave like short-term debt instruments because their interest rates reset periodically through an auction process, typically at intervals of seven, 28 and 35 days. Investments in these securities can be sold for cash at par value on the auction date if the auction is successful. The majority of our ARS are AAA/Aaa-rated and collateralized by student loans, which are guaranteed 95% to 100% by the U.S. government. We also hold ARS that are in the form of municipal revenue bonds, which are AA/Aa-rated and insured by bond insurers. We do not have any investments in securities that are collateralized by assets that include mortgages or subprime debt. Our intent with these investments is not to hold these securities to maturity, but to use the periodic auction feature to provide liquidity as needed. See Note 3, Investments, for further information.

In accordance with our investment policy, we place our investments in debt securities with issuers who have high-quality credit and limit the amount of investment exposure to any one issuer. The primary objective of our investment activities is to preserve principal and maintain a desired level of liquidity to meet working capital needs. We seek to preserve principal and minimize exposure to interest rate fluctuations by limiting default risk, market risk and reinvestment risk.

Marketable Equity Securities

We also invest in marketable equity securities and classify them as available-for-sale. Investments in marketable equity securities are included in equity and other investments in our consolidated balance sheets, and are reported at fair value based on quoted market prices. All unrealized holding gains and losses are reflected net of tax in accumulated other comprehensive income in shareholders' equity.

Other Investments

We also have investments that are accounted for on either the cost method or the equity method that we include in equity and other investments in our consolidated balance sheets.

We review the key characteristics of our debt, marketable equity securities and other investments portfolio and their classification in accordance with GAAP on an annual basis, or when indications of potential impairment exist. If a decline in the fair value of a security is deemed by management to be other-than-temporary, we write down the cost basis of the investment to fair value, and the amount of the write-down is included in net earnings.

We are self-insured for certain losses related to health, workers' compensation and general liability claims, as well as customer warranty and insurance programs, although we obtain third-party insurance coverage to limit our exposure to these claims. A portion of these self-insured losses are managed through wholly-owned insurance captives. We estimate our self-insured liabilities using a number of factors, including historical claims experience, an estimate of incurred but not reported claims, demographic factors and severity factors, and utilizing valuations provided by independent third-party actuaries.

We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured pursuant to tax laws using rates we expect to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We recognize the effect of a change in income tax rates on deferred tax assets and liabilities in our consolidated statement of earnings in the period that includes the enactment date. We record a valuation allowance to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

In determining our provision for income taxes, we use an annual effective income tax rate based on annual income, permanent differences between book and tax income, and statutory income tax rates. The effective income tax rate also reflects our assessment of the ultimate outcome of tax audits. We adjust our annual effective income tax rate as additional information on outcomes or events becomes available. Discrete events such as audit settlements or changes in tax laws are recognized in the period in which they occur.

Our income tax returns, like those of most companies, are periodically audited by U.S. federal, state and local and foreign tax authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. At any one time, multiple tax years are subject to audit by the various tax authorities. In evaluating the tax benefits associated with our various tax filing positions, we record a tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. A number of years may elapse before a particular matter, for which we have established a liability, is audited and effectively settled. We adjust our liability for unrecognized tax benefits in the period in which we determine the issue is effectively settled with the tax authorities, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. We include our liability for unrecognized tax benefits, including accrued penalties and interest, in accrued income taxes and other long-term liabilities on our consolidated balance sheets and in income tax expense in our consolidated statements of earnings.

The major components of accrued liabilities at February 26, 2011, and February 27, 2010, were deferred revenue, state and local tax liabilities, rent-related liabilities including accrued real estate taxes, loyalty program liabilities and self-insurance reserves.

The major components of long-term liabilities at February 26, 2011, and February 27, 2010, were unrecognized tax benefits, rent-related liabilities, deferred revenue, deferred income tax liabilities, deferred compensation plan liabilities and self-insurance reserves.

Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our consolidated balance sheet date. For operations reported on a two-month lag, we use the exchange rates in effect two months prior to our consolidated balance sheet date. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders' equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A, have not been significant.

Our revenue arises primarily from sales of merchandise and services. We also record revenue from sales of extended warranties and other service contracts, commissions earned from various customer subscriptions, fees earned from private label and co-branded credit card agreements and amounts billed to customers for shipping and handling. Revenue excludes sales taxes collected.

We recognize revenue when the sales price is fixed or determinable, collectability is reasonably assured and the customer takes possession of the merchandise, or in the case of services, at the time the service is provided. Revenue is recognized for store sales when the customer receives and pays for the merchandise. For online sales, we defer revenue and the related product costs for shipments that are in-transit to the customer, and recognize revenue at the time the customer receives the product. Online customers typically receive goods within a few days of shipment. Revenue from merchandise sales and services is reported net of sales returns, including an estimate of future returns based on historical return rates. Our sales returns reserve, which represents the gross profit effect of our sales returns, was $15 and $17, at February 26, 2011, and February 27, 2010, respectively.

We sell extended warranties and other service contracts that typically have terms ranging from three months to four years. We also receive commissions for customer subscriptions with various third parties, notably from mobile phone network operators. In instances where we are deemed to be the obligor on the service contract or subscription, the service and commission revenue is deferred and recognized ratably over the term of the service contract or subscription period. In instances where we are not deemed to be the obligor on the service contract or subscription, commissions are recognized in revenue when such commission has been earned, primarily driven by customer activation. Commissions from the sale of extended warranties represented 2.0%, 2.0% and 2.0% of revenue in fiscal 2011, 2010 and 2009, respectively.

For revenue transactions that involve multiple deliverables, we defer the revenue associated with any undelivered elements. The amount of revenue deferred in connection with the undelivered elements is determined using the relative fair value of each element, which is generally based on each element's relative retail price.

At February 26, 2011, and February 27, 2010, deferred revenue included within accrued liabilities and long-term liabilities in our consolidated balance sheets was $499 and $451, respectively.

For additional information related to our credit card arrangements, see Credit Services and Financing, below.

For additional information regarding our customer loyalty programs, see Sales Incentives, below.

We sell gift cards to our customers in our retail stores, through our Web sites and through selected third parties. We do not charge administrative fees on unused gift cards, and our gift cards do not have an expiration date. We recognize revenue from gift cards when: (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote ("gift card breakage"), and we determine that we do not have a legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions. We determine our gift card breakage rate based upon historical redemption patterns. Based on our historical information, the likelihood of a gift card remaining unredeemed can be determined 24 months after the gift card is issued. At that time, we recognize breakage income for those cards for which the likelihood of redemption is deemed remote and we do not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdictions. Gift card breakage income is included in revenue in our consolidated statements of earnings.

In the U.S., we have private-label and co-branded credit card agreements with banks for the issuance of promotional financing and customer loyalty credit cards bearing the Best Buy brand. Under the agreements, the banks manage and directly extend credit to our customers. Cardholders who choose a private-label credit card can receive low- or zero-interest promotional financing on qualifying purchases.

The banks are the sole owner of the accounts receivable generated under the programs and absorb losses associated with non-payment by the cardholders and fraudulent usage of the accounts. Accordingly, sales generated through our private-label and co-branded credit cards are not reflected in our receivables. We earn revenue from fees the banks pay to us based on the number of credit card accounts activated and card usage. In accordance with accounting guidance for revenue arrangements with multiple deliverables, we defer revenue received from cardholder account activations and recognize revenue on a straight-line basis over the remaining term of the applicable agreement. The banks may also reimburse us for certain costs such as tender costs and Reward Zone points associated with our programs. We pay financing fees, which are recognized as a reduction of revenue, to the banks, and these fees are variable based on certain factors such as the London Interbank Offered Rate ("LIBOR"), charge volume and/or the types of promotional financing offers.

We also have similar agreements for the issuance of private-label and/or co-branded credit cards with banks for our businesses in Canada, China and Mexico, which we account for consistent with the U.S. credit card agreements.

In addition to our private-label and co-branded credit cards, we also accept Visa®, MasterCard®, Discover®, JCB® and American Express® credit cards, as well as debit cards from all major international networks.

We frequently offer sales incentives that entitle our customers to receive a reduction in the price of a product or service. Sales incentives include discounts, coupons and other offers that entitle a customer to receive a reduction in the price of a product or service either at the point of sale or by submitting a claim for a refund or rebate. For sales incentives issued to a customer in conjunction with a sale of merchandise or services, for which we are the obligor, the reduction in revenue is recognized at the time of sale, based on the retail value of the incentive expected to be redeemed.

Customer Loyalty Programs

We have customer loyalty programs which allow members to earn points for each qualifying purchase. Points earned enable members to receive a certificate that may be redeemed on future purchases at our Best Buy branded stores. There are two ways that members may participate and earn loyalty points.

First, we have customer loyalty programs where members earn points for each purchase completed at our Best Buy branded stores or through our related Web sites in the U.S. and Canada. Depending on the customer's membership level within our loyalty program, certificates expire either three or six months from the date of issuance. The retail value of points earned by our loyalty program members is included in accrued liabilities and recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed.

Second, under our co-branded credit card agreements with banks, we have a customer loyalty credit card bearing the Best Buy brand. Cardholders earn points for purchases made at our Best Buy branded stores and related Web sites in the U.S. and Canada, as well as purchases at other merchants. Points earned enable cardholders to receive certificates that may be redeemed on future purchases at our Best Buy branded stores and related Web sites. Certificates expire six months from the date of issuance. The retail value of points earned by our cardholders is included in accrued liabilities and recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed.

We recognize revenue when: (i) a certificate is redeemed by the customer, (ii) a certificate expires or (iii) the likelihood of a certificate being redeemed by a customer is remote ("certificate breakage"). We determine our certificate breakage rate based upon historical redemption patterns.

The following table illustrates the primary costs classified in each major expense category:

Cost of Goods Sold
  Total cost of products sold including:
      Freight expenses associated with moving merchandise inventories from our vendors to our distribution centers;
      Vendor allowances that are not a reimbursement of specific, incremental and identifiable costs to promote a vendor's products; and
      Cash discounts on payments to merchandise vendors;
  Cost of services provided including:
      Payroll and benefits costs for services employees; and
      Cost of replacement parts and related freight expenses;
  Physical inventory losses;
  Markdowns;
  Customer shipping and handling expenses;
  Costs associated with operating our distribution network, including payroll and benefit costs, occupancy costs, and depreciation; and
  Freight expenses associated with moving merchandise inventories from our distribution centers to our retail stores.

SG&A
  Payroll and benefit costs for retail and corporate employees;
  Occupancy and maintenance costs of retail, services and corporate facilities;
  Depreciation and amortization related to retail, services and corporate assets;
  Advertising costs;
  Vendor allowances that are a reimbursement of specific, incremental and identifiable costs to promote a vendor's products;
  Tender costs, including bank charges and costs associated with credit and debit card interchange fees;
  Charitable contributions;
  Outside and outsourced service fees;
  Long-lived asset impairment charges; and
  Other administrative costs, such as supplies, and travel and lodging.

We receive funds from vendors for various programs, primarily as reimbursements for costs such as markdowns, margin protection, advertising and sales incentives.

Vendor allowances provided as a reimbursement of specific, incremental and identifiable costs incurred to promote a vendor's products are included as an expense reduction when the cost is incurred. All other vendor allowances are generally in the form of receipt-based funds or sell-through credits. Receipt-based funds are generally determined based on our level of inventory purchases and initially deferred and recorded as a reduction of merchandise inventories. The deferred amounts are then included as a reduction of cost of goods sold when the related product is sold. Sell-through credits are generally based on the number of units we sell over a specified period and are recognized when the related product is sold.

Vendor allowances included in SG&A for reimbursement of specific, incremental and identifiable costs to promote and sell a vendor's products were $69, $139 and $161 in fiscal 2011, 2010 and 2009, respectively. The decrease for fiscal 2011 was due to a change in the form of vendor contracts that led to a higher proportion of vendor allowances being classified within cost of goods sold.

Advertising costs, which are included in SG&A, are expensed the first time the advertisement runs. Advertising costs consist primarily of print and television advertisements as well as promotional events. Net advertising expenses were $901, $740 and $765 in fiscal 2011, 2010 and 2009, respectively. Allowances received from vendors for advertising of $98 and $117, in fiscal 2010 and 2009, respectively, were classified as reductions of advertising expenses. As a result of a change in the form of vendor contracts, we received no allowances from vendors for advertising expenses that were deemed specific, incremental and identifiable in fiscal 2011.

Non-capital expenditures associated with opening new stores are expensed as incurred.

We apply the fair value recognition provisions of accounting guidance as they relate to our stock-based compensation, which require us to recognize expense for the fair value of our stock-based compensation awards. We elected the modified prospective transition method as permitted by the share-based payment accounting guidance. Under this transition method, stock-based compensation expense in fiscal 2011, 2010 and 2009 included: (i) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of February 26, 2005, based on the grant date fair value estimated in accordance with the prior accounting guidance for the treatment of stock-based compensation; and (ii) compensation expense for all stock-based compensation awards granted subsequent to February 26, 2005, based on the grant-date fair value estimated in accordance with the provisions of the revised guidance. We recognize compensation expense on a straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if earlier). In accordance with the modified prospective transition method, financial results for prior periods have not been restated.

Fair Value Measurements (Policies)
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 that are Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances in which 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 February 26, 2011, and February 27, 2010, according to the valuation techniques we used to determine their fair values.

Derivative Instruments (Policies)
Derivative Instruments

We manage our economic and transaction exposure to certain market-based risks through the use of foreign currency derivative instruments. Our objective in holding derivatives is to reduce the volatility of net earnings and cash flows associated with changes in foreign currency exchange rates. We do not hold or issue derivative financial instruments for trading or speculative purposes.

We record all foreign currency derivative instruments on our consolidated balance sheets at fair value and evaluate hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting treatment. We formally document all hedging relationships at inception for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. In addition, we have derivatives which are not designated as hedging instruments. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by engaging with major financial institutions as our counterparties.

Cash Flow Hedges

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on certain revenue streams denominated in non-functional currencies. The contracts have terms of up to two years. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and it is subsequently reclassified into net earnings in the period in which the hedged transaction affects net earnings or the forecasted transaction is no longer probable of occurring. We discontinued certain cash flow hedges and reclassified $5 into net earnings during the fourth quarter of fiscal 2011, as the forecasted transactions were no longer probable of occurring. We report the ineffective portion, if any, of the gain or loss in net earnings.

Net Investment Hedges

Previously, we entered into foreign exchange swap contracts to hedge against the effect of euro and Swiss franc exchange rate fluctuations on net investments of certain foreign operations. For a net investment hedge, we recognized changes in the fair value of the derivative as a component of foreign currency translation within other comprehensive income to offset a portion of the change in the translated value of the net investment being hedged, until the investment was sold or liquidated. During fiscal 2011, we discontinued this hedging strategy and no longer have contracts that hedge net investments of foreign operations.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include foreign exchange forward contracts used to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies and on certain forecasted inventory purchases denominated in non-functional currencies. The contracts have terms of up to six months. These derivative instruments are not designated in hedging relationships and, therefore, we record gains and losses on these contracts directly in net earnings.

Summary of Significant Accounting Policies (Tables)

Estimated useful lives by major asset category are as follows:

Asset
  Life
(in years)

 
   

Buildings

    25-50  

Leasehold improvements

    3-25  

Fixtures and equipment

    3-20  

Property under capital lease

    2-20  

 
  February 26, 2011   February 27, 2010  
 
  Tradenames
  Customer
Relationships

  Tradenames
  Customer
Relationships

 
   

Indefinite-lived

  $ 105   $   $ 112   $  

Definite-lived

    28     203     47     279  
                   

Total

  $ 133   $ 203   $ 159   $ 279  
                   

 
  Goodwill   Indefinite-Lived Tradenames  
 
  Domestic
  International
  Total
  Domestic
  International
  Total
 
   

Balances at March 1, 2008

  $ 450   $ 638   $ 1,088   $ 23   $ 74   $ 97  
 

Acquisitions

    46     1,641     1,687     13     8     21  
 

Tax adjustment(1)

        17     17              
 

Impairments

    (62 )       (62 )   (4 )       (4 )
 

Changes in foreign currency exchange rates

        (527 )   (527 )       (10 )   (10 )
                           

Balances at February 28, 2009

    434     1,769     2,203     32     72     104  
 

Purchase accounting adjustments(1)

        48     48              
 

Changes in foreign currency exchange rates

        201     201         8     8  
                           

Balances at February 27, 2010

    434     2,018     2,452     32     80     112  
 

Acquisitions

        5     5              
 

Impairments

                (10 )       (10 )
 

Sale of business

    (12 )       (12 )   (1 )       (1 )
 

Changes in foreign currency exchange rates

        9     9         4     4  
                           

Balances at February 26, 2011

  $ 422   $ 2,032   $ 2,454   $ 21   $ 84   $ 105  
                           
(1)
The adjustment in fiscal 2009 related to the resolution of certain tax matters associated with our acquisitions of Future Shop and Five Star, and in fiscal 2010, the finalization of the purchase price allocations from our acquisitions of Best Buy Europe and Five Star (see Note 2, Acquisitions).

 
  February 26, 2011   February 27, 2010  
 
  Gross Carrying
Amount

  Cumulative
Impairment

  Gross Carrying
Amount

  Cumulative
Impairment

 
   

Goodwill

  $ 2,519   $ (65 ) $ 2,578   $ (126 )
                   

 
  February 26, 2011   February 27, 2010  
 
  Gross Carrying
Amount

  Cumulative
Impairment

  Gross Carrying
Amount

  Cumulative
Impairment

 
   

Tradenames

  $ 73   $ (45 ) $ 75   $ (28 )

Customer relationships

    383     (180 )   401     (122 )
                   

Total

  $ 456   $ (225 ) $ 476   $ (150 )
                   

Fiscal Year
   
 
   

2012

  $ 60  

2013

    44  

2014

    39  

2015

    35  

2016

    35  

Thereafter

    18  

 
  February 26, 2011   February 27, 2010  
 
  Gross Carrying
Amount

  Accumulated
Amortization

  Gross Carrying
Amount

  Accumulated
Amortization

 
   

Lease rights

  $ 131   $ (57 ) $ 137   $ (46 )

 
  February 26,
2011

  February 27,
2010

 
   

Accrued liabilities

  $ 81   $ 64  

Long-term liabilities

    49     46  
           

Total

  $ 130   $ 110  
           

 
  2011
  2010
  2009
 
   

Gift card breakage income

  $ 53   $ 43   $ 38  
               

Cost of Goods Sold
  Total cost of products sold including:
      Freight expenses associated with moving merchandise inventories from our vendors to our distribution centers;
      Vendor allowances that are not a reimbursement of specific, incremental and identifiable costs to promote a vendor's products; and
      Cash discounts on payments to merchandise vendors;
  Cost of services provided including:
      Payroll and benefits costs for services employees; and
      Cost of replacement parts and related freight expenses;
  Physical inventory losses;
  Markdowns;
  Customer shipping and handling expenses;
  Costs associated with operating our distribution network, including payroll and benefit costs, occupancy costs, and depreciation; and
  Freight expenses associated with moving merchandise inventories from our distribution centers to our retail stores.

SG&A
  Payroll and benefit costs for retail and corporate employees;
  Occupancy and maintenance costs of retail, services and corporate facilities;
  Depreciation and amortization related to retail, services and corporate assets;
  Advertising costs;
  Vendor allowances that are a reimbursement of specific, incremental and identifiable costs to promote a vendor's products;
  Tender costs, including bank charges and costs associated with credit and debit card interchange fees;
  Charitable contributions;
  Outside and outsourced service fees;
  Long-lived asset impairment charges; and
  Other administrative costs, such as supplies, and travel and lodging.
Acquisitions (Tables)

The allocation of the purchase price to the acquired assets and liabilities was finalized in the fourth quarter of fiscal 2010, with no material adjustments made to the preliminary allocation. None of the goodwill is deductible for tax purposes.

The final purchase price allocation for the remaining 25% interest in Five Star was as follows:

Net assets of noncontrolling interests

  $ 48  

Tradename

    8  

Goodwill

    142  
       

Total assets

    198  
       

Long-term liabilities

    (2 )
       

Purchase price allocated to assets and liabilities acquired

  $ 196  
       

The allocation of the purchase price to the acquired assets and liabilities was finalized in the third quarter of fiscal 2010, with no material adjustments made to the preliminary allocation. None of the goodwill is deductible for tax purposes.

The final purchase price allocation was as follows:

Cash and cash equivalents

  $ 21  

Short-term investments

    28  

Receivables

    2  

Other current assets

    3  

Property and equipment

    10  

Goodwill

    32  

Tradenames

    13  

Customer relationships

    3  

Equity and other investments

    3  

Other assets (deferred tax assets)

    48  
       

Total assets

    163  
       

Accounts payable

   
(3

)

Other current liabilities

    (38 )
       

Total liabilities

    (41 )
       

Purchase price allocated to assets and liabilities acquired

  $ 122  
       

The allocation of the purchase price to the acquired assets and liabilities was finalized in the second quarter of fiscal 2010, with no material adjustments made to the preliminary allocation. None of the goodwill is deductible for tax purposes.

The final purchase price allocation was as follows:

Cash and cash equivalents

  $ 124  

Restricted cash

    112  

Receivables

    1,190  

Merchandise inventories

    535  

Other current assets

    114  

Property and equipment

    500  

Goodwill

    1,546  

Tradenames

    93  

Customer relationships

    484  

Other assets

    184  
       

Total assets

    4,882  
       

Accounts payable

    (803 )

Other current liabilities

    (695 )

Short-term debt

    (299 )

Long-term liabilities

    (246 )
       

Total liabilities

    (2,043 )
       

Noncontrolling interest(1)

    (643 )
       

Purchase price allocated to assets and liabilities acquired

  $ 2,196  
       
(1)
We recorded the fair value adjustments only in respect of the 50% of net assets acquired, with the remaining 50% of the net assets of Best Buy Europe being consolidated and recorded at their historical cost basis. This also resulted in a $643 noncontrolling interest being reflected in our consolidated balance sheet in respect of the 50% owned by CPW.

The following table summarizes the identified intangible asset categories and their respective weighted-average amortization periods based on the purchase price allocation finalized in the second quarter of fiscal 2010:

 
  Weighted-Average
Amortization Period
(in years)

  Fair
Value

 
   

Customer relationships

    6.8   $ 484  

Tradenames

    4.2     93  
             

Total

    6.4   $ 577  
             

Fiscal Year
  2009
 
   

Pro forma revenue

  $ 48,021  

Pro forma net earnings

    998  

Pro forma earnings per common share

       
 

Basic

  $ 2.42  
 

Diluted

    2.38  

Weighted-average common shares outstanding

       
 

Basic

    412.5  
 

Diluted

    422.9  
Investments (Tables)

 
  February 26,
2011

  February 27,
2010

 
   

Short-term investments

             
 

Money market fund

  $ 2   $ 2  
 

U.S. Treasury bills

    20      
 

Debt securities (auction rate securities)

        88  
           

Total short-term investments

  $ 22   $ 90  
           

Equity and other investments

             
 

Debt securities (auction rate securities)

  $ 110   $ 192  
 

Marketable equity securities

    146     77  
 

Other investments

    72     55  
           

Total equity and other investments

  $ 328   $ 324  
           

Description
  Nature of collateral or guarantee
  February 26,
2011

  February 27,
2010

 
   
Student loan bonds   Student loans guaranteed 95% to 100% by the U.S. government   $ 108   $ 261  
Municipal revenue bonds   100% insured by AAA/Aaa-rated bond insurers at February 26, 2011     2     19  
               
Total fair value plus accrued interest(1)       $ 110   $ 280  
               
(1)
The par value and weighted-average interest rates (taxable equivalent) of our ARS were $115 and $285 and 0.8% and 1.1%, respectively, at February 26, 2011, and February 27, 2010, respectively.

 
  February 26,
2011

  February 27,
2010

 
   

Common stock of The Carphone Warehouse Group PLC

  $   $ 74  

Common stock of TalkTalk Telecom Group PLC

    62      

Common stock of Carphone Warehouse Group plc

    84      

Other

        3  
           

Total

  $ 146   $ 77  
           
Fair Value Measurements (Tables)

 
   
  Fair Value Measurements Using Inputs Considered as  
 
  Fair Value at
February 26, 2011

  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

  $ 70   $ 70   $   $  
 

Short-term investments

                         
   

Money market fund

    2         2      
   

U.S. Treasury bills

    20     20          
 

Other current assets

                         
   

Money market funds (restricted assets)

    63     63          
   

U.S. Treasury bills (restricted assets)

    105     105          
   

Foreign currency derivative instruments

    2         2      
 

Equity and other investments

                         
   

Auction rate securities

    110             110  
   

Marketable equity securities

    146     146          
 

Other assets

                         
   

Marketable securities that fund deferred compensation

    83     83          

Liabilities

                         
 

Accrued liabilities

                         
   

Foreign currency derivative instruments

    1         1      
 

Long-term liabilities

                         
   

Deferred compensation

    64     64          
   

Foreign currency derivative instruments

    2         2      


 

 
   
  Fair Value Measurements Using Inputs Considered as  
 
  Fair Value at
February 27, 2010

  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

  $ 752   $ 752   $   $  
   

U.S. Treasury bills

    300     300          
 

Short-term investments

                         
   

Money market fund

    2         2      
   

Auction rate securities

    88             88  
 

Other current assets

                         
   

Money market funds (restricted assets)

    123     123          
   

U.S. Treasury bills (restricted assets)

    25     25          
   

Foreign currency derivative instruments

    4         4      
 

Equity and other investments

                         
   

Auction rate securities

    192             192  
   

Marketable equity securities

    77     77          
 

Other assets

                         
   

Marketable securities that fund deferred compensation

    75     75          

Liabilities

                         
 

Long-term liabilities

                         
   

Deferred compensation

    61     61          

 
  Debt securities — Auction rate securities only  
 
  Student
loan
bonds

  Municipal
revenue
bonds

  Auction
preferred
securities

  Total
 
   

Balances at February 28, 2009

  $ 276   $ 24   $ 14   $ 314  
 

Changes in unrealized losses in other comprehensive income

    8     1     1     10  
 

Sales

    (22 )   (6 )   (15 )   (43 )
 

Interest received

    (1 )           (1 )
                   

Balances at February 27, 2010

  $ 261   $ 19   $   $ 280  
 

Changes in unrealized losses in other comprehensive income

    (1 )   1          
 

Sales

    (152 )   (18 )       (170 )
                   

Balances at February 26, 2011

  $ 108   $ 2   $   $ 110  
                   

The following table summarizes the fair value remeasurments recorded for fiscal 2011:

 
  Impairments
  Remaining Net
Carrying Value

 
   

Property and equipment

  $ 147   $ 51  

Tradename

    10     3  
           

Total

  $ 157   $ 54  
           
Restructuring Charges (Tables)

The composition of the restructuring charges we incurred in fiscal 2011 for fiscal 2011 restructuring activities, for both the Domestic and International segments, were as follows:

 
  Domestic
  International
  Total
 
   

Inventory write-downs

  $ 10   $ 14   $ 24  

Property and equipment impairments

    15     132     147  

Termination benefits

    16     12     28  

Intangible asset impairments

    10         10  

Facility closure and other costs

        13     13  
               

Total

  $ 51   $ 171   $ 222  
               

 
  Termination Benefits
  Facility
Closure and
Other Costs

  Total
 
   

Balance at February 27, 2010

  $   $   $  
 

Charges

    28     13     41  
 

Cash payments

             
 

Changes in foreign currency exchange rates

             
               

Balance at February 26, 2011

  $ 28   $ 13   $ 41  
               

 
  Domestic   International   Total  
 
  Fiscal
2011

  Fiscal
2010

  Fiscal
2009

  Cumulative
Amount

  Fiscal
2011

  Fiscal
2010

  Fiscal
2009

  Cumulative
Amount

  Fiscal
2011

  Fiscal
2010

  Fiscal
2009

  Cumulative
Amount

 
   

Termination benefits

  $   $ 25   $ 69   $ 94   $   $ 26   $ 6   $ 32   $   $ 51   $ 75   $ 126  

Facility closure costs

            1     1         1         1         1     1     2  

Property and equipment write-downs

            2     2                             2     2  
                                                   

Total

  $   $ 25   $ 72   $ 97   $   $ 27   $ 6   $ 33   $   $ 52   $ 78   $ 130  
                                                   

 
  Termination
Benefits

  Facility
Closure Costs

  Total
 
   

Balance at February 28, 2009

  $ 73   $ 1   $ 74  
 

Charges

    51     1     52  
 

Cash payments

    (119 )   (1 )   (120 )
 

Changes in foreign currency exchange rates

    3         3  
               

Balance at February 27, 2010

    8     1     9  
 

Charges

             
 

Cash payments

    8     1     9  
 

Changes in foreign currency exchange rates

             
               

Balance at February 26, 2011

  $   $   $  
               
Debt (Tables)

 
  February 26, 2011   February 27, 2010
 
  Principal
Balance

  Interest
Rate

  Principal
Balance

  Interest
Rate

 

JPMorgan revolving credit facility

  $     $  

ARS revolving credit line

           

Europe receivables financing facility

    455   3.7%     442   3.6%

Europe revolving credit facility

    98   3.6%     206   1.4%

Canada revolving demand facility

           

China revolving demand facilities

    4   4.8%     15   4.4%
                 

Total short-term debt

  $ 557       $ 663    
                 

 

Fiscal Year
  2011
  2010
 
   

Maximum month-end outstanding during the year

  $ 690   $ 1,262  

Average amount outstanding during the year

  $ 383   $ 881  

Weighted-average interest rate at year-end

    3.7%     2.1%  

 
  February 26,
2011

  February 27,
2010

 
   

2013 Notes

  $ 500   $ 500  

Convertible debentures

    402     402  

Financing lease obligations, due 2011 to 2025, interest rates ranging from 3.0% to 8.1%

    170     186  

Capital lease obligations, due 2011 to 2035, interest rates ranging from 2.1% to 8.3%

    79     49  

Other debt, due 2018 to 2022, interest rates ranging from 2.6% to 6.7%

    1     2  
           

Total long-term debt

  $ 1,152   $ 1,139  

Less: current portion(1)

    (441 )   (35 )
           

Total long-term debt, less current portion

  $ 711   $ 1,104  
           
(1)
Since holders of our convertible debentures may require us to purchase all or a portion of the debentures on January 15, 2012, we have classified the $402 for such debentures in the current portion of long-term debt at February 26, 2011.

At February 26, 2011, the future maturities of long-term debt, including capitalized leases, consisted of the following:

Fiscal Year
   
 
   

2012(1)

  $ 441  

2013

    37  

2014

    537  

2015

    36  

2016

    29  

Thereafter

    72  
       

Total long-term debt

  $ 1,152  
       
(1)
Holders of our convertible debentures may require us to purchase all or a portion of their debentures on January 15, 2012. The table above assumes that all holders exercise their redemption right on that date.
Derivative Instruments (Tables)

 
  February 26, 2011   February 27, 2010  
Contract Type
  Assets
  Liabilities
  Assets
  Liabilities
 
   

Cash flow hedges (foreign exchange forward contracts)

  $ 1   $ (2 ) $ 2   $ (1 )

Net investment hedges (foreign exchange swap contracts)

            4      
                   

Total derivatives designated as hedging instruments

  $ 1   $ (2 ) $ 6   $ (1 )
                   

No hedge designation (foreign exchange forward contracts)

    2     (2 )   1     (2 )
                   

Total

  $ 3   $ (4 ) $ 7   $ (3 )
                   

 

 
  2011   2010  
Contract Type
  Pre-tax Gain(Loss) Recognized in OCI(1)
  Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)(2)
  Pre-tax Gain(Loss) Recognized in OCI(1)
  Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)(2)
 
   

Cash flow hedges (foreign exchange forward contracts)

  $ 9   $ 12   $ 1   $ 4  

Net investment hedges (foreign exchange swap contracts)

    8         45      
                   

Total

  $ 17   $ 12   $ 46   $ 4  
                   
(1)
Reflects the amount recognized in OCI prior to the reclassification of 50% to noncontrolling interests for the cash flow and net investment hedges, respectively.

(2)
Gain reclassified from accumulated OCI is included within SG&A in our consolidated statements of earnings.

 
  Gain (Loss) Recognized within SG&A  
Contract Type
  2011
  2010
 
   

No hedge designation (foreign exchange forward contracts)

  $ 13   $ (5 )
           

 
  Notional Amount  
Contract Type
  February 26,
2011

  February 27,
2010

 
   

Derivatives designated as cash flow hedging instruments

  $ 264   $ 203  

Derivatives designated as net investment hedging instruments

        608  

Derivatives not designated as hedging instruments

    493     240  
           

Total

  $ 757   $ 1,051  
           
Shareholders' Equity (Tables)

 
  2011
  2010
  2009
 
   

Stock options

  $ 90   $ 85   $ 77  

Share awards

                   
 

Market-based

    4     8     13  
 

Performance-based

    (1 )   1     2  
 

Time-based

    16     10     4  

Employee stock purchase plans

    12     14     14  
               

Total

  $ 121   $ 118   $ 110  
               

 
  Stock
Options

  Weighted-
Average
Exercise Price
per Share

  Weighted-
Average
Remaining
Contractual
Term (in years)

  Aggregate
Intrinsic Value

 
   

Outstanding at February 27, 2010

    36,588,000   $ 38.18              
 

Granted

    4,924,000     38.85              
 

Exercised

    (4,355,000 )   30.83              
 

Forfeited/Canceled

    (1,570,000 )   42.88              
                         

Outstanding at February 26, 2011

    35,587,000   $ 38.97     6.4   $ 41  
                         

Vested or expected to vest at February 26, 2011

    32,438,000   $ 39.21     6.2   $ 39  
                         

Exercisable at February 26, 2011

    21,717,000   $ 40.14     5.1   $ 30  
                         

 

Valuation Assumptions(1)
  2011
  2010
  2009
 
   

Risk-free interest rate(2)

    0.2% - 3.9%     0.2% - 3.8%     0.9% - 4.0%  

Expected dividend yield

    1.5%     1.6%     1.6%  

Expected stock price volatility(3)

    36%     42%     45%  

Expected life of stock options (in years)(4)

    6.1     6.1     6.1  
(1)
Forfeitures are estimated using historical experience and projected employee turnover.

(2)
Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of our stock options.

(3)
We use an outside valuation advisor to assist us in projecting expected stock price volatility. We consider both the historical volatility of our stock price as well as implied volatilities from exchange-traded options on our stock.

(4)
We estimate the expected life of stock options based upon historical experience.

 

Market-Based Share Awards
  Shares
  Weighted-
Average
Fair Value
per Share

 
   

Outstanding at February 27, 2010

    633,000   $ 42.97  
 

Granted

         
 

Vested

    (200,000 )   38.65  
 

Forfeited/Canceled

    (240,000 )   39.14  
             

Outstanding at February 26, 2011

    193,000   $ 52.19  
             

 

Performance-Based Share Awards
  Shares
  Weighted-Average Fair Value per Share
 
   

Outstanding at February 27, 2010

    2,343,000   $ 42.11  
 

Granted

    6,000     44.20  
 

Vested

    (64,000 )   54.13  
 

Forfeited/Canceled

    (106,000 )   44.58  
             

Outstanding at February 26, 2011

    2,179,000   $ 41.64  
             

 

Time-Based Share Awards
  Shares
  Weighted-Average Fair Value per Share
 
   

Outstanding at February 27, 2010

    1,332,000   $ 34.06  
 

Granted

    1,321,000     38.40  
 

Vested

    (380,000 )   34.17  
 

Forfeited/Canceled

    (102,000 )   35.93  
             

Outstanding at February 26, 2011

    2,171,000   $ 36.60  
             

 

Valuation Assumptions
  2011
  2010
  2009
 
   

Risk-free interest rate(1)

    0.2%     0.3%     1.3%  

Expected dividend yield

    1.4%     1.5%     1.4%  

Expected stock price volatility(2)

    29%     53%     42%  

Expected life of employee stock purchase plan options (in months)(3)

    6     6     6  
(1)
Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of employee stock purchase plan shares.
(2)
We consider both the historical volatility of our stock price as well as implied volatilities from exchange-traded options on our stock.

(3)
Based on semi-annual purchase period.

At February 26, 2011, options to purchase 35.6 million shares of common stock were outstanding as follows (shares in millions):

 
  Exercisable   Unexercisable   Total  
 
  Shares
  %
  Weighted-
Average
Price
per Share

  Shares
  %
  Weighted-
Average
Price
per Share

  Shares
  %
  Weighted-
Average
Price
per Share

 
   

In-the-money

    9.0     41   $ 30.61     8.5     61   $ 33.59     17.5     49   $ 32.06  

Out-of-the-money

    12.7     59     46.83     5.4     39     42.78     18.1     51     45.63  
                                             

Total

    21.7     100   $ 40.14     13.9     100   $ 37.13     35.6     100   $ 38.97  
                                             

 

 
  2011
  2010
  2009
 
   

Numerator:

                   
 

Net earnings attributable to Best Buy Co., Inc., basic

  $ 1,277   $ 1,317   $ 1,003  
 

Adjustment for assumed dilution:

                   
   

Interest on convertible debentures due in 2022, net of tax

    6     6     6  
               
 

Net earnings attributable to Best Buy Co., Inc., diluted

  $ 1,283   $ 1,323   $ 1,009  
               

Denominator (in millions):

                   
 

Weighted-average common shares outstanding

    406.1     416.8     412.5  
 

Effect of potentially dilutive securities:

                   
   

Shares from assumed conversion of convertible debentures

    8.8     8.8     8.8  
   

Stock options and other

    1.6     1.9     1.6  
               
 

Weighted-average common shares outstanding, assuming dilution

    416.5     427.5     422.9  
               

Net earnings per share attributable to Best Buy Co., Inc.

                   
 

Basic

  $ 3.14   $ 3.16   $ 2.43  
 

Diluted

  $ 3.08   $ 3.10   $ 2.39  

 
  2011
  2010
  2009
 
   

Total number of shares repurchased

    32.6          

Total cost of shares repurchased

  $ 1,193   $   $  

 

 
  February 26,
2011

  February 27,
2010

 
   

Foreign currency translation

  $ 102   $ 26  

Unrealized gains on available-for-sale investments

    72     14  

Unrealized losses on derivative instruments (cash flow hedges)

    (1 )    
           

Total

  $ 173   $ 40  
           
Leases (Tables)

 

 
  2011
  2010
  2009
 
   

Minimum rentals

  $ 1,176   $ 1,145   $ 962  

Contingent rentals

    2     2     1  
               

Total rent expense

    1,178     1,147     963  

Less: sublease income

    (19 )   (20 )   (23 )
               

Net rent expense

  $ 1,159   $ 1,127   $ 940  
               

The future minimum lease payments under our capital, financing and operating leases by fiscal year (not including contingent rentals) at February 26, 2011, were as follows:

Fiscal Year
  Capital
Leases

  Financing
Leases

  Operating
Leases

 
   

2012

  $ 18   $ 34   $ 1,208  

2013

    16     32     1,166  

2014

    16     30     1,079  

2015

    14     29     992  

2016

    8     25     872  

Thereafter

    25     60     2,930  
               

Subtotal

    97     210   $ 8,247  
                   

Less: imputed interest

    (18 )   (40 )      
                 

Present value

  $ 79   $ 170        
                 
Income Taxes (Tables)

 

 
  2011
  2010
  2009
 
   

Federal income tax at the statutory rate

  $ 727   $ 768   $ 595  

State income taxes, net of federal benefit

    42     66     49  

Benefit from foreign operations

    (50 )   (41 )   (30 )

Non-taxable interest income

        (1 )   (3 )

Other

    (5 )   10     16  

Impairments(1)

            47  
               

Income tax expense

  $ 714   $ 802   $ 674  
               

Effective income tax rate

    34.4%     36.5%     39.6%  
(1)
Tax impact of the other-than-temporary impairment of our investment in the common stock of CPW and the non-deductibility of our goodwill impairment charge.

 

 
  2011
  2010
  2009
 
   

United States

  $ 1,629   $ 1,870   $ 1,540  

Outside the United States

    449     325     160  
               

Earnings before income tax expense and equity in income of affiliates

  $ 2,078   $ 2,195   $ 1,700  
               

 

 
  2011
  2010
  2009
 
   

Current:

                   
 

Federal

  $ 689   $ 666   $ 573  
 

State

    67     113     78  
 

Foreign

    92     53     66  
               

 

    848     832     717  
               

Deferred:

                   
 

Federal

    (113 )   (13 )   (7 )
 

State

    (2 )   (11 )   1  
 

Foreign

    (19 )   (6 )   (37 )
               

 

    (134 )   (30 )   (43 )
               

Income tax expense

  $ 714   $ 802   $ 674  
               

 

 
  February 26,
2011

  February 27,
2010

 
   

Accrued property expenses

  $ 154   $ 149  

Other accrued expenses

    122     126  

Deferred revenue

    141     150  

Compensation and benefits

    86     64  

Stock-based compensation

    137     125  

Net operating loss carryforwards

    247     211  

Other

    181     60  
           
 

Total deferred tax assets

    1,068     885  

Valuation allowance

    (212 )   (151 )
           
 

Total deferred tax assets after valuation allowance

    856     734  
           

Property and equipment

    (316 )   (381 )

Convertible debt

    (79 )   (71 )

Goodwill and intangibles

    (123 )   (125 )

Other

    (47 )   (31 )
           
 

Total deferred tax liabilities

    (565 )   (608 )
           

Net deferred tax assets

  $ 291   $ 126  
           

 

 
  February 26,
2011

  February 27,
2010

 
   

Other current assets

  $ 261   $ 244  

Other assets

    98     19  

Other long-term liabilities

    (68 )   (137 )
           

Net deferred tax assets

  $ 291   $ 126  
           

 

Balance at February 28, 2009

  $ 349  
 

Gross increases related to prior period tax positions

    96  
 

Gross decreases related to prior period tax positions

    (72 )
 

Gross increases related to current period tax positions

    50  
 

Settlements with taxing authorities

    (24 )
 

Lapse of statute of limitations

    (6 )
       

Balance at February 27, 2010

  $ 393  
 

Gross increases related to prior period tax positions

    36  
 

Gross decreases related to prior period tax positions

    (90 )
 

Gross increases related to current period tax positions

    40  
 

Settlements with taxing authorities

     
 

Lapse of statute of limitations

    (20 )
       

Balance at February 26, 2011

  $ 359  
       
Segment and Geographic Information (Tables)

 

 
  2011
  2010
  2009
 
   

Revenue

                   

Domestic

  $ 37,186   $ 37,314   $ 35,070  

International

    13,086     12,380     9,945  
               

Total revenue

  $ 50,272   $ 49,694   $ 45,015  
               

Percentage of revenue, by revenue category

                   

Domestic:

                   
 

Consumer electronics

    37%     39%     39%  
 

Home office

    37%     34%     31%  
 

Entertainment

    14%     16%     19%  
 

Appliances

    5%     4%     5%  
 

Services

    6%     6%     6%  
 

Other

    1%     1%     < 1%  
               

Total

    100%     100%     100%  
               

International:

                   
 

Consumer electronics

    21%     20%     26%  
 

Home office

    55%     53%     45%  
 

Entertainment

    6%     7%     9%  
 

Appliances

    9%     8%     10%  
 

Services

    9%     12%     10%  
 

Other

    < 1%     < 1%     < 1%  
               

Total

    100%     100%     100%  
               

 

 
  2011
  2010
  2009
 
   

Operating income

                   

Domestic

  $ 2,031   $ 2,071   $ 1,758  

International

    83     164     112  
               

Total operating income

    2,114     2,235     1,870  

Other income (expense)

                   
 

Investment income and other

    51     54     35  
 

Investment impairment

            (111 )
 

Interest expense

    (87 )   (94 )   (94 )
               

Earnings from operations before income tax expense and equity in income of affiliates

  $ 2,078   $ 2,195   $ 1,700  
               

Assets

                   

Domestic

  $ 9,610   $ 10,431   $ 9,059  

International

    8,239     7,871     6,767  
               

Total assets

  $ 17,849   $ 18,302   $ 15,826  
               

Capital expenditures

                   

Domestic

  $ 481   $ 385   $ 971  

International

    263     230     332  
               

Total capital expenditures

  $ 744   $ 615   $ 1,303  
               

Depreciation

                   

Domestic

  $ 623   $ 585   $ 550  

International

    273     253     180  
               

Total depreciation

  $ 896   $ 838   $ 730  
               

 

 
  2011
  2010
  2009
 
   

Net sales to customers

                   

United States

  $ 37,186   $ 37,315   $ 35,070  

Europe

    5,511     5,591     3,205  

Canada

    5,468     5,065     5,174  

China

    1,952     1,677     1,558  

Other

    155     46     8  
               

Total revenue

  $ 50,272   $ 49,694   $ 45,015  
               

Long-lived assets

                   

United States

  $ 2,741   $ 2,960   $ 3,155  

Europe

    438     464     439  

Canada

    474     462     408  

China

    147     152     161  

Other

    23     32     11  
               

Total long-lived assets

  $ 3,823   $ 4,070   $ 4,174  
               
Related-Party Transactions (Tables)
Schedule of related-party transactions

 

 
  2011
  2010
  2009
 
   

Revenue earned (primarily commission revenue and fees for information technology services provided to CPW and Carphone Warehouse)

  $ 6   $ 63   $ 12  

SG&A incurred (primarily for rent and other payroll-related costs paid to CPW and Carphone Warehouse)

    8     6     29  

Interest expense incurred on credit facility with CPW and Carphone Warehouse as lender

    1     4     15  

Accounts payable to CPW and Carphone Warehouse at the end of the fiscal year

        4     108  

Accounts receivable from CPW and Carphone Warehouse at the end of the fiscal year

    2     31     60  

Balance outstanding on credit facility from CPW and Carphone Warehouse at the end of the fiscal year (see Note 6, Debt)

    98     206     584  
Condensed Consolidating Financial Information (Tables)

At February 26, 2011

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Assets

                               

Current Assets

                               
 

Cash and cash equivalents

  $ 282   $ 51   $ 770   $   $ 1,103  
 

Short-term investments

    20         2         22  
 

Receivables

    3     738     1,607         2,348  
 

Merchandise inventories

        3,973     1,999     (75 )   5,897  
 

Other current assets

    234     117     752         1,103  
 

Intercompany receivable

            9,300     (9,300 )    
 

Intercompany note receivable

    854         91     (945 )    
                       
   

Total current assets

    1,393     4,879     14,521     (10,320 )   10,473  

Net Property and Equipment

    200     1,803     1,820         3,823  

Goodwill

        6     2,448         2,454  

Tradenames, Net

            133         133  

Customer Relationships, Net

            203         203  

Equity and Other Investments

    162         166         328  

Other Assets

    181     36     273     (55 )   435  

Investments in Subsidiaries

    14,030     229     2,444     (16,703 )    
                       

Total Assets

  $ 15,966   $ 6,953   $ 22,008   $ (27,078 ) $ 17,849  
                       

Liabilities and Equity

                               

Current Liabilities

                               
 

Accounts payable

  $ 361   $ 101   $ 4,432   $   $ 4,894  
 

Unredeemed gift card liabilities

        404     70         474  
 

Accrued compensation and related expenses

        200     370         570  
 

Accrued liabilities

    13     625     833         1,471  
 

Accrued income taxes

    256                 256  
 

Short-term debt

            557         557  
 

Current portion of long-term debt

    402     23     16         441  
 

Intercompany payable

    7,497     1,665     138     (9,300 )    
 

Intercompany note payable

    103     500     342     (945 )    
                       
   

Total current liabilities

    8,632     3,518     6,758     (10,245 )   8,663  

Long-Term Liabilities

    160     863     447     (287 )   1,183  

Long-Term Debt

    500     128     83         711  

Equity

                               
 

Shareholders' equity

    6,674     2,444     14,030     (16,546 )   6,602  
 

Noncontrolling interests

            690         690  
                       
   

Total equity

    6,674     2,444     14,720     (16,546 )   7,292  
                       

Total Liabilities and Equity

  $ 15,966   $ 6,953   $ 22,008   $ (27,078 ) $ 17,849  
                       

At February 27, 2010

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Assets

                               

Current Assets

                               
 

Cash and cash equivalents

  $ 1,170   $ 53   $ 603   $   $ 1,826  
 

Short-term investments

    88         2         90  
 

Receivables

        485     1,535         2,020  
 

Merchandise inventories

        3,662     1,873     (49 )   5,486  
 

Other current assets

    221     149     775     (1 )   1,144  
 

Intercompany receivable

            7,983     (7,983 )    
 

Intercompany note receivable

    833             (833 )    
                       
   

Total current assets

    2,312     4,349     12,771     (8,866 )   10,566  

Net Property and Equipment

    214     1,864     1,992         4,070  

Goodwill

        6     2,446         2,452  

Tradenames, Net

            159         159  

Customer Relationships, Net

            279         279  

Equity and Other Investments

    216         108         324  

Other Assets

    103     34     362     (47 )   452  

Investments in Subsidiaries

    12,246     287     2,296     (14,829 )    
                       

Total Assets

  $ 15,091   $ 6,540   $ 20,413   $ (23,742 ) $ 18,302  
                       

Liabilities and Equity

                               

Current Liabilities

                               
 

Accounts payable

  $ 414   $ 26   $ 4,836   $   $ 5,276  
 

Unredeemed gift card liabilities

        401     62         463  
 

Accrued compensation and related expenses

    4     218     322         544  
 

Accrued liabilities

    25     652     1,004         1,681  
 

Accrued income taxes

    316                 316  
 

Short-term debt

            663         663  
 

Current portion of long-term debt

    1     21     13         35  
 

Intercompany payable

    6,816     1,167         (7,983 )    
 

Intercompany note payable

        500     333     (833 )    
                       
   

Total current liabilities

    7,576     2,985     7,233     (8,816 )   8,978  

Long-Term Liabilities

    247     1,123     224     (338 )   1,256  

Long-Term Debt

    902     136     66         1,104  

Equity

                               
 

Shareholders' equity

    6,366     2,296     12,246     (14,588 )   6,320  
 

Noncontrolling interests

            644         644  
                       
   

Total equity

    6,366     2,296     12,890     (14,588 )   6,964  
                       

Total Liabilities and Equity

  $ 15,091   $ 6,540   $ 20,413   $ (23,742 ) $ 18,302  
                       

Fiscal Year Ended February 26, 2011

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Revenue

  $ 16   $ 33,924   $ 45,843   $ (29,511 ) $ 50,272  

Cost of goods sold

        25,140     39,022     (26,551 )   37,611  

Restructuring charges — cost of goods sold

        9     15         24  
                       

Gross profit

    16     8,775     6,806     (2,960 )   12,637  

Selling, general and administrative expenses

    169     8,439     4,895     (3,178 )   10,325  

Restructuring charges

        9     189         198  
                       

Operating (loss) income

    (153 )   327     1,722     218     2,114  

Other income (expense)

                               
 

Investment income and other

    20         43     (12 )   51  
 

Interest expense

    (47 )   (15 )   (37 )   12     (87 )

Equity in earnings of subsidiaries

    1,189     49     194     (1,432 )    
                       

Earnings before income tax (benefit) expense and equity in income of affiliates

    1,009     361     1,922     (1,214 )   2,078  

Income tax (benefit) expense

    (50 )   118     646         714  

Equity in income of affiliates

            2         2  
                       

Net earnings including noncontrolling interests

    1,059     243     1,278     (1,214 )   1,366  

Net earnings attributable to noncontrolling interests

            (89 )       (89 )
                       

Net earnings attributable to Best Buy Co., Inc.

  $ 1,059   $ 243   $ 1,189   $ (1,214 ) $ 1,277  
                       

Fiscal Year Ended February 27, 2010

 
  Best Buy
Co., Inc.

  Guarantor Subsidiary
  Non-Guarantor Subsidiaries
  Eliminations
  Consolidated
 
   

Revenue

  $ 16   $ 34,347   $ 43,743   $ (28,412 ) $ 49,694  

Cost of goods sold

        25,809     39,292     (27,567 )   37,534  
                       

Gross profit

    16     8,538     4,451     (845 )   12,160  

Selling, general and administrative expenses

    166     8,170     4,705     (3,168 )   9,873  

Restructuring charges

        25     27         52  
                       

Operating (loss) income

    (150 )   343     (281 )   2,323     2,235  

Other income (expense)

                               
 

Investment income and other

    10     1     66     (23 )   54  
 

Interest expense

    (59 )   (21 )   (37 )   23     (94 )

Equity in (loss) earnings of subsidiaries

    (335 )   (3 )   202     136      
                       

(Loss) earnings before income tax expense and equity in income of affiliates

    (534 )   320     (50 )   2,459     2,195  

Income tax expense

    471     122     209         802  

Equity in income of affiliates

            1         1  
                       

Net (loss) earnings including noncontrolling interests

    (1,005 )   198     (258 )   2,459     1,394  

Net earnings attributable to noncontrolling interests

            (77 )       (77 )
                       

Net (loss) earnings attributable to Best Buy Co., Inc.

  $ (1,005 ) $ 198   $ (335 ) $ 2,459   $ 1,317  
                       

Fiscal Year Ended February 28, 2009

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Revenue

  $ 16   $ 32,407   $ 47,925   $ (35,333 ) $ 45,015  

Cost of goods sold

        26,793     42,316     (35,092 )   34,017  
                       

Gross profit

    16     5,614     5,609     (241 )   10,998  

Selling, general and administrative expenses

    150     5,317     3,499     18     8,984  

Restructuring charges

        43     35         78  

Goodwill and tradename impairment

            66         66  
                       

Operating (loss) income

    (134 )   254     2,009     (259 )   1,870  

Other income (expense)

                               
 

Investment income and other

    12         206     (183 )   35  
 

Investment impairment

            (111 )       (111 )
 

Interest expense

    (211 )   (47 )   (19 )   183     (94 )

Equity in earnings (loss) of subsidiaries

    1,293     (146 )   108     (1,255 )    
                       

Earnings before income tax expense and equity in income of affiliates

    960     61     2,193     (1,514 )   1,700  

Income tax (benefit) expense

    (302 )   99     877         674  

Equity in income of affiliates

            7         7  
                       

Net earnings (loss) including noncontrolling interests

    1,262     (38 )   1,323     (1,514 )   1,033  

Net earnings attributable to noncontrolling interests

            (30 )       (30 )
                       

Net earnings (loss) attributable to Best Buy Co., Inc.

  $ 1,262   $ (38 ) $ 1,293   $ (1,514 ) $ 1,003  
                       

Fiscal Year Ended February 26, 2011

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Total cash (used in) provided by operating activities

  $ (288 ) $ (171 ) $ 1,649   $   $ 1,190  
                       

Investing Activities

                               
 

Additions to property and equipment

        (319 )   (425 )       (744 )
 

Purchases of investments

    (267 )               (267 )
 

Sales of investments

    397         18         415  
 

Proceeds from sale of business, net of cash transferred

            21         21  
 

Change in restricted assets

            (2 )       (2 )
 

Settlement of net investment hedges

            12         12  
 

Other, net

            (4 )       (4 )
                       
   

Total cash provided by (used in) investing activities

    130     (319 )   (380 )       (569 )
                       

Financing Activities

                               
 

Repurchase of common stock

    (1,193 )               (1,193 )
 

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

    179                 179  
 

Dividends paid

    (237 )               (237 )
 

Repayments of debt

    (886 )   (13 )   (2,221 )       (3,120 )
 

Proceeds from issuance of debt

    885         2,136         3,021  
 

Acquisition of noncontrolling interests

            (21 )       (21 )
 

Excess tax benefits from stock-based compensation

    11                 11  
 

Other, net

            3         3  
 

Change in intercompany receivable/payable

    511     501     (1,012 )        
                       
   

Total cash (used in) provided by financing activities

    (730 )   488     (1,115 )       (1,357 )
                       

Effect of Exchange Rate Changes on Cash

            13         13  
                       

(Decrease) Increase in Cash and Cash Equivalents

    (888 )   (2 )   167         (723 )

Cash and Cash Equivalents at Beginning of Year

    1,170     53     603         1,826  
                       

Cash and Cash Equivalents at End of Year

  $ 282   $ 51   $ 770   $   $ 1,103  
                       

Fiscal Year Ended February 27, 2010

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Total cash (used in) provided by operating activities

  $ (1,351 ) $ 2,957   $ 600   $   $ 2,206  
                       

Investing Activities

                               
 

Additions to property and equipment

        (165 )   (450 )       (615 )
 

Purchases of investments

    (16 )               (16 )
 

Sales of investments

    45         11         56  
 

Acquisition of businesses, net of cash acquired

        (3 )   (4 )       (7 )
 

Change in restricted assets

    (5 )       23         18  
 

Settlement of net investment hedges

            40         40  
 

Other, net

        (12 )   (4 )       (16 )
                       
   

Total cash provided by (used in) investing activities

    24     (180 )   (384 )       (540 )
                       

Financing Activities

                               
 

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

    138                 138  
 

Dividends paid

    (234 )               (234 )
 

Repayments of debt

    (3,035 )   (27 )   (2,280 )       (5,342 )
 

Proceeds from issuance of debt

    2,870         2,262         5,132  
 

Acquisition of noncontrolling interests

            (34 )       (34 )
 

Excess tax benefits from stock-based compensation

    7                 7  
 

Other, net

            (15 )       (15 )
 

Change in intercompany receivable/payable

    2,601     (2,745 )   144          
                       
   

Total cash provided by (used in) financing activities

    2,347     (2,772 )   77         (348 )
                       

Effect of Exchange Rate Changes on Cash

            10         10  
                       

Increase in Cash and Cash Equivalents

    1,020     5     303         1,328  

Cash and Cash Equivalents at Beginning of Year

    150     48     300         498  
                       

Cash and Cash Equivalents at End of Year

  $ 1,170   $ 53   $ 603   $   $ 1,826  
                       

Fiscal Year Ended February 28, 2009

 
  Best Buy
Co., Inc.

  Guarantor
Subsidiary

  Non-Guarantor
Subsidiaries

  Eliminations
  Consolidated
 
   

Total cash (used in) provided by operating activities

  $ (1,281 ) $ 616   $ 2,542   $   $ 1,877  
                       

Investing Activities

                               
 

Additions to property and equipment

        (641 )   (662 )       (1,303 )
 

Purchases of investments

    (28 )       (53 )       (81 )
 

Sales of investments

    91         155         246  
 

Acquisition of businesses, net of cash acquired

        2     (2,172 )       (2,170 )
 

Change in restricted assets

            (97 )       (97 )
 

Other, net

        (17 )   (5 )       (22 )
                       
   

Total cash provided by (used in) investing activities

    63     (656 )   (2,834 )       (3,427 )
                       

Financing Activities

                               
 

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

    83                 83  
 

Dividends paid

    (223 )               (223 )
 

Repayments of debt

    (3,249 )   (19 )   (1,444 )       (4,712 )
 

Proceeds from issuance of debt

    3,795     37     1,774         5,606  
 

Acquisition of noncontrolling interests

            (146 )       (146 )
 

Excess tax benefits from stock-based compensation

    6                 6  
 

Other, net

    (5 )       (18 )       (23 )
 

Change in intercompany receivable/payable

    790         (790 )        
                       
   

Total cash provided by (used in) financing activities

    1,197     18     (624 )       591  
                       

Effect of Exchange Rate Changes on Cash

            19         19  
                       

Decrease in Cash and Cash Equivalents

    (21 )   (22 )   (897 )       (940 )

Cash and Cash Equivalents at Beginning of Year

    171     70     1,197         1,438  
                       

Cash and Cash Equivalents at End of Year

  $ 150   $ 48   $ 300   $   $ 498  
                       
Supplementary Financial Information (Unaudited) (Tables)
Schedule of supplementary financial information

 

 
  Quarter    
 
 
  Fiscal
Year

 
 
  1st
  2nd
  3rd
  4th
 
   

Fiscal 2011

                               

Revenue

  $ 10,787   $ 11,339   $ 11,890   $ 16,256   $ 50,272  

Comparable store sales % change(1)

    2.8%     (0.1 )%   (3.3 )%   (4.6 )%   (1.8 )%

Gross profit

  $ 2,793   $ 2,918   $ 2,983   $ 3,943   $ 12,637  

Operating income(2)

    313     411     385     1,005     2,114  

Net earnings including noncontrolling interests

    181     257     240     688     1,366  

Net earnings attributable to Best Buy Co., Inc.

    155     254     217     651     1,277  

Diluted earnings per share(3)

    0.36     0.60     0.54     1.62     3.08  

 

 
  Quarter    
 
 
  Fiscal
Year

 
 
  1st
  2nd
  3rd
  4th
 
   

Fiscal 2010

                               

Revenue

  $ 10,095   $ 11,022   $ 12,024   $ 16,553   $ 49,694  

Comparable store sales % change(1)

    (6.2 )%   (3.9 )%   1.7%     7.0%     0.6%  

Gross profit

  $ 2,557   $ 2,684   $ 2,942   $ 3,977   $ 12,160  

Operating income(4)

    296     280     376     1,283     2,235  

Net earnings including noncontrolling interests

    156     157     271     810     1,394  

Net earnings attributable to Best Buy Co., Inc.

    153     158     227     779     1,317  

Diluted earnings per share(3)

    0.36     0.37     0.53     1.82     3.10  

Note: Certain fiscal year totals may not add due to rounding.

(1)
Comprised of revenue from stores operating for at least 14 full months as well as revenue related to call centers, Web sites and our other comparable sales channels. Revenue we earn from sales of merchandise to wholesalers or dealers is not included within our comparable store sales calculation. Relocated, remodeled and expanded stores are excluded from our comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in our comparable store sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The portion of our calculation of the comparable store sales percentage change attributable to our International segment excludes the effect of fluctuations in foreign currency exchange rates. The method of calculating comparable store sales varies across the retail industry. As a result, our method of calculating comparable store sales may not be the same as other retailers' methods.

(2)
Includes $222 of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our businesses.

(3)
The sum of our quarterly diluted earnings per share does not equal our annual diluted earnings per share due to the impact of the timing of the repurchases of common stock and stock option exercises on quarterly and annual weighted-average shares outstanding.

(4)
Includes $52 of restructuring charges recorded in the fiscal first quarter related to measures we took to restructure our businesses.
Valuation and Qualifying Accounts (Tables)
Schedule of valuation and qualifying accounts

 

 
  Balance at
Beginning
of Period

  Charged to
Expenses or
Other Accounts

  Other(1)
  Balance at
End of
Period

 
   

Year ended February 26, 2011

                         
 

Allowance for doubtful accounts

  $ 101   $ 46   $ (40 ) $ 107  

Year ended February 27, 2010

                         
 

Allowance for doubtful accounts

  $ 97   $ 48   $ (44 ) $ 101  

Year ended February 28, 2009

                         
 

Allowance for doubtful accounts

  $ 24   $ (5 ) $ 78   $ 97  
(1)
Includes bad debt write-offs and recoveries, acquisitions and the effect of foreign currency fluctuations.
Summary of Significant Accounting Policies (Details)
In Millions
3 Months Ended
Feb. 26, 2011
3 Months Ended
Feb. 27, 2010
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Description of Business
 
 
 
 
 
Number of reportable segments
 
 
 
 
Basis of Presentation
 
 
 
 
 
Reporting period lag for consolidation of financial results (in months)
 
 
2 months 
 
 
Restructuring and Related Cost
 
 
 
 
 
Restructuring charges
 
 
24 
 
 
Reclassifications
 
 
 
 
 
Net earnings including noncontrolling interests
688 
810 
1,366 
1,394 
1,033 
Net earnings attributable to noncontrolling interests
 
 
(89)
(77)
(30)
Net (loss) earnings attributable to Best Buy Co., Inc.
651 
779 
1,277 
1,317 
1,003 
Acquisition of noncontrolling interests
 
 
(21)
(34)
(146)
Fiscal Year
 
 
 
 
 
Number of weeks in fiscal year
 
 
52 
 
 
Cash and Cash Equivalents
 
 
 
 
 
Maximum term of original maturity to classify instrument as cash equivalents (in months)
 
 
 
 
Cash equivalents
120 
1,108 
120 
1,108 
 
Weighted-average interest rate on cash equivalents (as a percent)
 
 
0.003 
0.001 
 
Outstanding checks in excess of funds on deposit
57 
108 
57 
108 
 
Receivables
 
 
 
 
 
Allowances for uncollectible receivables
107 
101 
107 
101 
 
Restricted Assets
 
 
 
 
 
Restricted cash and investments in debt securities
490 
496 
490 
496 
 
Property and Equipment
 
 
 
 
 
Carrying value of property under capital lease
74 
54 
74 
54 
 
Accumulated depreciation
45 
41 
45 
41 
 
Impairment of Long-Lived Assets and Costs Associated With Exit Activities
 
 
 
 
 
Obligation associated with location closings
76 
78 
76 
78 
 
Leases
 
 
 
 
 
Term of lease agreement, low end of the range (in years)
 
 
10 
 
 
Term of lease agreement, high end of the range (in years)
 
 
20 
 
 
Deferred rent, current
34 
38 
34 
38 
 
Deferred rent, noncurrent
343 
309 
343 
309 
 
Insurance
 
 
 
 
 
Self-insured liabilities included in accrued liabilities
81 
64 
81 
64 
 
Self-insured liabilities included in long-term liabilities
49 
46 
49 
46 
 
Total insured liabilities
130 
110 
130 
110 
 
Foreign Currency
 
 
 
 
 
Use of prior months' exchange rate to align operations reported (in months)
 
 
 
Revenue Recognition
 
 
 
 
 
Sales returns reserve
15 
17 
15 
17 
 
Term of extended warranties, low end of the range (in months)
 
 
 
 
Term of extended warranties, high end of the range (in years)
 
 
 
 
Percentage of commissions on sale of extended warranties to revenue (as a percent)
0.02 
0.02 
0.02 
0.02 
0.02 
Deferred revenue
499 
451 
499 
451 
 
Gift Cards
 
 
 
 
 
Historical period used to determine the likelihood of a gift card remaining unredeemed (in months)
 
 
24 
 
 
Gift card breakage income
 
 
53 
43 
38 
Credit Services and Financing
 
 
 
 
 
Private label promotional credit card financing rate description
 
 
low- or zero 
 
 
Sales Incentives
 
 
 
 
 
Number of ways members may participate and earn loyalty points
 
 
 
 
Period of expiration of certificates of loyalty program members from the date of issuance (in months)
 
 
three or six months 
 
 
Period of expiration of certificates of cardholders from the date of issuance (in months)
 
 
 
 
Vendor Allowances
 
 
 
 
 
Vendor allowances received to promote and sell a vendor's products
 
 
69 
139 
161 
Advertising Costs
 
 
 
 
 
Net advertising expenses
 
 
901 
740 
765 
Allowances received from vendors for advertising
 
 
 
98 
117 
International
 
 
 
 
 
Restructuring and Related Cost
 
 
 
 
 
Restructuring charges
 
 
171 
 
 
Summary of Significant Accounting Policies (Details 2) (Issuance of Debt, USD $)
In Millions
Feb. 26, 2011
Subsequent Event
 
Debt instrument issued, principal amount
$ 1,000 
Summary of Significant Accounting Policies (Details 3) (USD $)
In Millions
Feb. 26, 2011
Feb. 27, 2010
Tradenames
 
 
Tradenames and Customer Relationships
 
 
Indefinite-lived
$ 105 
$ 112 
Definite-lived
28 
47 
Total
133 
159 
Customer Relationships
 
 
Tradenames and Customer Relationships
 
 
Definite-lived
203 
279 
Total
$ 203 
$ 279 
Summary of Significant Accounting Policies (Details 4)
Year Ended
Feb. 26, 2011
Software developed for internal use
 
Property and Equipment
 
Estimated useful lives, minimum (in years)
Estimated useful lives, maximum (in years)
Buildings
 
Property and Equipment
 
Estimated useful lives, minimum (in years)
25 
Estimated useful lives, maximum (in years)
50 
Leasehold improvements
 
Property and Equipment
 
Estimated useful lives, minimum (in years)
Estimated useful lives, maximum (in years)
25 
Fixtures and equipment
 
Property and Equipment
 
Estimated useful lives, minimum (in years)
Estimated useful lives, maximum (in years)
20 
Property under capital lease
 
Property and Equipment
 
Estimated useful lives, minimum (in years)
Estimated useful lives, maximum (in years)
20 
Summary of Significant Accounting Policies (Details 5) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Goodwill
 
 
 
Impairment of goodwill, discount rate, low end of the range (as a percent)
0.085 
 
 
Impairment of goodwill, discount rate, high end of the range (as a percent)
0.125 
 
 
Changes in the carrying amount of goodwill
 
 
 
Goodwill, balance at the beginning of the period
$ 2,452 
$ 2,203 
$ 1,088 
Acquisitions
 
1,687 
Tax adjustment
 
 
17 
Impairments
 
 
(62)
Purchase accounting adjustments
 
48 
 
Sale of business
(12)
 
 
Changes in foreign currency exchange rates
201 
(527)
Goodwill, balance at the end of the period
2,454 
2,452 
2,203 
Gross amount of goodwill and the accumulated goodwill impairment losses
 
 
 
Gross Carrying Amount
2,519 
2,578 
 
Cumulative Impairment
(65)
(126)
 
Domestic
 
 
 
Changes in the carrying amount of goodwill
 
 
 
Goodwill, balance at the beginning of the period
434 
 
450 
Acquisitions
 
 
46 
Impairments
 
 
(62)
Sale of business
(12)
 
 
Goodwill, balance at the end of the period
422 
 
434 
International
 
 
 
Changes in the carrying amount of goodwill
 
 
 
Goodwill, balance at the beginning of the period
2,018 
1,769 
638 
Acquisitions
 
1,641 
Tax adjustment
 
 
17 
Purchase accounting adjustments
 
48 
 
Changes in foreign currency exchange rates
201 
(527)
Goodwill, balance at the end of the period
2,032 
2,018 
1,769 
Speakeasy business | Domestic
 
 
 
Changes in the carrying amount of goodwill
 
 
 
Goodwill, balance at the beginning of the period
 
12 
 
Impairments
 
 
(62)
Goodwill, balance at the end of the period
 
12 
 
Summary of Significant Accounting Policies (Details 6) (Tradenames, USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Domestic | Tradenames
 
 
 
Changes in the carrying value of indefinite-lived tradenames
 
 
 
Indefinite-lived tradenames, balance at the beginning of the period
32 
 
23 
Acquisitions
 
 
13 
Impairments
(10)
 
(4)
Sale of business
(1)
 
 
Indefinite-lived tradenames, balance at the end of the period
21 
 
32 
International | Tradenames
 
 
 
Changes in the carrying value of indefinite-lived tradenames
 
 
 
Indefinite-lived tradenames, balance at the beginning of the period
80 
72 
74 
Acquisitions
 
 
Changes in foreign currency exchange rates
(10)
Indefinite-lived tradenames, balance at the end of the period
84 
80 
72 
Speakeasy business | Domestic | Tradenames
 
 
 
Changes in the carrying value of indefinite-lived tradenames
 
 
 
Impairments
 
 
(4)
Tradenames
 
 
 
Changes in the carrying value of indefinite-lived tradenames
 
 
 
Indefinite-lived tradenames, balance at the beginning of the period
112 
104 
97 
Acquisitions
 
 
21 
Impairments
(10)
 
(4)
Sale of business
(1)
 
 
Changes in foreign currency exchange rates
(10)
Indefinite-lived tradenames, balance at the end of the period
$ 105 
$ 112 
$ 104 
Summary of Significant Accounting Policies (Details 7) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Total amortization expense and future amortization expense for identifiable intangible assets for the next five fiscal years
 
 
Amortization expense
$ 82 
$ 88 
Future amortization expense for identifiable intangible assets for the next five fiscal years
 
 
2012
60 
 
2013
44 
 
2014
39 
 
2015
35 
 
2016
35 
 
Thereafter
18 
 
Trade names and customer relationship
 
 
Definite Lived Intangible Assets
 
 
Gross Carrying Amount
456 
476 
Accumulated Amortization
(225)
(150)
Tradenames
 
 
Definite Lived Intangible Assets
 
 
Gross Carrying Amount
73 
75 
Accumulated Amortization
(45)
(28)
Customer Relationships
 
 
Definite Lived Intangible Assets
 
 
Gross Carrying Amount
383 
401 
Accumulated Amortization
(180)
(122)
Lease rights
 
 
Definite Lived Intangible Assets
 
 
Gross Carrying Amount
131 
137 
Accumulated Amortization
(57)
(46)
Amortization period (in years)
15 
 
Total amortization expense and future amortization expense for identifiable intangible assets for the next five fiscal years
 
 
Amortization expense
14 
18 
Future amortization expense for identifiable intangible assets for the next five fiscal years
 
 
2012
 
2013
 
2014
 
2015
 
2016
 
Summary of Significant Accounting Policies (Details 8)
Year Ended
Feb. 26, 2011
Debt Securities (Auction-Rate Securities)
 
Investments
 
Interval of auction process
Seven, 28 and 35 days 
Student loan bonds
 
Investments
 
Guaranteed or Insured Percentage, Low Range (as a percent)
0.95 
Guaranteed or Insured Percentage, High Range (as a percent)
Acquisitions (Details)
In Millions, except Per Share data
3 Months Ended
Feb. 27, 2010
Feb. 28, 2009
Jun. 30, 2006
Oct. 31, 2008
Nov. 28, 2009
Year Ended
Feb. 26, 2011
Mar. 26, 2011
Aug. 29, 2009
Jun. 30, 2009
Jun. 28, 2009
Acquisitions
 
 
 
 
 
 
 
 
 
 
Interest acquired (as a percent)
 
0.25 
0.75 
 
 
 
 
 
 
0.50 
Purchase price
 
196 
184 
122 
 
 
 
 
2,196 
 
Working capital injection
 
 
122 
 
 
 
 
 
 
 
Period over which remaining 25% interest is to be acquired (in years)
 
 
 
 
 
 
 
 
 
Reporting period lag for consolidation of financial results (in months)
2 months 
 
 
 
 
2 months 
 
 
 
 
Purchase price (net of cash acquired)
 
 
 
101 
 
 
 
 
 
 
Purchase price, per outstanding share of acquiree (in dollars per share)
 
 
 
2.65 
 
 
 
 
 
 
Previous ownership interest, amount
 
 
 
 
 
 
 
 
 
Aggregate purchase price, paid
 
 
 
 
 
 
 
 
 
2,167 
Transaction costs
 
 
 
 
 
 
 
 
 
29 
Existing business and infrastructure contributed to Best Buy Europe by CPW
 
 
 
 
 
 
 
2,400 
 
 
Final purchase price allocation
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
21 
 
 
124 
 
 
Restricted cash
 
 
 
 
 
 
 
112 
 
 
Short-term investments
 
 
 
 
28 
 
 
 
 
 
Receivables
 
 
 
 
 
 
1,190 
 
 
Merchandise inventories
 
 
 
 
 
 
 
535 
 
 
Other current assets
 
 
 
 
 
 
114 
 
 
Property and equipment
 
 
 
 
10 
 
 
500 
 
 
Goodwill
142 
 
 
 
32 
 
 
1,546 
 
 
Tradename
 
 
 
13 
 
 
93 
 
 
Customer relationships
 
 
 
 
 
 
484 
 
 
Equity and other investments
 
 
 
 
 
 
 
 
 
Other assets (deferred tax assets)
 
 
 
 
48 
 
 
 
 
 
Other assets
 
 
 
 
 
 
 
184 
 
 
Total assets
198 
 
 
 
163 
 
 
4,882 
 
 
Accounts payable
 
 
 
 
(3)
 
 
(803)
 
 
Other current liabilities
 
 
 
 
(38)
 
 
(695)
 
 
Short-term debt
 
 
 
 
 
 
 
(299)
 
 
Long-term liabilities
(2)
 
 
 
 
 
 
(246)
 
 
Total liabilities
 
 
 
 
(41)
 
 
(2,043)
 
 
Net assets of noncontrolling interests
48 
 
 
 
 
 
 
(643)
 
 
Total
196 
 
 
 
122 
 
 
2,196 
 
 
Remaining net assets (as a percent)
 
 
 
 
 
 
 
0.50 
 
 
Net assets acquired, historical cost basis (as a percent)
 
 
 
 
 
 
 
0.50 
 
 
Noncontrolling interest owned by CPW reflected in consolidated balance sheet (as a percent)
 
 
 
 
 
 
 
0.50 
 
 
Restructuring accrual
 
 
 
 
 
 
 
20 
 
 
Number of companies formed after CPW demerger
 
 
 
 
 
 
 
 
 
Acquisitions (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Aug. 29, 2009
Finite-Lived Intangible Assets
 
Weighted-Average Amortization Period (in years)
6.4 
Fair Value
$ 577 
Customer Relationships
 
Finite-Lived Intangible Assets
 
Weighted-Average Amortization Period (in years)
6.8 
Fair Value
484 
Tradenames
 
Finite-Lived Intangible Assets
 
Weighted-Average Amortization Period (in years)
4.2 
Fair Value
$ 93 
Acquisitions (Details 3) (USD $)
In Millions, except Per Share data
Year Ended
Feb. 28, 2009
Pro forma condensed consolidated financial results of operations
 
Pro forma revenue
$ 48,021 
Pro forma net earnings
998 
Pro forma earnings per common share
 
Basic (in dollars per share)
2.42 
Diluted (in dollars per share)
$ 2.38 
Weighted-average common shares outstanding
 
Basic (in shares)
413 
Diluted (in shares)
423 
Investments (Details)
In Millions
Year Ended
Feb. 26, 2011
Feb. 27, 2010
Feb. 26, 2011
Feb. 27, 2010
Feb. 26, 2011
Feb. 27, 2010
Year Ended
Feb. 26, 2011
3 Months Ended
Nov. 28, 2009
Year Ended
Feb. 26, 2011
Year Ended
Dec. 31, 2008
Schedule of Investments
 
 
 
 
 
 
 
 
 
 
Total short-term investments
 
88 
 
 
 
 
 
 
 
 
Total equity and other investments
110 
192 
 
 
 
 
 
 
 
 
Interval of auction process
Seven, 28 and 35 days 
 
 
 
 
 
 
 
 
 
Securities redeemed
170 
 
 
 
 
 
88 
 
 
 
Investments in portfolio
22 
 
 
 
 
 
 
 
 
 
Aggregate value of failed auctions
115 
 
 
 
 
 
 
 
 
 
Securities subsequently sold
14 
 
 
 
 
 
 
 
 
 
Investments
110 
280 
108 
261 
19 
 
 
 
 
Debt Instrument, Par Value
115 
285 
 
 
 
 
 
 
 
 
Weighted Average Interest Rate Percentage (as a percent)
0.008 
0.011 
 
 
 
 
 
 
 
 
Percentage of Portfolio With Credit Rating AAA/Aaa (as a percent)
0.73 
 
 
 
 
 
 
 
 
 
Percentage of Portfolio With Credit Rating AA/Aa (as a percent)
0.02 
 
 
 
 
 
 
 
 
 
Percentage of Portfolio With Credit Rating A/A (as a percent)
0.25 
 
 
 
 
 
 
 
 
 
Maturity of debt issuances, start
5 years 
 
 
 
 
 
 
 
 
 
Maturity of debt issuances, end
32 years 
 
 
 
 
 
 
 
 
 
Pre-tax unrealized gain (loss) in accumulated other comprehensive income
(5)
 
 
 
 
 
 
 
87 
 
Accumulated Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax
(3)
(3)
 
 
 
 
 
 
 
 
Price of CPW's common stock purchased
 
 
 
 
 
 
 
 
 
(183)
Percentage of Entity Acquired (as a percent)
 
 
 
 
 
 
 
 
 
0.03 
Impairment of Investments
 
 
 
 
 
 
 
(111)
 
 
Guaranteed or Insured Percentage, Low Range (as a percent)
 
 
0.95 
 
 
 
 
 
 
 
Guaranteed or Insured Percentage, High Range (as a percent)
 
 
 
 
 
 
 
 
 
Percentage Insured by Rated Bond Insurers (as a percent)
 
 
 
 
 
 
 
 
 
Fair Value Measurements (Details) (USD $)
In Millions
Feb. 26, 2011
Feb. 27, 2010
Cash and cash equivalents
 
 
Money market funds
$ 70 
$ 752 
U.S. Treasury bills
 
300 
Short-term investments
 
 
Money market fund
Auction-rate securities
 
88 
U.S. Treasury bills
20 
 
Other current assets
 
 
Money market funds (restricted assets)
63 
123 
U.S. Treasury bills (restricted assets)
105 
25 
Foreign currency derivative instruments
Equity and other investments
 
 
Auction-rate securities
110 
192 
Marketable equity securities
146 
77 
Other assets
 
 
Marketable securities that fund deferred compensation
83 
75 
Accrued liabilities
 
 
Foreign currency derivative instruments, current
 
Long-term liabilities
 
 
Deferred compensation
64 
61 
Foreign currency derivative instruments, noncurrent
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
Cash and cash equivalents
 
 
Money market funds
70 
752 
U.S. Treasury bills
 
300 
Short-term investments
 
 
U.S. Treasury bills
20 
 
Other current assets
 
 
Money market funds (restricted assets)
63 
123 
U.S. Treasury bills (restricted assets)
105 
25 
Equity and other investments
 
 
Marketable equity securities
146 
77 
Other assets
 
 
Marketable securities that fund deferred compensation
83 
75 
Long-term liabilities
 
 
Deferred compensation
64 
61 
Significant Other Observable Inputs (Level 2)
 
 
Short-term investments
 
 
Money market fund
Other current assets
 
 
Foreign currency derivative instruments
Accrued liabilities
 
 
Foreign currency derivative instruments, current
 
Long-term liabilities
 
 
Foreign currency derivative instruments, noncurrent
 
Significant Unobservable Inputs (Level 3)
 
 
Short-term investments
 
 
Auction-rate securities
 
88 
Equity and other investments
 
 
Auction-rate securities
$ 110 
$ 192 
Fair Value Measurements (Details 2) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation.
 
 
Balance at the beginning of the period
$ 280 
$ 314 
Changes in unrealized losses in other comprehensive income
 
10 
Sales
(170)
(43)
Interest received
 
(1)
Balance at the end of the period
110 
280 
Student loan bonds
 
 
Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation.
 
 
Balance at the beginning of the period
261 
276 
Changes in unrealized losses in other comprehensive income
(1)
Sales
(152)
(22)
Interest received
 
(1)
Balance at the end of the period
108 
261 
Municipal revenue bonds
 
 
Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation.
 
 
Balance at the beginning of the period
19 
24 
Changes in unrealized losses in other comprehensive income
Sales
(18)
(6)
Balance at the end of the period
19 
Auction preferred securities
 
 
Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation.
 
 
Balance at the beginning of the period
 
14 
Changes in unrealized losses in other comprehensive income
 
Sales
 
(15)
Fair Value Measurements (Details 3) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Impairments
 
Property and equipment
$ 147 
Tradename
10 
Total
157 
Remaining Net Carrying Value
 
Property and equipment
51 
Tradename
Total
$ 54 
Restructuring Charges (Details)
In Millions
Year Ended
Feb. 26,
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
Restructuring and Related Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
 
 
 
 
 
12 
 
 
 
 
 
 
 
Restructuring charges expected to be incurred in fiscal 2012
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges expected to incur, low end of range
 
 
 
 
 
10 
 
 
 
 
 
 
 
Restructuring charges expected to incur, high end of range
 
 
 
 
 
15 
 
 
 
 
 
 
 
Cumulative amount
 
97 
94 
 
130 
33 
32 
126 
Restructuring Charges (Details 2)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Restructuring Program 2011
 
 
Restructuring Accrual Activity
 
 
Charges
41 
 
Restructuring reserve, balance at the end of the period
41 
 
Restructuring Program 2011 | Termination benefits
 
 
Restructuring Accrual Activity
 
 
Charges
28 
 
Restructuring reserve, balance at the end of the period
28 
 
Restructuring Program 2011 | Facility closure and other costs
 
 
Restructuring Accrual Activity
 
 
Charges
13 
 
Restructuring reserve, balance at the end of the period
13 
 
Restructuring Program 2009 and 2010
 
 
Restructuring Accrual Activity
 
 
Restructuring reserve, balance at the beginning of the period
74 
Charges
 
52 
Cash payments
(120)
Changes in foreign currency exchange rates
 
Restructuring reserve, balance at the end of the period
 
Restructuring Program 2009 and 2010 | Termination benefits
 
 
Restructuring Accrual Activity
 
 
Restructuring reserve, balance at the beginning of the period
73 
Charges
 
51 
Cash payments
(119)
Changes in foreign currency exchange rates
 
Restructuring reserve, balance at the end of the period
 
Restructuring Program 2009 and 2010 | Facility closure and other costs
 
 
Restructuring Accrual Activity
 
 
Restructuring reserve, balance at the beginning of the period
Charges
 
Cash payments
(1)
Restructuring reserve, balance at the end of the period
 
Debt (Details)
Year Ended
Feb. 26,
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 26, 2011
Feb. 26, 2011
Feb. 26, 2011
Feb. 27, 2010
Year Ended
Feb. 26, 2011
Feb. 26, 2011
Feb. 27, 2010
2011
2011
Feb. 26, 2011
Feb. 26, 2011
Feb. 27, 2010
Short-term Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate (as a percent)
 
 
 
 
0.037 
0.036 
 
0.036 
0.014 
 
 
 
0.048 
0.044 
Maximum month-end outstanding during the year
690,000,000 
1,262,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Average amount outstanding during the year
383,000,000 
881,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average interest rate (as a percent)
0.037 
0.021 
 
 
 
 
 
 
 
 
 
 
 
 
Revolving lines of credit, term
 
 
five-year  
 
 
 
 
 
 
 
 
 
 
 
Remaining borrowing capacity
 
 
2,300,000,000 
 
 
 
 
 
 
 
 
 
 
 
Interest rate, description
 
 
(i) the greater of the federal funds rate plus 0.5% or JPMorgan's prime rate, or (ii) the LIBOR plus an applicable LIBOR margin 
 
 
 
Three-month LIBOR plus a margin of 3% 
 
 
 
LIBOR plus a margin of 3.00% 
 
 
 
LIBOR margin, low end of the range (as a percent)
 
 
0.0032 
 
 
 
 
 
 
 
 
 
 
 
LIBOR margin, high end of the range (as a percent)
 
 
0.006 
 
 
 
 
 
 
 
 
 
 
 
Facility fee, low end of the range (as a percent)
 
 
0.0008 
 
 
 
 
 
 
 
 
 
 
 
Facility fee, high end of the range (as a percent)
 
 
0.0015 
 
 
 
 
 
 
 
 
 
 
 
Amount drawn on facility at end of period
 
 
 
291,000,000 
455,000,000 
 
 
 
 
 
 
 
 
 
Commitment fee on unused available capacity (as a percent)
 
 
 
 
 
 
0.015 
 
 
 
0.015 
 
 
 
Initial commitment fee (as a percent)
 
 
 
 
 
 
0.0275 
 
 
 
 
 
 
 
Debt Instrument, Parent Guarantee Percentage (as a percent)
 
 
 
 
 
 
 
 
 
0.5 
 
 
 
 
Additional seasonal facility
 
 
 
 
 
 
 
 
 
 
 
51,000,000 
 
 
Debt (Details 2)
In Millions, except Per Share data, unless otherwise specified
Feb. 26, 2011
Feb. 27, 2010
Jun. 30, 2008
Feb. 26, 2011
Feb. 27, 2010
Jan. 31, 2002
Year Ended
Feb. 26, 2011
Feb. 27, 2010
3 Months Ended
Feb. 26, 2011
Feb. 27, 2010
3 Months Ended
Feb. 26, 2011
Feb. 27, 2010
3 Months Ended
Feb. 26, 2011
Feb. 27, 2010
Long-term Debt.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total long-term debt
1,152 
1,139 
 
500 
500 
 
402 
402 
170 
186 
79 
49 
Less: current portion
(441)
(35)
 
 
 
 
(441)
(35)
 
 
 
 
 
 
Total long-term debt, less current portion
711 
1,104 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, interest rate, low end of the range (percent, in hundredths)
 
 
 
 
 
 
 
 
0.03 
 
0.021 
 
0.026 
 
Debt instrument, interest rate, high end of the range (as a percent)
 
 
 
 
 
 
 
 
0.081 
 
0.083 
 
0.067 
 
Interest rate (as a percent)
 
 
 
0.0675 
 
 
0.0225 
 
 
 
 
 
 
 
Debt instrument issued, principal amount
 
 
500 
 
 
402 
 
 
 
 
 
 
 
 
Net proceeds from the sale of the Notes
 
 
496 
 
 
396 
 
 
 
 
 
 
 
 
Initial issuance discount and offering expenses
 
 
 
 
 
 
 
 
 
 
 
 
Redemption price, as percentage of principal amount of debt instrument (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
Conversion rate per one thousand ($1,000) principal amount of debentures (in shares)
 
 
 
 
 
 
21.7391 
 
 
 
 
 
 
 
Initial conversion price (in dollars per share)
 
 
 
 
 
 
46 
 
 
 
 
 
 
 
Conversion terms, condition
 
 
 
 
 
 
The closing price of entity's common stock exceeds a specified price for 20 consecutive trading days in a 30-day trading day period preceding the date of conversion, if credit rating falls below specified levels, if the debentures are called for redemption or if certain specified corporate transactions occur. 
 
 
 
 
 
 
 
Interest rate, minimum at reset dates, July 15, 2011 and July 15, 2016 (as a percent)
 
 
 
 
 
 
0.0225 
 
 
 
 
 
 
 
Interest rate, maximum at reset dates, July 15, 2011 and July 15, 2016 (as a percent)
 
 
 
 
 
 
0.0325 
 
 
 
 
 
 
 
Long-term debt, fair value
1,210 
1,210 
 
 
 
 
 
 
 
 
 
 
 
 
Future maturities of long-term debt, including capitalized leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012
441 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013
37 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014
537 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
36 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
29 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thereafter
72 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Instruments (Details) (USD $)
In Millions
3 Months Ended
Feb. 26, 2011
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Derivative Instruments
 
 
 
Cash flow hedge contract term (in years)
 
Two years 
 
Contract term of derivative instruments not designated as hedging instruments, (in months)
 
 
Gross fair values for derivative instruments
 
 
 
Gross fair values for derivative assets
$ 3 
$ 3 
$ 7 
Gross fair values for derivative liabilities
(4)
(4)
(3)
Cash flow hedges (foreign exchange forward contracts) pre-tax gain (loss) recognized in OCI
 
Net investment hedges (foreign exchange swap contracts) pre-tax gain (loss) recognized in OCI
 
45 
Total pre-tax gain (loss) recognized in OCI
 
17 
46 
Cash flow hedges gain (loss) reclassified from accumulated OCI to earnings (effective portion)
 
 
Cash flow hedges (foreign exchange forward contracts) gain (loss) reclassified from accumulated OCI to earnings (effective portion)
 
12 
Total gain (loss) reclassified from accumulated OCI to earnings (effective portion)
 
12 
Percent pre-tax gain (loss) recognized in OCI reclassified to noncontrolling interest (as a percent)
 
0.50 
0.50 
No hedge designation (foreign exchange forward contracts)
 
13 
(5)
Notional amount derivatives designated as cash flow hedging instruments
264 
264 
203 
Notional amount derivatives designated as net investment hedging instruments
 
 
608 
Notional amount derivatives not designated as hedging instruments
493 
493 
240 
Total notional amount of derivatives
757 
757 
1,051 
Derivatives designated as hedging instruments
 
 
 
Gross fair values for derivative instruments
 
 
 
Gross fair values for derivative assets
 
Gross fair values for derivative liabilities
(2)
 
(1)
Derivatives designated as hedging instruments | Cash Flow Hedging
 
 
 
Gross fair values for derivative instruments
 
 
 
Gross fair values for derivative assets
 
Gross fair values for derivative liabilities
(2)
 
(1)
Derivatives designated as hedging instruments | Net Investment Hedging
 
 
 
Gross fair values for derivative instruments
 
 
 
Gross fair values for derivative assets
 
 
No hedge designation
 
 
 
Gross fair values for derivative instruments
 
 
 
Gross fair values for derivative assets
 
Gross fair values for derivative liabilities
(2)
 
(2)
Shareholders' Equity (Details) (USD $)
In Millions, except Share data
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Stock Compensation Plans
 
 
 
Stock-based compensation expense (in dollars)
$ 121 
$ 118 
$ 110 
Stock Compensation Plans, Shares Authorized and Available
 
 
 
Number of shares authorized under the Omnibus Plan (in shares)
52,000,000 
 
 
Number of shares available for future grants under the Omnibus Plan (in shares)
3,400,000 
 
 
Stock Options
 
 
 
Outstanding at the beginning of the period (in shares)
36,588,000 
 
 
Granted (in shares)
4,924,000 
 
 
Exercised (in shares)
(4,355,000)
 
 
Forfeited/Canceled (in shares)
(1,570,000)
 
 
Outstanding at the end of the period (in shares)
35,587,000 
36,588,000 
 
Vested or expected to vest at the end of the period (in shares)
32,438,000 
 
 
Exercisable at the end of the period (in shares)
21,717,000 
 
 
Weighted-Average Exercise Price per Share
 
 
 
Outstanding at the beginning of the period (in dollars per share)
38.18 
 
 
Granted (in dollars per share)
38.85 
 
 
Exercised (in dollars per share)
30.83 
 
 
Forfeited/Canceled (in dollars per share)
42.88 
 
 
Outstanding at the end of the period (in dollars per share)
38.97 
38.18 
 
Vested or expected to vest at the end of the period (in dollars per share)
39.21 
 
 
Exercisable at the end of the period (in dollars per share)
40.14 
 
 
Weighted-Average Remaining Contractual Term (in years)
 
 
 
Outstanding at the end of the period (in years)
6.4 
 
 
Vested or expected to vest at the end of the period (in years)
6.2 
 
 
Exercisable at the end of the period (in years)
5.1 
 
 
Aggregate Intrinsic Value
 
 
 
Outstanding at the end of the period (in dollars)
41 
 
 
Vested or expected to vest at the end of the period (in dollars)
39 
 
 
Exercisable at the end of the period (in dollars)
30 
 
 
Weighted-average grant-date fair value of stock options granted (in dollars per share)
11.97 
12.69 
13.04 
Aggregate intrinsic value of stock options exercised (in dollars)
52 
28 
26 
Net cash proceeds from the exercise of stock options (in dollars)
134 
96 
34 
Actual income tax benefit realized from stock option exercises (in dollars)
19 
10 
Stock options
 
 
 
Stock Compensation Plans
 
 
 
Term of stock options (in years)
10 years 
 
 
Vesting period (in years)
4Y 
 
 
Stock-based compensation expense (in dollars)
90 
85 
77 
Unrecognized compensation
 
 
 
Unrecognized compensation expense (in dollars)
127 
 
 
Weighted-average period over which compensation expense is expected to be recognized (in years)
1.7 
 
 
Assumptions used in the valuation model
 
 
 
Risk-free interest rate low end of the range (as a percent)
0.002 
0.002 
0.009 
Risk-free interest rate high end of the range (as a percent)
0.039 
0.038 
0.04 
Expected dividend yield (as a percent)
0.015 
0.016 
0.016 
Expected stock price volatility (as a percent)
0.36 
0.42 
0.45 
Expected life of stock options (in years)
6.1 
6.1 
6.1 
Market-based
 
 
 
Stock Compensation Plans
 
 
 
Vesting period (in years)
3Y 
 
 
Stock-based compensation expense (in dollars)
13 
Equity instrument other than options
 
 
 
Outstanding at the beginning of the period (in shares)
633,000 
 
 
Vested (in shares)
(200,000)
 
 
Forfeited/Canceled (in shares)
(240,000)
 
 
Outstanding at the end of the period (in shares)
193,000 
633,000 
 
Weighted-Average Fair Value per Share
 
 
 
Outstanding at the beginning of the period (in dollars per share)
42.97 
 
 
Vested (in dollars per share)
38.65 
 
 
Forfeited/Canceled (in dollars per share)
39.14 
 
 
Outstanding at the end of the period (in dollars per share)
52.19 
42.97 
 
Performance-based
 
 
 
Stock Compensation Plans
 
 
 
Stock-based compensation expense (in dollars)
(1)
Equity instrument other than options
 
 
 
Outstanding at the beginning of the period (in shares)
2,343,000 
 
 
Granted (in shares)
6,000 
 
 
Vested (in shares)
(64,000)
 
 
Forfeited/Canceled (in shares)
(106,000)
 
 
Outstanding at the end of the period (in shares)
2,179,000 
2,343,000 
 
Weighted-Average Fair Value per Share
 
 
 
Outstanding at the beginning of the period (in dollars per share)
42.11 
 
 
Granted (in dollars per share)
44.20 
 
 
Vested (in dollars per share)
54.13 
 
 
Forfeited/Canceled (in dollars per share)
44.58 
 
 
Outstanding at the end of the period (in dollars per share)
41.64 
42.11 
 
Time-based
 
 
 
Stock Compensation Plans
 
 
 
Minimum term of vesting period, options vesting in their entirety (in years)
Three-year 
 
 
Maximum term of vesting period, options vesting in their entirety (in years)
Four-year 
 
 
Vesting percentage per increment, options vesting in annual increments
25% of the award vests on the date of grant and 25% vests on each of the three anniversary dates thereafter 
 
 
Stock-based compensation expense (in dollars)
16 
10 
Unrecognized compensation
 
 
 
Unrecognized compensation expense (in dollars)
53 
 
 
Weighted-average period over which compensation expense is expected to be recognized (in years)
 
 
Equity instrument other than options
 
 
 
Outstanding at the beginning of the period (in shares)
1,332,000 
 
 
Granted (in shares)
1,321,000 
 
 
Vested (in shares)
(380,000)
 
 
Forfeited/Canceled (in shares)
(102,000)
 
 
Outstanding at the end of the period (in shares)
2,171,000 
1,332,000 
 
Weighted-Average Fair Value per Share
 
 
 
Outstanding at the beginning of the period (in dollars per share)
34.06 
 
 
Granted (in dollars per share)
38.40 
 
 
Vested (in dollars per share)
34.17 
 
 
Forfeited/Canceled (in dollars per share)
35.93 
 
 
Outstanding at the end of the period (in dollars per share)
36.60 
34.06 
 
2003 and 2008 Employee Stock Purchase Plans
 
 
 
Stock Compensation Plans
 
 
 
Discounted purchase rate on the market price of the stock (as a percent)
0.85 
 
 
Stock-based compensation expense (in dollars)
12 
14 
14 
Assumptions used in the valuation model
 
 
 
Risk-free interest rate (as a percent)
0.002 
0.003 
0.013 
Expected dividend yield (as a percent)
0.014 
0.015 
0.014 
Expected stock price volatility (as a percent)
0.29 
0.53 
0.42 
Expected life of employee stock purchase plan options (in months)
Employee Stock Purchase Plans
 
 
 
Purchase of shares through employee stock purchase plans (in shares)
1,300,000 
1,200,000 
1,400,000 
Weighted-average fair value of shares purchased (in dollars per share)
$ 9.54 
$ 11.34 
$ 10.32 
Amount accumulated by plan participants to purchase common stock (in dollars)
19 
18 
 
Shareholders' Equity (Details 2)
In Millions, except Share data
Jun. 30, 2007
Jun. 30, 2006
3 Months Ended
Feb. 26, 2011
3 Months Ended
Feb. 27, 2010
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Outstanding options to purchase common stock
 
 
 
 
 
 
 
Exercisable stock options (in shares)
 
 
21,717,000 
 
21,717,000 
 
 
Percentage of exercisable stock options (as a percent)
 
 
 
 
 
Exercisable stock options, weighted-average price (in dollars per share)
 
 
40.14 
 
40.14 
 
 
Unexercisable stock options (in shares)
 
 
13,900,000 
 
13,900,000 
 
 
Percentage of unexercisable stock options (as a percent)
 
 
 
 
 
Unexercisable stock options, weighted-average price (in dollars per share)
 
 
37.13 
 
37.13 
 
 
Total outstanding stock options (in shares)
 
 
35,587,000 
36,588,000 
35,587,000 
36,588,000 
 
Percentage of outstanding stock options (as a percent)
 
 
 
 
 
Outstanding stock options, weighted-average price (in dollars per share)
 
 
38.97 
38.18 
38.97 
38.18 
 
Numerator:
 
 
 
 
 
 
 
Net earnings attributable to Best Buy Co., Inc., basic (in dollars)
 
 
651 
779 
1,277 
1,317 
1,003 
Adjustment for assumed dilution:
 
 
 
 
 
 
 
Interest on convertible debentures due in 2022, net of tax (in dollars)
 
 
 
 
Net earnings attributable to Best Buy Co., Inc., diluted (in dollars)
 
 
 
 
1,283 
1,323 
1,009 
Denominator (in millions):
 
 
 
 
 
 
 
Weighted-average common shares outstanding (in shares)
 
 
 
 
406,100,000 
416,800,000 
412,500,000 
Effect of potentially dilutive securities:
 
 
 
 
 
 
 
Shares from assumed conversion of convertible debentures (in shares)
 
 
 
 
8,800,000 
8,800,000 
8,800,000 
Stock options and other (in shares)
 
 
 
 
1,600,000 
1,900,000 
1,600,000 
Weighted-average common shares outstanding, assuming dilution (in shares)
 
 
 
 
416,500,000 
427,500,000 
422,900,000 
Earnings per share attributable to Best Buy Co., Inc.
 
 
 
 
 
 
 
Basic (in dollars per share)
 
 
 
 
3.14 
3.16 
2.43 
Diluted (in dollars per share)
 
 
1.62 
1.82 
3.08 
3.10 
2.39 
Repurchase of Common Stock
 
 
 
 
 
 
 
Share repurchases authorized (in dollars)
5,500 
1,500 
 
 
 
 
 
Amount remaining available for future share repurchases (in dollars)
 
 
 
 
1,307 
 
 
Open Market Repurchases
 
 
 
 
 
 
 
Total number of shares repurchased (in shares)
 
 
 
 
32,600,000 
 
 
Total cost of shares repurchased (in dollars)
 
 
 
 
1,193 
 
 
Comprehensive Income
 
 
 
 
 
 
 
Comprehensive income (in dollars)
 
 
 
 
1,410 
1,674 
184 
Components of accumulated other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation (in dollars)
 
 
102 
26 
102 
26 
 
Unrealized gains on available-for-sale investments (in dollars)
 
 
72 
14 
72 
14 
 
Unrealized losses on derivative instruments (cash flow hedges) (in dollars)
 
 
(1)
 
(1)
 
 
Total
 
 
173 
40 
173 
40 
 
In-the-money
 
 
 
 
 
 
 
Outstanding options to purchase common stock
 
 
 
 
 
 
 
Exercisable stock options (in shares)
 
 
9,000,000 
 
 
 
 
Percentage of exercisable stock options (as a percent)
 
 
0.41 
 
 
 
 
Exercisable stock options, weighted-average price (in dollars per share)
 
 
30.61 
 
 
 
 
Unexercisable stock options (in shares)
 
 
8,500,000 
 
 
 
 
Percentage of unexercisable stock options (as a percent)
 
 
0.61 
 
 
 
 
Unexercisable stock options, weighted-average price (in dollars per share)
 
 
33.59 
 
 
 
 
Total outstanding stock options (in shares)
 
 
17,500,000 
 
 
 
 
Percentage of outstanding stock options (as a percent)
 
 
0.49 
 
 
 
 
Outstanding stock options, weighted-average price (in dollars per share)
 
 
32.06 
 
 
 
 
Out-of-the-money
 
 
 
 
 
 
 
Outstanding options to purchase common stock
 
 
 
 
 
 
 
Exercisable stock options (in shares)
 
 
12,700,000 
 
 
 
 
Percentage of exercisable stock options (as a percent)
 
 
0.59 
 
 
 
 
Exercisable stock options, weighted-average price (in dollars per share)
 
 
46.83 
 
 
 
 
Unexercisable stock options (in shares)
 
 
5,400,000 
 
 
 
 
Percentage of unexercisable stock options (as a percent)
 
 
0.39 
 
 
 
 
Unexercisable stock options, weighted-average price (in dollars per share)
 
 
42.78 
 
 
 
 
Total outstanding stock options (in shares)
 
 
18,100,000 
 
 
 
 
Percentage of outstanding stock options (as a percent)
 
 
0.51 
 
 
 
 
Outstanding stock options, weighted-average price (in dollars per share)
 
 
45.63 
 
 
 
 
Leases (Details) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Composition of net rent expense for operating leases, including leases of property and equipment
 
 
 
Minimum rentals
$ 1,176 
$ 1,145 
$ 962 
Contingent rentals
Total rent expense
1,178 
1,147 
963 
Less: sublease income
(19)
(20)
(23)
Net rent expense
1,159 
1,127 
940 
Future minimum lease payments under capital leases
 
 
 
2012
18 
 
 
2013
16 
 
 
2014
16 
 
 
2015
14 
 
 
2016
 
 
Thereafter
25 
 
 
Subtotal
97 
 
 
Less: imputed interest
(18)
 
 
Present value
79 
 
 
Future minimum lease payments under financing leases
 
 
 
2012
34 
 
 
2013
32 
 
 
2014
30 
 
 
2015
29 
 
 
2016
25 
 
 
Thereafter
60 
 
 
Subtotal
210 
 
 
Less: imputed interest
(40)
 
 
Present value
170 
 
 
Future minimum lease payments under operating leases
 
 
 
2012
1,208 
 
 
2013
1,166 
 
 
2014
1,079 
 
 
2015
992 
 
 
2016
872 
 
 
Thereafter
2,930 
 
 
Subtotal
8,247 
 
 
Minimum sublease rent income excluded from minimum lease payments
124 
 
 
Information system and real estate capital leases, agreements' amount
52 
 
Benefit Plans (Details) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Benefit Plans
 
 
 
Maximum percentage of a participant's eligible compensation that a participant may contribute annually to the plan (as a percent)
0.5 
 
 
Percentage of participating employees contribution, matched 100% (as a percent)
0.03 
 
 
Percentage of participating employees contribution, matched 50% (as a percent)
0.02 
 
 
Percentage of matching contribution made by company, of first 3% of participating employees' contributions (as a percent)
 
 
Percentage of matching contribution made by company, of next 2% of participating employees' contributions (as a percent)
0.50 
 
 
Employer contribution
$ 69 
$ 62 
$ 58 
Non-qualified, unfunded deferred compensation plan
 
 
 
Benefit Plans
 
 
 
Deferred compensation liability
64 
61 
 
Cash value of the investment vehicles
83 
75 
 
Income Taxes (Details) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Reconciliation of the federal statutory income tax rate to income tax expense
 
 
 
Federal income tax at the statutory rate
$ 727 
$ 768 
$ 595 
State Income taxes, net of federal benefit
42 
66 
49 
Benefit from foreign operations
(50)
(41)
(30)
Non-taxable interest income
 
(1)
(3)
Other
(5)
10 
16 
Impairments
 
 
47 
Income tax expense
$ 714 
$ 802 
$ 674 
Effective income tax rate (as a percent)
0.344 
0.365 
0.396 
Income Taxes (Details 2) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Earnings before income tax expense and equity in income of affiliates
 
 
 
United States
$ 1,629 
$ 1,870 
$ 1,540 
Outside the United States
449 
325 
160 
Earnings before income tax expense and equity in income of affiliates
2,078 
2,195 
1,700 
Current:
 
 
 
Federal
689 
666 
573 
State
67 
113 
78 
Foreign
92 
53 
66 
Current income tax expense
848 
832 
717 
Deferred:
 
 
 
Federal
(113)
(13)
(7)
State
(2)
(11)
Foreign
(19)
(6)
(37)
Deferred income tax expense
(134)
(30)
(43)
Income tax expense
$ 714 
$ 802 
$ 674 
Income Taxes (Details 3) (USD $)
In Millions
Feb. 26, 2011
Feb. 27, 2010
Components of deferred income tax assets and liabilities
 
 
Accrued property expenses
$ 154 
$ 149 
Other accrued expenses
122 
126 
Deferred revenue
141 
150 
Compensation and benefits
86 
64 
Stock-based compensation
137 
125 
Net operating loss carryforwards
247 
211 
Other deferred tax assets
181 
60 
Total deferred tax assets
1,068 
885 
Valuation allowance
(212)
(151)
Total deferred tax assets after valuation allowance
856 
734 
Property and equipment
(316)
(381)
Convertible debt
(79)
(71)
Goodwill and intangibles
(123)
(125)
Other deferred tax liabilities
(47)
(31)
Total deferred tax liabilities
(565)
(608)
Net deferred tax assets
291 
126 
Other current assets
261 
244 
Other assets
98 
19 
Other long-term liabilities
(68)
(137)
Net deferred tax assets
$ 291 
$ 126 
Income Taxes (Details 4) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Income Taxes
 
Net Operating loss carryforwards from international operations
$ 218 
Net Operating loss carryforwards from international operations expire in various years
93 
U.S. federal net operating loss carryforwards which expire between 2025 and 2028
29 
U.S. federal foreign tax credits which expire between 2015 and 2021
58 
Valuation allowance, related to the international net operating loss carryforwards and other international deferred tax assets
212 
Increase in the valuation allowance, related to the international net operating loss carryforwards and other international deferred tax assets
61 
Unremitted profits of foreign operations considered indefinitely reinvested
$ 1,764 
Income Taxes (Details 5) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Reconciliation of changes in unrecognized tax benefits
 
 
Balance at the beginning of the period
$ 393 
$ 349 
Gross increases related to prior period tax positions
36 
96 
Gross decreases related to prior period tax positions
(90)
(72)
Gross increases related to current period tax positions
40 
50 
Settlements with taxing authorities
 
(24)
Lapse of statute of limitations
(20)
(6)
Balance at the end of the period
359 
393 
Unrecognized tax benefits that would impact the effective tax rate if recognized
233 
195 
Interest expense recognized as component of income tax expense
 
Penalties expense (benefit) recognized as component of income tax expense
(4)
 
Accrued interest in income tax expense
84 
78 
Accrued penalties in income tax expense
$ 0 
$ 4 
Segment and Geographic Information (Details) (USD $)
In Millions
3 Months Ended
Feb. 26, 2011
3 Months Ended
Feb. 27, 2010
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Segment and Geographic Information
 
 
 
 
 
Number of Segments
 
 
 
 
Business segment information
 
 
 
 
 
Total revenue
$ 16,256 
$ 16,553 
$ 50,272 
$ 49,694 
$ 45,015 
Operating income
1,005 
1,283 
2,114 
2,235 
1,870 
Other income (expense)
 
 
 
 
 
Investment income and other
 
 
51 
54 
35 
Investment impairment
 
 
 
 
(111)
Interest expense
 
 
(87)
(94)
(94)
Earnings from operations before income tax expense and equity in income (loss) of affiliates
 
 
2,078 
2,195 
1,700 
Total Assets
17,849 
18,302 
17,849 
18,302 
15,826 
Total capital expenditures
 
 
744 
615 
1,303 
Total depreciation
 
 
896 
838 
730 
Domestic
 
 
 
 
 
Business segment information
 
 
 
 
 
Total revenue
 
 
37,186 
37,314 
35,070 
Percentage of revenue, by revenue category (as a percent)
 
 
Operating income
 
 
2,031 
2,071 
1,758 
Other income (expense)
 
 
 
 
 
Total Assets
 
 
9,610 
10,431 
9,059 
Total capital expenditures
 
 
481 
385 
971 
Total depreciation
 
 
623 
585 
550 
Domestic | Consumer electronics
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.37 
0.39 
 
 
0.39 
Domestic | Home office
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.37 
0.34 
 
 
0.31 
Domestic | Entertainment
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.14 
0.16 
 
 
0.19 
Domestic | Appliances
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.05 
0.04 
 
 
0.05 
Domestic | Services
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.06 
0.06 
 
 
0.06 
Domestic | Other
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.01 
0.01 
 
 
 
Maximum percentage of revenue, by revenue category (as a percent)
 
 
 
 
0.01 
International
 
 
 
 
 
Business segment information
 
 
 
 
 
Total revenue
 
 
13,086 
12,380 
9,945 
Percentage of revenue, by revenue category (as a percent)
 
 
Operating income
 
 
83 
164 
112 
Other income (expense)
 
 
 
 
 
Total Assets
 
 
8,239 
7,871 
6,767 
Total capital expenditures
 
 
263 
230 
332 
Total depreciation
 
 
273 
253 
180 
International | Consumer electronics
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.21 
0.20 
 
 
0.26 
International | Home office
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.55 
0.53 
 
 
0.45 
International | Entertainment
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.06 
0.07 
 
 
0.09 
International | Appliances
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.09 
0.08 
 
 
0.10 
International | Services
 
 
 
 
 
Business segment information
 
 
 
 
 
Percentage of revenue, by revenue category (as a percent)
0.09 
0.12 
 
 
0.10 
International | Other
 
 
 
 
 
Business segment information
 
 
 
 
 
Maximum percentage of revenue, by revenue category (as a percent)
0.01 
0.01 
 
 
0.01 
Segment and Geographic Information (Details 2) (USD $)
In Millions
3 Months Ended
Feb. 26, 2011
3 Months Ended
Nov. 27, 2010
3 Months Ended
Aug. 28, 2010
3 Months Ended
May 29, 2010
3 Months Ended
Feb. 27, 2010
3 Months Ended
Nov. 28, 2009
3 Months Ended
Aug. 29, 2009
3 Months Ended
May 30, 2009
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Geographic information
 
 
 
 
 
 
 
 
 
 
 
Total revenue
$ 16,256 
$ 11,890 
$ 11,339 
$ 10,787 
$ 16,553 
$ 12,024 
$ 11,022 
$ 10,095 
$ 50,272 
$ 49,694 
$ 45,015 
Total long-lived assets
3,823 
 
 
 
4,070 
 
 
 
3,823 
4,070 
4,174 
United States
 
 
 
 
 
 
 
 
 
 
 
Geographic information
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
37,186 
37,315 
35,070 
Total long-lived assets
 
 
 
 
 
 
 
 
2,741 
2,960 
3,155 
Europe
 
 
 
 
 
 
 
 
 
 
 
Geographic information
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
5,511 
5,591 
3,205 
Total long-lived assets
 
 
 
 
 
 
 
 
438 
464 
439 
Canada
 
 
 
 
 
 
 
 
 
 
 
Geographic information
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
5,468 
5,065 
5,174 
Total long-lived assets
 
 
 
 
 
 
 
 
474 
462 
408 
China
 
 
 
 
 
 
 
 
 
 
 
Geographic information
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
1,952 
1,677 
1,558 
Total long-lived assets
 
 
 
 
 
 
 
 
147 
152 
161 
Other.
 
 
 
 
 
 
 
 
 
 
 
Geographic information
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
155 
46 
Total long-lived assets
 
 
 
 
 
 
 
 
23 
32 
11 
Contingencies and Commitments (Details) (USD $)
In Millions
Feb. 26, 2011
Purchase commitments
 
Minimum future contractual obligation to Accenture
$ 165 
Maximum future contractual obligation to Accenture
215 
Outstanding letters of credit and bankers' acceptances
 
Purchase commitments
 
Commitments for the purchase obligations
516 
Purchase and Construction of Facilities
 
Purchase commitments
 
Commitments for the purchase obligations
32 
Lease commitments for land and buildings
 
Purchase commitments
 
Number of future locations
27 
Minimum period for minimum rentals (in years)
Maximum period for minimum rentals (in years)
20 
Minimum rentals per year
$ 15 
Sale of business (Details) (USD $)
In Millions
3 Months Ended
Aug. 28, 2010
Sale of Business
 
Number of combined businesses
Gain on Sale of Speakeasy
$ 7 
Related-Party Transactions (Details) (Best Buy Europe, Carphone Warehouse Group PLC ("CPW"), USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Best Buy Europe | Carphone Warehouse Group PLC ("CPW")
 
 
 
Related-Party Transactions
 
 
 
Revenue earned (primarily commission revenue and fees for information technology services provided to CPW and Carphone Warehouse)
$ 6 
$ 63 
$ 12 
SG&A incurred (primarily for rent and other payroll-related costs paid to CPW and Carphone Warehouse)
29 
Interest expense incurred on credit facility with CPW and Carphone Warehouse as lender
15 
Accounts payable to CPW and Carphone Warehouse at the end of the fiscal year
 
108 
Accounts receivable from CPW and Carphone Warehouse at the end of the fiscal year
31 
60 
Balance outstanding on credit facility from CPW and Carphone Warehouse at the end of the fiscal year
$ 98 
$ 206 
$ 584 
Subsequent Event (Details) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Issuance of Debt
 
Subsequent Event
 
Debt instrument issued, principal amount
$ 1,000 
Underwriting discounts on the issuance of debt
Net proceeds from the sale of the Notes
990 
Percentage of the principal amount of notes redeemed (as a percent)
Redemption price as a percentage of the principal amount of Notes if triggering event occurs (as a percent)
1.01 
2016 Notes
 
Subsequent Event
 
Debt instrument issued, principal amount
350 
Interest rate (as a percent)
0.0375 
2021 Notes
 
Subsequent Event
 
Debt instrument issued, principal amount
$ 650 
Interest rate (as a percent)
0.055 
Condensed Consolidating Financial Information (Details) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Condensed Consolidating Financial Information
 
Convertible debentures, aggregate principal and carrying amount
$ 402 
Percentage of voting interest of subsidiary (as a percent)
Condensed Consolidating Financial Information (Details 2) (USD $)
In Millions
Feb. 26, 2011
Feb. 27, 2010
Current Assets
 
 
Cash and cash equivalents
$ 1,103 
$ 1,826 
Short-term investments
22 
90 
Receivables
2,348 
2,020 
Merchandise inventories
5,897 
5,486 
Other current assets
1,103 
1,144 
Total current assets
10,473 
10,566 
Property and Equipment, Net
3,823 
4,070 
Goodwill
2,454 
2,452 
Tradenames, net
133 
159 
Customer Relationships, Net
203 
279 
Equity and Other Investments
328 
324 
Other Assets
435 
452 
Total Assets
17,849 
18,302 
Current Liabilities
 
 
Accounts payable
4,894 
5,276 
Unredeemed gift card liabilities
474 
463 
Accrued compensation and related expenses
570 
544 
Accrued liabilities
1,471 
1,681 
Accrued income taxes
256 
316 
Current portion of long-term debt
441 
35 
Total current liabilities
8,663 
8,978 
Long-Term Liabilities
1,183 
1,256 
Total long-term debt, less current portion
711 
1,104 
Shareholders' equity
6,602 
6,320 
Noncontrolling interests
690 
644 
Total equity
7,292 
6,964 
Total Liabilities and Equity
17,849 
18,302 
Best Buy Co., Inc.
 
 
Current Assets
 
 
Cash and cash equivalents
282 
1,170 
Short-term investments
20 
88 
Receivables
 
Other current assets
234 
221 
Intercompany note receivable
854 
833 
Total current assets
1,393 
2,312 
Property and Equipment, Net
200 
214 
Equity and Other Investments
162 
216 
Other Assets
181 
103 
Investments in Subsidiaries
14,030 
12,246 
Total Assets
15,966 
15,091 
Current Liabilities
 
 
Accounts payable
361 
414 
Accrued compensation and related expenses
 
Accrued liabilities
13 
25 
Accrued income taxes
256 
316 
Current portion of long-term debt
402 
Intercompany payable
7,497 
6,816 
Intercompany note payable
103 
 
Total current liabilities
8,632 
7,576 
Long-Term Liabilities
160 
247 
Total long-term debt, less current portion
500 
902 
Shareholders' equity
6,674 
6,366 
Total equity
6,674 
6,366 
Total Liabilities and Equity
15,966 
15,091 
Guarantor Subsidiary
 
 
Current Assets
 
 
Cash and cash equivalents
51 
53 
Receivables
738 
485 
Merchandise inventories
3,973 
3,662 
Other current assets
117 
149 
Total current assets
4,879 
4,349 
Property and Equipment, Net
1,803 
1,864 
Goodwill
Other Assets
36 
34 
Investments in Subsidiaries
229 
287 
Total Assets
6,953 
6,540 
Current Liabilities
 
 
Accounts payable
101 
26 
Unredeemed gift card liabilities
404 
401 
Accrued compensation and related expenses
200 
218 
Accrued liabilities
625 
652 
Current portion of long-term debt
23 
21 
Intercompany payable
1,665 
1,167 
Intercompany note payable
500 
500 
Total current liabilities
3,518 
2,985 
Long-Term Liabilities
863 
1,123 
Total long-term debt, less current portion
128 
136 
Shareholders' equity
2,444 
2,296 
Total equity
2,444 
2,296 
Total Liabilities and Equity
6,953 
6,540 
Non-Guarantor Subsidiaries
 
 
Current Assets
 
 
Cash and cash equivalents
770 
603 
Short-term investments
Receivables
1,607 
1,535 
Merchandise inventories
1,999 
1,873 
Other current assets
752 
775 
Intercompany receivable
9,300 
7,983 
Intercompany note receivable
91 
 
Total current assets
14,521 
12,771 
Property and Equipment, Net
1,820 
1,992 
Goodwill
2,448 
2,446 
Tradenames, net
133 
159 
Customer Relationships, Net
203 
279 
Equity and Other Investments
166 
108 
Other Assets
273 
362 
Investments in Subsidiaries
2,444 
2,296 
Total Assets
22,008 
20,413 
Current Liabilities
 
 
Accounts payable
4,432 
4,836 
Unredeemed gift card liabilities
70 
62 
Accrued compensation and related expenses
370 
322 
Accrued liabilities
833 
1,004 
Current portion of long-term debt
16 
13 
Intercompany payable
138 
 
Intercompany note payable
342 
333 
Total current liabilities
6,758 
7,233 
Long-Term Liabilities
447 
224 
Total long-term debt, less current portion
83 
66 
Shareholders' equity
14,030 
12,246 
Noncontrolling interests
690 
644 
Total equity
14,720 
12,890 
Total Liabilities and Equity
22,008 
20,413 
Eliminations
 
 
Current Assets
 
 
Merchandise inventories
(75)
(49)
Other current assets
 
(1)
Intercompany receivable
(9,300)
(7,983)
Intercompany note receivable
(945)
(833)
Total current assets
(10,320)
(8,866)
Other Assets
(55)
(47)
Investments in Subsidiaries
(16,703)
(14,829)
Total Assets
(27,078)
(23,742)
Current Liabilities
 
 
Intercompany payable
(9,300)
(7,983)
Intercompany note payable
(945)
(833)
Total current liabilities
(10,245)
(8,816)
Long-Term Liabilities
(287)
(338)
Shareholders' equity
(16,546)
(14,588)
Total equity
(16,546)
(14,588)
Total Liabilities and Equity
$ (27,078)
$ (23,742)
Condensed Consolidating Financial Information (Details 3) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Revenue
$ 50,272 
$ 49,694 
$ 45,015 
Cost of goods sold
37,611 
37,534 
34,017 
Restructuring charges - cost of goods sold
24 
 
 
Gross profit
12,637 
12,160 
10,998 
Selling, general and administrative expenses
10,325 
9,873 
8,984 
Restructuring charges
198 
52 
78 
Goodwill and tradename impairment
 
 
66 
Operating income (loss)
2,114 
2,235 
1,870 
Other income (expense)
 
 
 
Investment income and other
51 
54 
35 
Investment impairment
 
 
(111)
Interest expense
(87)
(94)
(94)
Earnings (loss) before income tax expense (benefit) and equity in income (loss) of affiliates
2,078 
2,195 
1,700 
Income tax expense (benefit)
714 
802 
674 
Equity in income (loss) of affiliates
Net earnings (loss) including noncontrolling interests
1,366 
1,394 
1,033 
Net earnings attributable to noncontrolling interests
(89)
(77)
(30)
Net earnings (loss) attributable to Best Buy Co., Inc.
1,277 
1,317 
1,003 
Best Buy Co., Inc.
 
 
 
Revenue
16 
16 
16 
Gross profit
16 
16 
16 
Selling, general and administrative expenses
169 
166 
150 
Operating income (loss)
(153)
(150)
(134)
Other income (expense)
 
 
 
Investment income and other
20 
10 
12 
Interest expense
(47)
(59)
(211)
Equity in earnings (loss) of subsidiaries
1,189 
(335)
1,293 
Earnings (loss) before income tax expense (benefit) and equity in income (loss) of affiliates
1,009 
(534)
960 
Income tax expense (benefit)
(50)
471 
(302)
Net earnings (loss) including noncontrolling interests
1,059 
(1,005)
1,262 
Net earnings (loss) attributable to Best Buy Co., Inc.
1,059 
(1,005)
1,262 
Guarantor Subsidiary
 
 
 
Revenue
33,924 
34,347 
32,407 
Cost of goods sold
25,140 
25,809 
26,793 
Restructuring charges - cost of goods sold
 
 
Gross profit
8,775 
8,538 
5,614 
Selling, general and administrative expenses
8,439 
8,170 
5,317 
Restructuring charges
25 
43 
Operating income (loss)
327 
343 
254 
Other income (expense)
 
 
 
Investment income and other
 
 
Interest expense
(15)
(21)
(47)
Equity in earnings (loss) of subsidiaries
49 
(3)
(146)
Earnings (loss) before income tax expense (benefit) and equity in income (loss) of affiliates
361 
320 
61 
Income tax expense (benefit)
118 
122 
99 
Net earnings (loss) including noncontrolling interests
243 
198 
(38)
Net earnings (loss) attributable to Best Buy Co., Inc.
243 
198 
(38)
Non-Guarantor Subsidiaries
 
 
 
Revenue
45,843 
43,743 
47,925 
Cost of goods sold
39,022 
39,292 
42,316 
Restructuring charges - cost of goods sold
15 
 
 
Gross profit
6,806 
4,451 
5,609 
Selling, general and administrative expenses
4,895 
4,705 
3,499 
Restructuring charges
189 
27 
35 
Goodwill and tradename impairment
 
 
66 
Operating income (loss)
1,722 
(281)
2,009 
Other income (expense)
 
 
 
Investment income and other
43 
66 
206 
Investment impairment
 
 
(111)
Interest expense
(37)
(37)
(19)
Equity in earnings (loss) of subsidiaries
194 
202 
108 
Earnings (loss) before income tax expense (benefit) and equity in income (loss) of affiliates
1,922 
(50)
2,193 
Income tax expense (benefit)
646 
209 
877 
Equity in income (loss) of affiliates
Net earnings (loss) including noncontrolling interests
1,278 
(258)
1,323 
Net earnings attributable to noncontrolling interests
(89)
(77)
(30)
Net earnings (loss) attributable to Best Buy Co., Inc.
1,189 
(335)
1,293 
Eliminations
 
 
 
Revenue
(29,511)
(28,412)
(35,333)
Cost of goods sold
(26,551)
(27,567)
(35,092)
Gross profit
(2,960)
(845)
(241)
Selling, general and administrative expenses
(3,178)
(3,168)
18 
Operating income (loss)
218 
2,323 
(259)
Other income (expense)
 
 
 
Investment income and other
(12)
(23)
(183)
Interest expense
12 
23 
183 
Equity in earnings (loss) of subsidiaries
(1,432)
136 
(1,255)
Earnings (loss) before income tax expense (benefit) and equity in income (loss) of affiliates
(1,214)
2,459 
(1,514)
Net earnings (loss) including noncontrolling interests
(1,214)
2,459 
(1,514)
Net earnings (loss) attributable to Best Buy Co., Inc.
$ (1,214)
$ 2,459 
$ (1,514)
Condensed Consolidating Financial Information (Details 4) (USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Total cash provided by (used in) operating activities
$ 1,190 
$ 2,206 
$ 1,877 
Investing activities
 
 
 
Additions to property and equipment
(744)
(615)
(1,303)
Purchases of investments
(267)
(16)
(81)
Sales of investments
415 
56 
246 
Acquisition of businesses, net of cash acquired
 
(7)
(2,170)
Proceeds from sale of business, net of cash transferred
21 
 
 
Change in restricted assets
(2)
18 
(97)
Settlement of net investment hedges
12 
40 
 
Other, net
(4)
(16)
(22)
Total cash provided by (used in) investing activities
(569)
(540)
(3,427)
Financing activities
 
 
 
Repurchase of common stock
(1,193)
 
 
Issuance of common stock under employee stock purchase plan and for the exercise of stock options
179 
138 
83 
Dividends paid
(237)
(234)
(223)
Repayments of debt
(3,120)
(5,342)
(4,712)
Proceeds from issuance of debt
3,021 
5,132 
5,606 
Acquisition of noncontrolling interests
(21)
(34)
(146)
Excess tax benefits from stock-based compensation
11 
Other, net
(15)
(23)
Total cash provided by (used in) financing activities
(1,357)
(348)
591 
Effect of Exchange Rate Changes on Cash
13 
10 
19 
Increase (Decrease) in Cash and Cash Equivalents
(723)
1,328 
(940)
Cash and Cash Equivalents at Beginning of Year
1,826 
498 
1,438 
Cash and Cash Equivalents at End of Year
1,103 
1,826 
498 
Best Buy Co., Inc.
 
 
 
Total cash provided by (used in) operating activities
(288)
(1,351)
(1,281)
Investing activities
 
 
 
Purchases of investments
(267)
(16)
(28)
Sales of investments
397 
45 
91 
Change in restricted assets
 
(5)
 
Total cash provided by (used in) investing activities
130 
24 
63 
Financing activities
 
 
 
Repurchase of common stock
(1,193)
 
 
Issuance of common stock under employee stock purchase plan and for the exercise of stock options
179 
138 
83 
Dividends paid
(237)
(234)
(223)
Repayments of debt
(886)
(3,035)
(3,249)
Proceeds from issuance of debt
885 
2,870 
3,795 
Excess tax benefits from stock-based compensation
11 
Other, net
 
 
(5)
Change in intercompany activity
511 
2,601 
790 
Total cash provided by (used in) financing activities
(730)
2,347 
1,197 
Increase (Decrease) in Cash and Cash Equivalents
(888)
1,020 
(21)
Cash and Cash Equivalents at Beginning of Year
1,170 
150 
171 
Cash and Cash Equivalents at End of Year
282 
1,170 
150 
Guarantor Subsidiary
 
 
 
Total cash provided by (used in) operating activities
(171)
2,957 
616 
Investing activities
 
 
 
Additions to property and equipment
(319)
(165)
(641)
Acquisition of businesses, net of cash acquired
 
(3)
Other, net
 
(12)
(17)
Total cash provided by (used in) investing activities
(319)
(180)
(656)
Financing activities
 
 
 
Repayments of debt
(13)
(27)
(19)
Proceeds from issuance of debt
 
 
37 
Change in intercompany activity
501 
(2,745)
 
Total cash provided by (used in) financing activities
488 
(2,772)
18 
Increase (Decrease) in Cash and Cash Equivalents
(2)
(22)
Cash and Cash Equivalents at Beginning of Year
53 
48 
70 
Cash and Cash Equivalents at End of Year
51 
53 
48 
Non-Guarantor Subsidiaries
 
 
 
Total cash provided by (used in) operating activities
1,649 
600 
2,542 
Investing activities
 
 
 
Additions to property and equipment
(425)
(450)
(662)
Purchases of investments
 
 
(53)
Sales of investments
18 
11 
155 
Acquisition of businesses, net of cash acquired
 
(4)
(2,172)
Proceeds from sale of business, net of cash transferred
21 
 
 
Change in restricted assets
(2)
23 
(97)
Settlement of net investment hedges
12 
40 
 
Other, net
(4)
(4)
(5)
Total cash provided by (used in) investing activities
(380)
(384)
(2,834)
Financing activities
 
 
 
Repayments of debt
(2,221)
(2,280)
(1,444)
Proceeds from issuance of debt
2,136 
2,262 
1,774 
Acquisition of noncontrolling interests
(21)
(34)
(146)
Other, net
(15)
(18)
Change in intercompany activity
(1,012)
144 
(790)
Total cash provided by (used in) financing activities
(1,115)
77 
(624)
Effect of Exchange Rate Changes on Cash
13 
10 
19 
Increase (Decrease) in Cash and Cash Equivalents
167 
303 
(897)
Cash and Cash Equivalents at Beginning of Year
603 
300 
1,197 
Cash and Cash Equivalents at End of Year
$ 770 
$ 603 
$ 300 
Supplementary Financial Information (Unaudited) (Details) (USD $)
In Millions, except Per Share data
3 Months Ended
Feb. 26, 2011
3 Months Ended
Nov. 27, 2010
3 Months Ended
Aug. 28, 2010
3 Months Ended
May 29, 2010
3 Months Ended
Feb. 27, 2010
3 Months Ended
Nov. 28, 2009
3 Months Ended
Aug. 29, 2009
3 Months Ended
May 30, 2009
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Supplementary Financial Information (Unaudited)
 
 
 
 
 
 
 
 
 
 
Revenue
$ 16,256 
$ 11,890 
$ 11,339 
$ 10,787 
$ 16,553 
$ 12,024 
$ 11,022 
$ 10,095 
$ 50,272 
$ 49,694 
Comparable store sales % change (as a percent)
(0.046)
(0.033)
(0.001)
0.028 
0.07 
0.017 
(0.039)
(0.062)
(0.018)
0.006 
Gross profit
3,943 
2,983 
2,918 
2,793 
3,977 
2,942 
2,684 
2,557 
12,637 
12,160 
Operating income
1,005 
385 
411 
313 
1,283 
376 
280 
296 
2,114 
2,235 
Net earnings including noncontrolling interests
688 
240 
257 
181 
810 
271 
157 
156 
1,366 
1,394 
Net earnings attributable to Best Buy Co., Inc., basic (in dollars)
651 
217 
254 
155 
779 
227 
158 
153 
1,277 
1,317 
Diluted earnings per share (in dollars per share)
$ 1.62 
$ 0.54 
$ 0.60 
$ 0.36 
$ 1.82 
$ 0.53 
$ 0.37 
$ 0.36 
$ 3.08 
$ 3.10 
Restructuring charges
222 
 
 
 
 
 
 
52 
222 
52 
Valuation and Qualifying Accounts (Details) ( Allowance for Doubtful Accounts, USD $)
In Millions
Year Ended
Feb. 26, 2011
Year Ended
Feb. 27, 2010
Year Ended
Feb. 28, 2009
Activity in valuation and qualifying accounts
 
 
 
Balance at Beginning of Period
$ 101 
$ 97 
$ 24 
Charged to Expenses or Other Accounts
46 
48 
(5)
Other
(40)
(44)
78 
Balance at End of Period
$ 107 
$ 101 
$ 97 
Document and Entity Information
In Billions, except Share data
Year Ended
Feb. 26, 2011
Apr. 20, 2011
Aug. 28, 2010
Document and Entity Information
 
 
 
Entity Registrant Name
BEST BUY CO INC 
 
 
Entity Central Index Key
0000764478 
 
 
Document Type
10-K 
 
 
Document Period End Date
2011-02-26 
 
 
Amendment Flag
FALSE 
 
 
Current Fiscal Year End Date
02/26 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
Entity Common Stock, Shares Outstanding
 
389,520,245 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY