UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549

FORM 10-K
(Mark One)
ý
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 26, 2011
OR
o
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                           to                            
Commission file number  1-9595

BEST BUY CO., INC.
 (Exact name of registrant as specified in its charter)

Minnesota	 	41-0907483	
State or other jurisdiction of
incorporation or organization	 	(I.R.S. Employer
Identification No.)	

7601 Penn Avenue South
Richfield, Minnesota	
 	
55423 
(Zip Code)	
(Address of principal executive offices)	 	 	
Registrant's telephone number, including area code 612-291-1000
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	 	Name of each exchange on which registered	
Common Stock, par value $.10 per share	 	New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý Yes o No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes ý No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ý  Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý	 	Accelerated filer o	 	Non-accelerated filer o	 	Smaller reporting company o	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) o Yes ý No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of August 28, 2010, was approximately $8.8 billion, computed by reference to the price of $31.86 per share, the price at which the common equity was last sold on August 28, 2010, as reported on the New York Stock Exchange-Composite Index. (For purposes of this calculation all of the registrant's directors and executive officers are deemed affiliates of the registrant.)
As of April 20, 2011, the registrant had 389,520,245 shares of its Common Stock issued and outstanding.

Table of Contents

 DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement dated on or about May 9, 2011 (to be filed pursuant to Regulation 14A within 120 days after the registrant's fiscal year-end of February 26, 2011), for the regular meeting of shareholders to be held on June 21, 2011 ("Proxy Statement"), are incorporated by reference into Part III.

 CAUTIONARY STATEMENT PURSUANT TO THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), provide a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Annual Report on Form 10-K are forward-looking statements and may be identified by the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "foresee," "plan," "project," "outlook," and other words and terms of similar meaning. Such statements reflect our current view with respect to future events and are subject to certain risks, uncertainties and assumptions. A variety of factors could cause our future results to differ materially from the anticipated results expressed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of this Annual Report on Form 10-K for a description of important factors that could cause our future results to differ materially from those contemplated by the forward-looking statements made in this Annual Report on Form 10-K. Among the factors that could cause our actual future results and outcomes to differ materially from those projected in such forward looking statements are the following: general economic conditions, changes in consumer preferences, credit market constraints, acquisitions and development of new businesses, divestitures, product availability, sales volumes, pricing actions and promotional activities of competitors, profit margins, weather, changes in law or regulations, foreign currency fluctuations, availability of suitable real estate locations, our ability to react to a disaster recovery situation, the impact of labor markets and new product introductions on our overall profitability, failure to achieve anticipated benefits of announced transactions and integration challenges relating to new ventures.

BEST BUY    FISCAL    2011    FORM    10-K
TABLE OF CONTENTS

PART I	 	 	 	 	4	 	
Item 1.	 	Business.	 	 	4	 	
Item 1A.	 	Risk Factors.	 	 	14	 	
Item 1B.	 	Unresolved Staff Comments.	 	 	21	 	
Item 2.	 	Properties.	 	 	22	 	
Item 3.	 	Legal Proceedings.	 	 	25	 	
Item 4.	 	Reserved.	 	 	28	 	
PART II	 	 	 	 	
29	 	
Item 5.	 	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	 	 	29	 	
Item 6.	 	Selected Financial Data.	 	 	32	 	
Item 7.	 	Management's Discussion and Analysis of Financial Condition and Results of Operations.	 	 	34	 	
Item 7A.	 	Quantitative and Qualitative Disclosures About Market Risk.	 	 	65	 	
Item 8.	 	Financial Statements and Supplementary Data.	 	 	66	 	
Item 9.	 	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	 	 	130	 	
Item 9A.	 	Controls and Procedures.	 	 	130	 	
Item 9B.	 	Other Information.	 	 	130	 	
PART III	 	 	 	 	
131	 	
Item 10.	 	Directors, Executive Officers and Corporate Governance.	 	 	131	 	
Item 11.	 	Executive Compensation.	 	 	132	 	
Item 12.	 	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	 	 	132	 	
Item 13.	 	Certain Relationships and Related Transactions, and Director Independence.	 	 	132	 	
Item 14.	 	Principal Accounting Fees and Services.	 	 	132	 	
PART IV	 	 	 	 	
133	 	
Item 15.	 	Exhibits, Financial Statement Schedules.	 	 	133	 	

 	
Signatures	

137	

Table of Contents
PART I
Item 1.  Business.
Description of Business
Unless the context otherwise requires, the use of the terms "we," "us" and "our" in this Annual Report on Form 10-K 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 retail stores and call centers and conduct online retail operations under a variety of brand names such as Best Buy (BestBuy.com, BestBuy.ca, BestBuy.co.uk), Best Buy Mobile (BestBuyMobile.com), The Carphone Warehouse (CarphoneWarehouse.com), Five Star (Five-Star.cn), Future Shop (FutureShop.ca), Geek Squad, Magnolia Audio Video, Napster (Napster.com), Pacific Sales and The Phone House (PhoneHouse.com). References to our Web site addresses do not constitute incorporation by reference of the information contained on the Web sites.
Information About Our Segments
During fiscal 2011, we operated two reportable segments: Domestic and International. The Domestic segment is comprised of the operations in all states, districts and territories of the U.S., operating under various brand names including, but not limited to, Best Buy, Best Buy Mobile, Geek Squad, Magnolia Audio Video, Napster and Pacific Sales.
The International segment is comprised of: (i) all Canada operations, operating under the brand names Best Buy, Best Buy Mobile, Cell Shop, Connect Pro, Future Shop and Geek Squad; (ii) all Europe operations, operating under the brand names Best Buy, The Carphone Warehouse, The Phone House and Geek Squad; (iii) all China operations, operating under the brand names Best Buy, Geek Squad and Five Star; (iv) all Mexico operations, operating under the brand names Best Buy and Geek Squad and (v) all Turkey operations, operating under the brand names Best Buy and Geek Squad.
Financial information about our segments is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations , and Note 12, Segment and Geographic Information , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Domestic Segment
We were incorporated in the state of Minnesota in 1966 as Sound of Music, Inc. We began as an audio components retailer and, with the introduction of the videocassette recorder in the early 1980s, expanded into video products. In 1983, we changed our name to Best Buy Co., Inc. and began using mass-merchandising techniques, which included offering a wider variety of products and operating stores under a "superstore" concept. In 1989, we dramatically changed our method of retailing by introducing a self-service, noncommissioned, discount-style store concept designed to give the customer a variety of brands and more control over the purchasing process. Today, our U.S. Best Buy stores operate a model whereby we offer our customers a wide variety of consumer electronics, home office products, entertainment products, appliances and related services with variations on product assortments, staffing, promotions and store design to address specific customer groups and local market needs.
In fiscal 2001, we acquired Magnolia Hi-Fi, Inc. — a Seattle-based, high-end retailer of audio and video products and services — to access an upscale customer segment. In fiscal 2005, we began operating Magnolia Home Theater store-within-a-store experiences in U.S. Best Buy stores, offering customers high-end electronics with specially trained employees.
In fiscal 2003, we acquired Geek Squad Inc. Geek Squad provides repair, support and installation services. We acquired Geek Squad to further our plans of providing technology support services to customers. Geek Squad service is available in all U.S. Best Buy branded stores.
4

Table of Contents
In fiscal 2007, we acquired California-based Pacific Sales Kitchen and Bath Centers, Inc. ("Pacific Sales"). Pacific Sales specializes in the sale and installation of high-end and mass-market premium brand kitchen appliances, plumbing fixtures and home entertainment products, with a focus on builders and remodelers.
In fiscal 2007, we also developed the Best Buy Mobile concept through a management consulting agreement with U.K.-based The Carphone Warehouse Group PLC ("CPW"). Best Buy Mobile provides a comprehensive assortment of mobile phones, accessories and related services using experienced sales personnel, now in all U.S. Best Buy stores, as well as stand-alone stores.
In fiscal 2008, we acquired Speakeasy Inc. ("Speakeasy"). Speakeasy provides broadband, voice, data and information technology services to small businesses. During the second quarter of fiscal 2011, we completed the sale of our Speakeasy business to Covad Communications Group.
In fiscal 2009, we acquired Napster, Inc. Napster provides a comprehensive digital music service offering, including digital music downloads and on-demand streaming capabilities.
International Segment
Our International segment was established in fiscal 2002 in connection with our acquisition of Future Shop Ltd., Canada's largest consumer electronics retailer.
During fiscal 2003, we launched our dual-branding strategy in Canada by introducing the Best Buy brand. The dual-branding strategy allows us to retain Future Shop's brand equity and attract more customers by offering a choice of distinct store experiences.
In fiscal 2007, we acquired a 75% interest in Jiangsu Five Star Appliance Co., Ltd. ("Five Star"), one of China's largest appliance and consumer electronics retailers. We made the investment in Five Star to further our international growth plans, to increase our knowledge of Chinese customers and to obtain an immediate retail presence in China. We also opened our first Best Buy branded store in China, located in Shanghai, in fiscal 2007. In the fourth quarter of fiscal 2009, we completed the acquisition of the remaining 25% interest in Five Star.
In fiscal 2009, we acquired a 50% share in Best Buy Europe Distributions Limited ("Best Buy Europe"). Best Buy Europe is a venture with CPW, consisting of CPW's former retail and distribution business with over 2,400 small-format The Carphone Warehouse and The Phone House stores, online channels, device insurance operations, and mobile and fixed-line telecommunication services. The transaction also included CPW's economic interest in both Best Buy Mobile in the U.S. and Geek Squad in the U.K. and Spain. We made the investment in Best Buy Europe to further our international growth plans, to increase our knowledge of European customers and to obtain an immediate retail presence in Europe. During fiscal 2011, we launched large-format Best Buy branded stores in the U.K. and a related online channel in the European market.
In fiscal 2009, we also expanded our Best Buy Mobile operations to Canada by opening stand-alone stores. We now also offer the Best Buy Mobile store-within-a-store experience in all Canadian Best Buy branded stores. Also in fiscal 2009, we opened our first Best Buy branded store in Mexico, located in Mexico City.
In fiscal 2010, we opened our first Best Buy branded store in Turkey, located in Izmir.
In the fourth quarter of fiscal 2011, we announced plans to exit the Turkey market and restructure the Best Buy branded stores in China during fiscal 2012. The exit from the Turkey market includes exiting of all current operations in that country, including its two Best Buy branded stores. Restructuring activities in China include closing all eight Best Buy branded stores. We also intend to explore other more profitable growth options for the Best Buy brand in China, including the option to reopen two of the closed stores at a later date.
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. Consistent
5

Table of Contents
with such consolidation, the financial and non-financial information presented in this Annual Report on Form 10-K relative to our Europe, China, Mexico and Turkey operations is also presented on a two-month lag.
Operations
Domestic Segment
Our Domestic segment store operations are organized by store brand. U.S. Best Buy store operations are divided into districts and are under the management of a retail field officer who oversees store performance through district managers. District managers monitor U.S. Best Buy store operations and meet regularly with store managers to discuss merchandising, new product introductions, sales promotions, customer loyalty programs, employee satisfaction surveys and store operating performance.
Our U.S. Best Buy, U.S. Best Buy Mobile, Magnolia Audio Video, Pacific Sales and Geek Squad stores have developed procedures for inventory management, transaction processing, customer relations, store administration, product sales and services, staff training and merchandise display that are standardized within each store brand. Corporate retail management for each store brand generally controls advertising, merchandise purchasing and pricing, as well as inventory policies. All stores within each store brand generally operate in the same manner under the standard procedures adjusted to local customer needs.
International Segment
Located throughout nine European countries, The Carphone Warehouse and The Phone House stores are significantly smaller than our Best Buy branded stores and employ sales associates that provide independent advice on the best service and hardware suited to each customer. Most phone sales require in-store registration with the mobile phone network operator facilitated by our employees, allowing the customer to leave the store with a fully active phone and a service contract. Advertising, merchandise purchasing and pricing and inventory policies for these stores are controlled by corporate retail management in each respective local market.
Canada store operations are organized to support two principal brands. Future Shop stores have predominantly commissioned sales associates who take a proactive role in assisting customers and driving the transaction, whereas employees in Best Buy branded stores in Canada, like employees in U.S. Best Buy stores, are noncommissioned, allowing the customers to drive the transaction through interactive displays and grab-and-go merchandising. Each brand has national management that closely monitors store operations. All Canada stores use a standardized operating system that includes procedures for inventory management, transaction processing, customer relations, store administration, staff training and merchandise display. Advertising, merchandise purchasing and pricing and inventory policies are centrally controlled. Our Best Buy Mobile stores in Canada employ an operating model similar to that used in our U.S. Best Buy Mobile stores.
China store operations are also organized to support two principal brands. Our Five Star stores primarily utilize vendor employees and full-time sales associates to sell our products. Our Best Buy branded stores in China have employed an operating model similar to Best Buy branded stores in the U.S. However, in the fourth quarter of fiscal 2011, we announced plans to restructure the Best Buy branded stores in China during fiscal 2012. Corporate retail management for each store brand generally controls advertising, merchandise purchasing and pricing, and inventory policies, although management for individual regions within our Five Star brand may vary these operations locally to adapt to customer needs. We anticipate consolidating the support operations for the Best Buy branded stores in China with the existing Five Star business as a part of the announced restructuring of such stores.
Our Best Buy branded stores in the U.K., Mexico and Turkey employ an operating model similar to that used in our U.S. Best Buy stores. In the fourth quarter of fiscal 2011, we announced plans to exit the Turkey market during fiscal 2012.
6

Table of Contents
Merchandise and Services
Domestic Segment
U.S. Best Buy stores and the related online channel have offerings in six revenue categories: consumer electronics, home office, entertainment, appliances, services and other. Consumer electronics consists of video and audio products. Video products include televisions, navigation products, digital cameras and accessories, digital camcorders and accessories, e-Readers and DVD and Blu-ray players. Audio products consist of MP3 players and accessories, home theater audio systems and components, musical instruments and mobile electronics such as car stereo and satellite radio products. The home office revenue category includes notebook and desktop computers, tablets, monitors, mobile phones and related subscription service commissions, hard drives, networking equipment and related accessories such as printers. The entertainment revenue category includes video gaming hardware and software, DVDs, Blu-rays, CDs, digital downloads and computer software. The appliances revenue category includes major appliances as well as small electrics. The services revenue category consists primarily of service contracts, extended warranties, computer-related services, product repair, and delivery and installation for home theater, mobile audio and appliances. The other revenue category includes non-core offerings such as snacks and beverages.
U.S. Best Buy Mobile offerings are included in our home office revenue category. Revenue from U.S. Best Buy Mobile stand-alone stores is primarily derived from mobile phone hardware, subscription service commissions from mobile phone network operators and associated mobile phone accessories.
Magnolia Audio Video stores have offerings in two revenue categories: consumer electronics and services. Consumer electronics consists of video and audio products. Video products include televisions, DVD and Blu-ray players and accessories. Audio products include home theater audio systems and components, mobile electronics and accessories. The services revenue category consists primarily of home theater system installation as well as extended warranties.
Pacific Sales stores have offerings in three revenue categories: appliances, consumer electronics and services. Appliances consists of major appliances, evenly split between high-end and mass-market premium brands, and plumbing, which consists of kitchen and bath fixtures including faucets, sinks, toilets and bath tubs. Consumer electronics consists of video and audio products, including televisions and home theater systems. The services revenue category consists primarily of extended warranties, installation and repair services.
International Segment
Our small-format The Carphone Warehouse and The Phone House stores in Europe have offerings in two revenue categories: home office and services. Home office consists primarily of mobile phone hardware, subscription service commissions from mobile phone network operators and associated mobile phone accessories. Services consists of device insurance operations, providing protection primarily for the replacement of a lost, stolen or damaged handset, as well as mobile and fixed-line telecommunication services, billing management services and Geek Squad repair services.
Our large-format Best Buy branded stores in the U.K. have offerings in six revenue categories: consumer electronics, home office, entertainment, appliances, services and other, with products and services similar to those of our U.S. Best Buy stores.
In Canada, the Future Shop and Best Buy branded stores have offerings in five revenue categories: consumer electronics, home office, entertainment, services and other, and at Future Shop only, a sixth revenue category, appliances. Consumer electronics consists of video and audio products. Video products include televisions, navigation products, digital cameras and accessories, digital camcorders and accessories, e-Readers, and DVD and Blu-ray players. Audio products encompass MP3 players and accessories, home theater audio systems and components, mobile electronics such as car stereo and accessories. The home office revenue category includes notebook and desktop computers, tablets, monitors, mobile phones and related subscription service commissions, hard drives, networking equipment and related accessories such as printers. The entertainment revenue category includes video game hardware and software, DVDs, Blu-rays, CDs and computer software. The appliances revenue category includes major appliances as well as small electrics. The services
7

Table of Contents

revenue category includes extended warranties, repair, delivery, computer-related services and home theater installation. The other revenue category includes non-core offerings such as snacks and beverages.
Although Future Shop and Best Buy branded stores in Canada offer similar revenue categories (except for appliances, which are only offered at Future Shop stores), there are differences in product brands and depth of selection within revenue categories. On average, approximately 30% of the product assortment (excluding entertainment) overlaps between the two store brands. Further, Geek Squad services are only available in the Best Buy branded stores with Future Shop's service offerings branded as Connect Pro.
Canada Best Buy Mobile offerings are included in our home office revenue category. Revenue from Canada Best Buy Mobile stand-alone stores is primarily derived from mobile phone hardware, subscription service commissions from mobile phone network operators and related mobile phone accessories.
In China, our Five Star and Best Buy branded stores have offerings in four revenue categories: appliances, consumer electronics, home office and services. Our China stores do not carry products in our entertainment revenue category. Appliances includes major appliances, air conditioners, small electrics and housewares. The consumer electronics revenue category consists of video and audio products, including televisions, digital cameras, MP3 players and accessories. The home office revenue category includes desktop and notebook computers, tablets, mobile phones, traditional telephones and accessories. The services revenue category includes extended warranties, repair, delivery, computer-related services and installation.
Our Best Buy branded stores in Mexico and Turkey have offerings in six revenue categories: consumer electronics, home office, entertainment, appliances, services and other, with products and services similar to those of our U.S. Best Buy stores.
Distribution
Domestic Segment
Generally, U.S. Best Buy, U.S. Best Buy Mobile, Magnolia Audio Video and Pacific Sales stores' merchandise, except for major appliances and large-screen televisions, is shipped directly from manufacturers to our distribution centers located throughout the U.S. Major appliances and large-screen televisions are shipped to satellite warehouses in each major market. These stores are dependent upon the distribution centers for inventory storage and shipment of most merchandise. However, in order to meet release dates for selected products and to improve inventory management, certain merchandise is shipped directly to our stores from manufacturers and distributors. Contract carriers ship merchandise from the distribution centers to stores, though Pacific Sales stores' merchandise is generally fulfilled directly to customers through two distribution centers in California. Generally, U.S. Best Buy online merchandise sales are either picked up at U.S. Best Buy stores or fulfilled directly to customers through our distribution centers.
International Segment
Our small-format The Carphone Warehouse and The Phone House stores' merchandise is shipped directly from our suppliers to our distribution centers across Europe. Contract carriers ship merchandise from the distribution centers to stores. Stores hold the immediate stock requirement and the distribution center in each market holds additional inventory. Our large-format Best Buy branded stores in the U.K. have distribution methods similar to that of our U.S. Best Buy stores.
Our Canada stores' merchandise is shipped directly from our suppliers to our distribution centers in British Columbia and Ontario. Our Canada stores are dependent upon the distribution centers for inventory storage and shipment of most merchandise. However, in order to meet release dates for selected products and to improve inventory management, certain merchandise is shipped directly to our stores from manufacturers and distributors. Contract carriers ship merchandise from the distribution centers to stores.
We receive our Five Star stores' merchandise at more than 40 distribution centers and warehouses located throughout the Five Star retail chain, the largest of which is located in Nanjing, Jiangsu Province. Our Five Star stores are dependent
8

Table of Contents

upon the distribution centers for inventory storage and the shipment of most merchandise to our stores or customers. Large merchandise, such as major appliances, is generally fulfilled directly to customers through our distribution centers and warehouses.
Merchandise for our Best Buy branded stores in China is shipped directly from our suppliers to our distribution center in Shanghai. Our Best Buy branded stores in China are dependent upon the distribution center for inventory storage and shipment of most merchandise. However, in order to meet release dates for selected products and to improve inventory management, certain merchandise is shipped directly to our stores from manufacturers and distributors. In certain circumstances, merchandise is shipped directly to our customers from manufacturers and distributors.
Our Best Buy branded stores in Mexico and Turkey have distribution methods similar to that of our U.S. Best Buy stores.
Suppliers
Our strategy depends, in part, upon our ability to offer customers a broad selection of name-brand products and, therefore, our success is dependent upon satisfactory and stable supplier relationships. In fiscal 2011, our 20 largest suppliers accounted for just under 65% of the merchandise we purchased, with five suppliers — Apple, Samsung, Sony, Hewlett-Packard and Toshiba — representing 39% of total merchandise purchased. The loss of or disruption in supply from any one of these major suppliers could have a material adverse effect on our revenue and earnings. We generally do not have long-term written contracts with our major suppliers that would require them to continue supplying us with merchandise. We have no indication that any of our suppliers plan to discontinue selling us merchandise. We have not experienced significant difficulty in maintaining satisfactory sources of supply, and we generally expect that adequate sources of supply will continue to exist for the types of merchandise we sell.
We operate a global sourcing office in China in order to design, develop, test and contract manufacture our own line of exclusive brand products in association with factories in Asia.
Store Development
The addition of new stores has played a significant role in our growth and success. Our store development program has historically focused on testing stores in new markets; adding stores within existing markets; and relocating, remodeling and expanding existing stores in order to offer new products and services to our customers. We actively monitor our existing store portfolio, and where necessary, take steps to grow, modify, enhance, relocate or close those stores based on our judgment of future potential returns.
In our Domestic segment, we will continue to focus on enhancing existing stores to target high growth value propositions, increasing our presence in small-format stores like Best Buy Mobile, and moderating large-format store square footage growth. In our International segment, store investments will focus on growth areas such as Five Star in China, as well as selectively expanding the number of Best Buy branded stores in the relatively new markets of the U.K. and Mexico.
Domestic Segment
During fiscal 2011, we opened 134 new stores and closed seven stores in our Domestic segment. We offer Geek Squad support services and the Best Buy Mobile store-within-a-store experience in all U.S. Best Buy stores.
9

Table of Contents
The following tables show our Domestic segment stores open at the beginning and end of each of the last three fiscal years:

 	 	U.S. Best Buy
Stores	 	U.S. Best Buy
Mobile Stores	 	Pacific Sales
Stores	 	Magnolia Audio
Video Stores	 	Geek Squad
Stores	 	
 	 	
Total stores at end of fiscal 2010	 	 	1,069	 	 	74	 	 	35	 	 	6	 	 	6	 	
Stores opened	 	 	31	 	 	103	 	 	—	 	 	—	 	 	—	 	
Stores closed	 	 	(1	)	 	—	 	 	—	 	 	—	 	 	(6	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Total stores at end of fiscal 2011	 	 	1,099	 	 	177	 	 	35	 	 	6	 	 	—	 	

																	
 	 	U.S. Best Buy Stores	 	U.S. Best Buy
Mobile Stores	 	Pacific Sales Stores	 	Magnolia Audio
Video Stores	 	Geek Squad Stores	 	
 	 	
Total stores at end of fiscal 2009	 	 	1,023	 	 	38	 	 	34	 	 	6	 	 	6	 	
Stores opened	 	 	46	 	 	36	 	 	1	 	 	—	 	 	—	 	
Stores closed	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total stores at end of fiscal 2010	 	 	1,069	 	 	74	 	 	35	 	 	6	 	 	6	 	

																	
 	 	U.S. Best Buy Stores	 	U.S. Best Buy
Mobile Stores	 	Pacific Sales Stores	 	Magnolia Audio
Video Stores	 	Geek Squad Stores	 	
 	 	
Total stores at end of fiscal 2008	 	 	923	 	 	9	 	 	19	 	 	13	 	 	7	 	
Stores opened	 	 	100	 	 	32	 	 	15	 	 	—	 	 	—	 	
Stores closed	 	 	—	 	 	(3	)	 	—	 	 	(7	)	 	(1	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Total stores at end of fiscal 2009	 	 	1,023	 	 	38	 	 	34	 	 	6	 	 	6	 	
 	 	 	 	 	 	 	 	 	 	 	 	
International Segment
During fiscal 2011, we opened 123 new stores and closed 103 stores in our International segment, primarily within our Best Buy Europe business. We offer Geek Squad support services in all Best Buy branded stores and within select The Carphone Warehouse and The Phone House stores in the U.K and Spain, as well as similar Connect Pro branded services in Future Shop stores. We offer the Best Buy Mobile store-within-a-store experience in all Best Buy branded stores in Canada, with a similar Cell Shop branded concept in the majority of Future Shop stores.
The following tables show our International segment stores open at the beginning and end of each of the last three fiscal years:

 	 	Europe	 	Canada	 	China	 	Mexico	 	Turkey	 	
 	 	Best Buy Stores	 	The
Carphone
Warehouse
and The Phone
House Stores	 	Future
Shop
Stores	 	Best Buy
Stores	 	Best Buy
Mobile
Stores	 	Best Buy
Stores (1)	 	Five Star
Stores	 	Best Buy
Stores	 	Best Buy
Stores (1)	 	
 	 	
Total stores at end of fiscal 2010	 	 	—	 	 	2,453	 	 	144	 	 	64	 	 	4	 	 	6	 	 	158	 	 	5	 	 	1	 	
Stores opened	 	 	6	 	 	86	 	 	2	 	 	7	 	 	6	 	 	2	 	 	12	 	 	1	 	 	1	 	
Stores closed	 	 	—	 	 	(99	)	 	—	 	 	—	 	 	—	 	 	—	 	 	(4	)	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stores at end of fiscal 2011	 	 	6	 	 	2,440	 	 	146	 	 	71	 	 	10	 	 	8	 	 	166	 	 	6	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(1)
On February 21, 2011, we announced plans to exit the Turkey market and restructure the Best Buy branded stores in China during fiscal 2012.
10

Table of Contents

 	 	Europe	 	Canada	 	China	 	Mexico	 	Turkey	 	
 	 	Best Buy
Stores	 	The
Carphone
Warehouse
and The Phone
House Stores	 	Future Shop Stores	 	Best Buy Stores	 	Best Buy Mobile Stores	 	Best Buy Stores	 	Five Star Stores	 	Best Buy Stores	 	Best Buy Stores	 	
 	 	
Total stores at end of fiscal 2009	 	 	—	 	 	2,465	 	 	139	 	 	58	 	 	3	 	 	5	 	 	164	 	 	1	 	 	—	 	
Stores opened	 	 	—	 	 	82	 	 	5	 	 	6	 	 	1	 	 	1	 	 	6	 	 	4	 	 	1	 	
Stores closed	 	 	—	 	 	(94	)	 	—	 	 	—	 	 	—	 	 	—	 	 	(12	)	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stores at end of fiscal 2010	 	 	—	 	 	2,453	 	 	144	 	 	64	 	 	4	 	 	6	 	 	158	 	 	5	 	 	1	 	

																													
 	 	Europe	 	Canada	 	China	 	Mexico	 	Turkey	 	
 	 	Best Buy
Stores	 	The
Carphone
Warehouse and
The Phone
House Stores	 	Future Shop Stores	 	Best Buy Stores	 	Best Buy Mobile Stores	 	Best Buy Stores	 	Five Star Stores	 	Best Buy Stores	 	Best Buy Stores	 	
 	 	
Total stores at end of fiscal 2008	 	 	—	 	 	—	 	 	131	 	 	51	 	 	—	 	 	1	 	 	160	 	 	—	 	 	—	 	
Stores acquired (1)	 	 	—	 	 	2,414	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Stores opened	 	 	—	 	 	105	 	 	9	 	 	7	 	 	3	 	 	4	 	 	9	 	 	1	 	 	—	 	
Stores closed	 	 	—	 	 	(54	)	 	(1	)	 	—	 	 	—	 	 	—	 	 	(5	)	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stores at end of fiscal 2009	 	 	—	 	 	2,465	 	 	139	 	 	58	 	 	3	 	 	5	 	 	164	 	 	1	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(1)
Acquired on June 28, 2008.
Fiscal 2012 Store Opening Plans
For fiscal 2012, our new store opening plans include the opening of approximately 150 Best Buy Mobile small-format stand-alone stores in the U.S. We also plan to open 40-50 Five Star stores in growing markets in China. Finally, we plan to open approximately six to eight U.S. Best Buy stores and approximately 18 large-format Best Buy branded stores throughout Canada, the U.K. and Mexico.
Intellectual Property
We own or have the right to use valuable intellectual property such as trademarks, service marks and tradenames, including, but not limited to, "Best Buy," "Best Buy Mobile," "The Carphone Warehouse," "Dynex," "Five Star," "Future Shop," "Geek Squad," "Init," "Insignia," "Magnolia," "Napster," "Pacific Sales," "The Phone House," "Rocketfish," and our "Yellow Tag" logo.
We have secured domestic and international trademark and service mark registrations for many of our brands. We have also secured patents for many of our inventions. We believe our intellectual property has significant value and is an important factor in the marketing of our company, our stores, our products and our Web sites.
Seasonality
Our business, like that of many retailers, is seasonal. Historically, we have realized more of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Europe and Canada, than in any other fiscal quarter.
11

Table of Contents
Working Capital
We fund our business operations through a combination of available cash and cash equivalents, short-term investments and cash flows generated from operations. In addition, our revolving credit facilities are available for additional working capital needs and investment opportunities. Our working capital needs are typically greatest in the months leading up to the holiday shopping season as we purchase inventories in advance of expected sales.
Customers
We do not have a significant concentration of sales with any individual customer and, therefore, the loss of any one customer would not have a material impact on our business. No single customer has accounted for 10% or more of our total revenue.
Backlog
Our stores, call centers and online shopping sites do not have a material amount of backlog orders.
Government Contracts
No material portion of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of any government or government agencies or affiliates.
Competition
Our primary competitors are discount chains, consumer electronics retailers including vendors who offer their products direct to the consumer, wholesale clubs, home-improvement superstores and internet-based businesses.
We believe our dedicated and knowledgeable people, store and online experience, broad product assortment, distinct store formats and brand marketing strategies differentiate us from our competitors by positioning our stores and Web sites as the preferred destination for new technology and entertainment products in a fun and informative shopping environment.
Research and Development
We have not engaged in any material research and development activities during the past three fiscal years.
Environmental Matters
While seeking and discovering new and innovative ways to engage our customers in the connected world, we also strive to lessen our impact on the environment. Our energy efficiency strategy includes end-to-end efforts to reduce energy use in our own internal operations and of the products and services we offer our customers. And with an expanding selection of our internally developed exclusive brand products, we continue to make efforts to provide products that use less energy, are made of non-toxic materials and are packaged in more responsible ways.
Our energy efficient practices include a centralized automated energy management system for our U.S. Best Buy stores and retail energy reports by store. Lighting and HVAC upgrades, as well as aiming to build new stores to Leadership in Energy & Environmental Design ("LEED") standards, are also part of our continuing efforts. These energy efficiency improvements have helped us reduce our own carbon footprint. In calendar 2010, we set a new long-term goal of reducing our carbon dioxide emissions by 20% by 2020 (over a 2009 baseline). During calendar 2010, we reduced our total carbon dioxide emissions by approximately 0.5% in our U.S. Best Buy stores over the previous year. However, given that our total square footage increased by 2.9% in calendar 2010, the 0.5% reduction represented a 3.2% reduction on a per square foot basis.
12

Table of Contents
Increasing consumer demand for environmentally friendly products and services has led us to provide new energy efficient products and a means to recycle old products. We helped our U.S. Best Buy customers purchase over 22 million ENERGY STAR® qualified products in calendar 2010 and encouraged our vendors to participate in the ENERGY STAR program. The U.S. Environmental Protection Agency estimated that our sales of these products in calendar 2010 resulted in customer savings of 1.12 billion kilowatt hours of energy, generating over $120 million in electric utility bill savings, while preventing over 1.7 billion pounds of carbon dioxide from entering the atmosphere. As part of our strategy, we are also investing in emerging technologies such as home energy management systems for all the connected devices in a home, renewable energy technologies and electric transportation.
In addition, in calendar 2009, we launched a nationwide consumer electronics take-back program where customers can bring many consumer electronics products to our stores for free recycling. This recycling program is available in all U.S. Best Buy stores. We also collect old, inefficient appliances for recycling through a haul-away program. In fiscal 2011, our recycling program collected approximately 83 million pounds of consumer electronics and approximately 73 million pounds of old appliances, reducing the amount of electronic waste that would otherwise have been sent to landfills. These efforts marked an 11% increase over the 140 million combined pounds of consumer electronics and appliances collected in fiscal 2010.
Continued efforts to be more environmentally conscious in our exclusive brands packaging focused on the use of recycled materials, non-solvent coatings and organic inks where possible. Through a variety of opportunities, we reduced plastic usage by 745 tons and eliminated 890 tons of PVC within our exclusive brands packaging during fiscal 2011.
We are not aware of any federal, state or local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have materially affected, or are reasonably expected to materially affect, our net earnings or competitive position, or have resulted or are reasonably expected to result in material capital expenditures. See Item 1A, Risk Factors , for additional discussion.
We believe we can continue to reduce energy consumption and carbon emissions in cost effective ways that deliver value to our shareholders, customers, employees and the communities we serve, whether it's in our own internal operations or through our work to connect customers with more energy efficient solutions.
Number of Employees
At the end of fiscal 2011, we employed approximately 180,000 full-time, part-time and seasonal employees worldwide. We consider our employee relations to be good. We offer our employees a wide array of company-paid benefits that vary within our company due to customary local practices and statutory requirements, which we believe are competitive in the aggregate relative to others in our industry.
Financial Information About Geographic Areas
We operate two reportable segments: Domestic and International. Financial information regarding the Domestic and International geographic areas is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations , and Note 12, Segment and Geographic Information , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Available Information
We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC"). Copies of these reports, proxy statements and other information can be read and copied at:
SEC Public Reference Room
100 F Street NE
Washington, D.C. 20549
13

Table of Contents
Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web site that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC's Web site at www.sec.gov .
We make available, free of charge on our Web site, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file these documents with, or furnish them to, the SEC. These documents are posted on our Web site at www.bby.com  — select the "Investor Relations" link and then the "SEC Filings" link.
We also make available, free of charge on our Web site, the Corporate Governance Principles of our Board of Directors ("Board") and our Code of Business Ethics (including any amendment to, or waiver from, a provision of our Code of Business Ethics) adopted by our Board, as well as the charters of all of our Board's committees: Audit Committee, Compensation and Human Resources Committee, Finance and Investment Policy Committee, Global Strategy Committee and Nominating, Corporate Governance and Public Policy Committee. These documents are posted on our Web site at www.bby.com  — select the "Investor Relations" link and then the "Corporate Governance" link.
Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to:
Best Buy Co., Inc.
Investor Relations Department
7601 Penn Avenue South
Richfield, MN 55423-3645

 Item 1A. Risk Factors.
Described below are certain risks that our management believes are applicable to our business and the industry in which we operate. There may be additional risks that are not presently material or known. You should carefully consider each of the following risks and all other information set forth in this Annual Report on Form 10-K.
If any of the events described below occurs, our business, financial condition, results of operations, liquidity or access to the capital markets could be materially adversely affected. The following risks could cause our actual results to differ materially from our historical experience and from results predicted by forward-looking statements made by us or on our behalf related to conditions or events that we anticipate may occur in the future. The following risks should not be construed as an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf. All forward-looking statements made by us or on our behalf are qualified by the risks described below.
Economic conditions in the U.S. and key international markets, a decline in consumer discretionary spending or other conditions may materially adversely impact our operating results.
We sell certain products and services that consumers may view as discretionary items rather than necessities. As a result, our results of operations tend to be more sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending. Challenging macroeconomic conditions also impact our customers' ability to obtain consumer credit in a timely manner, if at all. Other factors, including consumer confidence, employment levels, interest rates, tax rates, consumer debt levels, and fuel and energy costs could reduce consumer spending or change consumer purchasing habits. In the past three fiscal years, many of these factors adversely affected consumer spending and, consequently, our business and results of operations. A slowdown in the U.S. or global economy, or an uncertain economic outlook, could materially adversely affect consumer spending habits and our operating results in the future.
The domestic and international political situation also affects consumer confidence. The threat or outbreak of domestic or international terrorism or other hostilities could lead to a decrease in consumer spending. Any of these events and factors
14

Table of Contents

could cause a decrease in revenue or an increase in inventory markdowns or certain operating expenses, which could materially adversely affect our results of operations.
Other conditions or factors that may impact our results of operations include disruptions to the availability of content such as sporting events or other televised content. Such disruptions may influence the demand for hardware that our customers purchase to access such content, as well as the commissions we receive from subscription services. Accordingly, such disruptions could cause a material adverse effect on our revenue and results of operations.
If we do not anticipate and respond to changing consumer preferences in a timely manner, our operating results could materially suffer.
Our business depends, in large part, on our ability to successfully introduce new products, services and technologies to consumers, the frequency of such introductions, the level of consumer acceptance, and the related impact on the demand for existing products, services and technologies. Failure to accurately predict constantly changing consumer tastes, preferences, spending patterns and other lifestyle decisions, or to effectively address consumer concerns, could have a material adverse effect on our revenue, results of operations and reputation with our customers.
Our results of operations could materially deteriorate if we fail to attract, develop and retain qualified employees.
Our performance is dependent on attracting and retaining qualified employees who are able to meet the wants and needs of our customers. We believe our competitive advantage is providing unique end-to-end solutions for each individual customer, which requires us to have highly trained and engaged employees. Our success depends in part upon our ability to attract, develop and retain a sufficient number of qualified employees, including store, service and administrative personnel. The turnover rate in the retail industry is high, and qualified individuals of the requisite caliber and number needed to fill these positions may be in short supply in some areas. Our inability to recruit a sufficient number of qualified individuals in the future may delay planned openings of new stores or affect the speed with which we expand initiatives related to the connected world, our exclusive brands and our international operations. Delayed store openings, significant increases in employee turnover rates or significant increases in labor costs could have a material adverse effect on our business, financial condition and results of operations.
We face strong competition from traditional store-based retailers, internet-based businesses, our vendors and other forms of retail commerce, which could materially adversely affect our revenue and profitability.
The retail business is highly competitive. We compete for customers, employees, locations, products and other important aspects of our business with many other local, regional, national and international retailers, as well as our vendors who offer their products and services direct to the consumer. Pressure from our competitors, some of which have greater market presence and financial resources than we do, could require us to reduce our prices or increase our costs of doing business. Furthermore, our business model includes offering our customers packaged value propositions that take the complexity out of managing devices, content and connectivity. Some of our vendors also continue to interact directly with customers by embedding their services into the products we sell. As a result of this competition and potential product disintermediation, we may experience lower revenue and/or higher operating costs, which could materially adversely affect our results of operations.
Our results of operations could materially deteriorate if we fail to maintain positive brand perception and recognition.
We operate a global portfolio of brands with a commitment to customer service and innovation. We believe that recognition and the reputation of our brands continue to drive our growth. Damage to the perception or reputation of our brands could result in declines in customer loyalty, lower employee morale and productivity concerns, and vendor relationship issues, and could ultimately have a material adverse effect on our business, financial condition and results of operations.
15

Table of Contents
The failure to control our costs could have a material adverse impact on our profitability.
Consumer spending remains uncertain, which makes it more challenging for us to maintain or grow our operating income rate. As a result, we must continue to control our expense structure. Failure to manage our labor and benefit rates, advertising and marketing expenses, operating lease costs, other store expenses or indirect spending could delay or prevent us from achieving increased profitability or otherwise have a material adverse impact on our results of operations.
Our liquidity may be materially adversely affected by constraints in the capital markets.
We must have sufficient sources of liquidity to fund our working capital requirements, service our outstanding indebtedness and finance investment opportunities. Without sufficient liquidity, we could be forced to curtail our operations or we may not be able to pursue promising business opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash and cash equivalents, and borrowings under credit facilities and other debt financings.
If our sources of liquidity do not satisfy our requirements, we may have to seek additional financing. The future availability of financing will depend on a variety of factors, such as economic and market conditions, the availability of credit and our credit ratings, as well as the possibility that lenders could develop a negative perception of us or the retail industry generally. If required, we may not be able to obtain additional financing, on favorable terms, or at all.
Changes in our credit ratings may limit our access to capital markets and materially increase our borrowing costs.
In fiscal 2011, Moody's Investors Service, Inc. and Standard & Poor's Ratings Services maintained their ratings and outlook of our debt securities at above investment grade level, while Fitch Ratings Ltd. reaffirmed its rating of our debt securities as BBB+ but raised its outlook to stable. Subsequent to the end of fiscal 2011, Fitch Ratings Ltd. reaffirmed its rating of our debt securities, but revised its outlook to negative.
Future downgrades to our long-term credit ratings and outlook could negatively impact our access to the capital markets and the perception of us by lenders and other third parties. Our credit ratings are based upon information furnished by us or obtained by a rating agency from its own sources and are subject to revision, suspension or withdrawal by one or more rating agencies at any time. Rating agencies may review the ratings assigned to us due to developments that are beyond our control, including as a result of new standards requiring the agencies to re-assess rating practices and methodologies.
Any downgrade to our debt securities may result in higher interest costs for certain of our credit facilities and other debt financings, and could result in higher interest costs on future financings. Further, in the event of such a downgrade, we may not be able to obtain additional financing, if necessary, on favorable terms, or at all.
Our growth is dependent on the success of our strategies.
Our growth is dependent on our ability to identify, develop and execute our strategies. Our failure to properly deploy and utilize capital and other resources may adversely affect our initiatives designed to assist our customers connect to a digital lifestyle, while expanding our footprint globally. While we believe our customer centricity and connected world initiatives, as well as the pursuit of international growth opportunities, will enable us to grow our business, misjudgments or flaws in our execution could have a material adverse effect on our business, financial condition and results of operations.
Our growth strategy includes expanding our business by opening stores in both existing markets and new markets.
Our future growth is dependent, in part, on our ability to build, buy or lease new stores. We compete with other retailers and businesses for suitable locations for our stores. Local land use, local zoning issues, environmental regulations and other regulations applicable to the types of stores we desire to construct may impact our ability to find suitable locations, and also influence the cost of building, buying and leasing our stores. We also may have difficulty negotiating real estate purchase agreements and leases on acceptable terms. Failure to manage effectively these and other similar factors will affect our ability to build, buy and lease new stores, which may have a material adverse effect on our future profitability.
16

Table of Contents
We may seek to expand our business in existing markets in order to attain a greater overall market share. Because our stores typically draw customers from their local areas, a new store may draw customers away from our nearby existing stores and may cause customer traffic and comparable store sales performance to decline at those existing stores.
We also open stores in new markets from time to time. The risks associated with entering a new market include difficulties in attracting customers where there is a lack of customer familiarity with our brands, our lack of familiarity with local customer preferences, seasonal differences in the market and our ability to obtain the necessary governmental approvals. In addition, entry into new markets may bring us into competition with new competitors or with existing competitors with a large, established market presence. We cannot ensure that our new stores will be profitably deployed. As a result, our future profitability may be materially adversely affected.
Failure in our pursuit or execution of new business ventures, strategic alliances and acquisitions could have a material adverse impact on our business.
Our growth strategy also includes expansion via new business ventures, strategic alliances and acquisitions. Assessing a potential growth opportunity involves extensive due diligence. However, the amount of information we can obtain about a potential growth opportunity may be limited, and we can give no assurance that new business ventures, strategic alliances and acquisitions will positively affect our financial performance or will perform as planned. Integrating new businesses, stores and concepts can be a difficult task. Cultural differences in some markets into which we expand or into which we introduce new retail concepts may result in customers in those markets being less receptive than originally anticipated. These types of transactions may divert our capital and our management's attention from other business issues and opportunities. Further, implementing new strategic alliances or business ventures may also impair our relationships with our vendors or strategic partners. We may not be able to successfully assimilate or integrate companies that we acquire, including their personnel, financial systems, distribution, operations and general operating procedures. We may also encounter challenges in achieving appropriate internal control over financial reporting in connection with the integration of an acquired company. If we fail to assimilate or integrate acquired companies successfully, our business, reputation and operating results could suffer materially. Likewise, our failure to integrate and manage acquired companies successfully may lead to impairment of the associated goodwill and intangible asset balances.
Failure to protect the integrity, security and use of our customers' information and media could expose us to litigation and materially damage our standing with our customers.
The use of individually identifiable data by our business and our business associates is regulated at the state, federal and international levels. Increasing costs associated with information security — such as increased investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud — could cause our business and results of operations to suffer materially. Additionally, the success of our online operations depends upon the secure transmission of confidential information over public networks, including the use of cashless payments. While we have taken significant steps to protect customer and confidential information, there can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other developments will prevent the compromise of our customer transaction processing capabilities and personal data. If any such compromise of our security were to occur, it could have a material adverse effect on our reputation, operating results and financial condition. Any compromise of our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional legal risk.
Risks associated with the vendors from whom our products are sourced could materially adversely affect our revenue and gross profit.
The products we sell are sourced from a wide variety of domestic and international vendors. Our 20 largest suppliers account for just under 65% of the merchandise we purchase. If any of our key vendors fails to supply us with products or continue to develop new technologies that create consumer demand, we may not be able to meet the demands of our customers and our revenue could materially decline. We require all of our vendors to comply with applicable laws,
17

Table of Contents

including labor and environmental laws, and otherwise be certified as meeting our required vendor standards of conduct. Our ability to find qualified vendors who meet our standards and supply products in a timely and efficient manner is a significant challenge, especially with respect to goods sourced from outside the U.S. Political or financial instability, merchandise quality issues, product safety concerns, trade restrictions, work stoppages, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation, civil unrest, natural disasters, outbreaks of pandemics and other factors relating to foreign trade are beyond our control. These and other issues affecting our vendors could materially adversely affect our revenue and gross profit.
Our exclusive brands products are subject to several additional product, supply chain and legal risks, which could have a material adverse impact on our business.
Sales of our exclusive brands, which primarily include Insignia, Dynex, Init, Geek Squad and Rocketfish branded products, represent a growing component of our revenue. Most of these products are manufactured under contract by vendors based in southeastern Asia. This arrangement exposes us to the following additional potential risks, which could materially adversely affect our reputation, financial condition and operating results:
•
We have greater exposure and responsibility to the consumer for warranty replacements and repairs as a result of product defects, as we generally have no recourse to contracted manufacturers for such warranty liabilities; 

•
We may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or property damage caused by such products, some of which may require us to take significant actions such as product recalls; 

•
We may experience disruptions in the manufacturing or the logistics within the manufacturing environment in southeastern Asia caused by inconsistent and unanticipated order patterns or if we are unable to develop long-term relationships with key factories; 

•
We are subject to developing and often-changing labor and environmental laws for the manufacture of products in foreign countries and we may be unable to conform to new rules or interpretations in a timely manner; 

•
We may be subject to claims by technology owners if we inadvertently infringe upon their patents or other intellectual property rights, or if we fail to pay royalties owed on our products; and 

•
We may be unable to obtain or adequately protect our patents and other intellectual property rights on our products, the new features of our products and/or our processes.
We are subject to certain statutory, regulatory and legal developments which could have a material adverse impact on our business.
Our statutory, regulatory and legal environment exposes us to complex compliance and litigation risks that could materially adversely affect our operations and financial results. The most significant compliance and litigation risks we face are:
•
The difficulty of complying with sometimes conflicting statutes and regulations in local, national or international jurisdictions; 

•
The impact of new or changing statutes and regulations including, but not limited to, financial reform, environmental requirements, labor reform, health care reform, corporate governance matters and/or other as yet unknown legislation, that could affect how we operate and execute our strategies as well as alter our expense structure; 

•
The impact of changes in tax laws (or interpretations thereof by courts and taxing authorities) and accounting standards; and 

•
The impact of litigation trends, including class action lawsuits involving consumers and shareholders, and labor and employment matters.
18

Table of Contents
Defending against lawsuits and other proceedings may involve significant expense and divert management's attention and resources from other matters.
Changes to the National Labor Relations Act or other labor-related statutes or regulations could have a material adverse impact on our business.
The National Labor Relations Board is considering changes to labor regulations which could significantly impact the nature of labor relations in the U.S. and how union elections and contract negotiations are conducted. At February 26, 2011, none of our U.S. stores had employees represented by labor unions or working under collective bargaining agreements. Changes in labor-related statutes or regulations could make it easier for unions to be formed, and employers of newly unionized employees may face mandatory, binding arbitration of labor scheduling, costs and standards, which could increase our costs of doing business and materially adversely affect our results of operations.
Additional legislation or rulemaking relating to environmental matters, including but not limited to, energy emissions, could have a material adverse impact on our business.
Environmental legislation or rulemaking efforts could impose unexpected costs or impact us more directly than other companies due to our operations as a global consumer electronics retailer with over 4,000 stores and 90 distribution centers worldwide.
Specifically, legislation that aims to control and reduce energy emissions has been considered by the U.S. Congress as well as governing bodies internationally, particularly in Europe. Should such legislation pass, we anticipate that energy costs within our operations would increase such as the expense to power our stores. In addition, rulemaking is being considered that could impose higher safety and compliance standards on transporting certain goods. Any significant rulemaking could increase the cost to transport our goods. Passage of any such legislation or rulemaking could materially adversely affect our results of operations.
Regulatory developments in the U.S. could impact the promotional financing offers available to our credit card customers and have a material adverse impact on our revenue and profitability .
We offer promotional financing in the U.S. through credit cards issued by third party banks that manage and directly extend credit to our customers. The cardholders can receive low- or no-interest promotional financing on qualifying purchases. Promotional financing credit card sales accounted for 18%, 17% and 18% of our Domestic segment's revenue in fiscal 2011, 2010 and 2009, respectively.
Recent economic developments, particularly in the financial markets, have resulted in increased legislative and regulatory actions affecting credit cards. Recently enacted legislative and regulatory changes that focus on a variety of credit-related matters, such as the Credit Card Accountability, Responsibility and Disclosure Act of 2009 ("Credit CARD Act"), included new rules and restrictions affecting interest rates, penalties and fees, contract terms, credit limits, billing practices and payment application. While we believe that neither the Credit CARD Act nor other recently enacted legislation or regulation related to credit matters have had a material adverse impact on our operations to date, if future legislative or regulatory restrictions or prohibitions arise that affect our ability to offer promotional financing and we are unable to adjust our operations in a timely manner, our revenue and profitability may be materially adversely affected.
Changes to our credit card agreements could adversely impact our ability to facilitate the provision of consumer credit to our customers and could materially adversely impact our results of operations.
We have agreements with third party 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. The banks are the sole owner of the accounts receivable generated under the credit card programs and absorb losses associated with non-payment by the cardholders and fraudulent usage of the accounts. We earn revenue from fees the banks pay to us based on the number of credit card accounts activated and card usage. The banks also reimburse us for
19

Table of Contents

certain costs associated with our credit card programs. Financing fees are paid by us to the banks and are variable based on certain factors such as the London Interbank Offered Rate ("LIBOR"), charge volume and/or the types of promotional financing offers.
Given the continuing changes in the economic and regulatory environment for banks, as well as a continuing period of consumer credit delinquencies, banks continue to re-evaluate their lending practices and terms, including, but not limited to, the levels at which consumer credit is granted. If any of our credit card programs ended prematurely or the terms and provisions, or interpretations thereof, were substantially modified, our results of operations and financial condition may be materially adversely impacted.
Our International activities subject us to risks associated with the legislative, judicial, accounting, regulatory, political and economic conditions specific to the countries or regions in which we operate, which could materially adversely affect our financial performance .
We have a presence in various foreign countries including Belgium, Bermuda, Canada, China, France, Germany, Hong Kong, India, Ireland, Japan, Luxembourg, Mexico, the Republic of Mauritius, the Netherlands, Portugal, Spain, Sweden, Switzerland, Taiwan, Turkey, Turks and Caicos, and the U.K. During fiscal 2011, our International segment's operations generated 26% of our revenue. Our growth strategy includes expansion of existing international markets and possible expansion into new international markets. Accordingly, our International segment's operations may account for a larger portion of our revenue in the future. Our future operating results in these countries and in other countries or regions throughout the world where we may operate in the future could be materially adversely affected by a variety of factors, many of which are beyond our control, including political conditions, economic conditions, legal and regulatory constraints and foreign currency regulations.
In addition, foreign currency exchange rates and fluctuations may have an impact on our future earnings and cash flows from our International segment's operations, and could materially adversely affect our financial performance. Moreover, the economies of some of the countries in which we have operations have in the past suffered from high rates of inflation and currency devaluations, which, if they were to occur again, could materially adversely affect our financial performance. Other factors which may materially adversely impact our International segment's operations include foreign trade, monetary, tax and fiscal policies both of the U.S. and of other countries; laws, regulations and other activities of foreign governments, agencies and similar organizations; and maintaining facilities in countries which have historically been less stable than the U.S.
Additional risks inherent in our International segment's operations generally include, among others, the costs and difficulties of managing international operations, adverse tax consequences and greater difficulty in enforcing intellectual property rights in countries other than the U.S. The various risks inherent in doing business in the U.S. generally also exist when doing business outside of the U.S., and may be exaggerated by the difficulty of doing business in numerous sovereign jurisdictions due to differences in culture, laws and regulations.
We rely heavily on our management information systems for inventory management, distribution and other functions. If our systems fail to perform these functions adequately or if we experience an interruption in their operation, our business and results of operations could be materially adversely affected.
The efficient operation of our business is dependent on our management information systems. We rely heavily on our management information systems to manage our order entry, order fulfillment, pricing, point-of-sale and inventory replenishment processes. The failure of our management information systems to perform as we anticipate, or to meet the continuously evolving needs of our business, could disrupt our business and could result in decreased revenue, increased overhead costs and excess or out-of-stock inventory levels, causing our business and results of operations to suffer materially.
20

Table of Contents
A disruption in relationships with key third-party business partners could materially adversely affect our business and results of operations.
We have engaged Accenture LLP ("Accenture"), a global management consulting, technology services and outsourcing company, to manage significant portions of our information technology and human resources operations as well as to conduct certain procurement activities. We rely heavily on our management information systems for inventory management, distribution and other functions. We also rely heavily on human resources support to attract, develop and retain a sufficient number of qualified employees. We also use Accenture to provide procurement support to research and purchase certain non-merchandise products and services. Furthermore, we have engaged other key third-party business partners to manage various functions of our business, including but not limited to, customer loyalty programs, promotional financing and customer loyalty credit cards, customer warranty and insurance programs, and other outsourced functions. Any material disruption in our relationship with Accenture or other key third-party business partners could result in decreased revenue and increased overhead costs, causing our business and results of operations to suffer materially.
We are highly dependent on the cash flows and net earnings we generate during our fourth fiscal quarter, which includes the majority of the holiday selling season.
Approximately one-third of our revenue and more than one-half of our net earnings are generated in our fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Europe and Canada. Unexpected events or developments such as natural or man-made disasters, product sourcing issues or adverse economic conditions in our fourth fiscal quarter could have a material adverse effect on our results of operations.

 Item 1B. Unresolved Staff Comments.
Not applicable.
21

Table of Contents

 Item 2. Properties.
Stores, Distribution Centers and Corporate Facilities
Domestic Segment
The following table summarizes the location of our Domestic segment stores at the end of fiscal 2011:

 	 	U.S. Best Buy
Stores	 	U.S. Best Buy
Mobile Stores	 	Pacific Sales
Stores	 	Magnolia
Audio
Video Stores	 	
 	 	
Alabama	 	 	15	 	 	4	 	 	—	 	 	—	 	
Alaska	 	 	2	 	 	—	 	 	—	 	 	—	 	
Arizona	 	 	27	 	 	1	 	 	2	 	 	—	 	
Arkansas	 	 	9	 	 	—	 	 	—	 	 	—	 	
California	 	 	126	 	 	20	 	 	32	 	 	4	 	
Colorado	 	 	22	 	 	3	 	 	—	 	 	—	 	
Connecticut	 	 	12	 	 	3	 	 	—	 	 	—	 	
Delaware	 	 	4	 	 	—	 	 	—	 	 	—	 	
District of Columbia	 	 	2	 	 	1	 	 	—	 	 	—	 	
Florida	 	 	66	 	 	20	 	 	—	 	 	—	 	
Georgia	 	 	30	 	 	5	 	 	—	 	 	—	 	
Hawaii	 	 	2	 	 	—	 	 	—	 	 	—	 	
Idaho	 	 	5	 	 	—	 	 	—	 	 	—	 	
Illinois	 	 	58	 	 	10	 	 	—	 	 	—	 	
Indiana	 	 	22	 	 	8	 	 	—	 	 	—	 	
Iowa	 	 	13	 	 	—	 	 	—	 	 	—	 	
Kansas	 	 	10	 	 	1	 	 	—	 	 	—	 	
Kentucky	 	 	9	 	 	2	 	 	—	 	 	—	 	
Louisiana	 	 	16	 	 	3	 	 	—	 	 	—	 	
Maine	 	 	6	 	 	—	 	 	—	 	 	—	 	
Maryland	 	 	25	 	 	8	 	 	—	 	 	—	 	
Massachusetts	 	 	29	 	 	8	 	 	—	 	 	—	 	
Michigan	 	 	34	 	 	1	 	 	—	 	 	—	 	
Minnesota	 	 	28	 	 	8	 	 	—	 	 	—	 	
Mississippi	 	 	9	 	 	—	 	 	—	 	 	—	 	
Missouri	 	 	22	 	 	1	 	 	—	 	 	—	 	
Montana	 	 	3	 	 	—	 	 	—	 	 	—	 	
Nebraska	 	 	6	 	 	2	 	 	—	 	 	—	 	
Nevada	 	 	10	 	 	—	 	 	1	 	 	—	 	
New Hampshire	 	 	6	 	 	2	 	 	—	 	 	—	 	
New Jersey	 	 	27	 	 	3	 	 	—	 	 	—	 	
New Mexico	 	 	5	 	 	—	 	 	—	 	 	—	 	
New York	 	 	54	 	 	7	 	 	—	 	 	—	 	
North Carolina	 	 	34	 	 	12	 	 	—	 	 	—	 	
North Dakota	 	 	4	 	 	—	 	 	—	 	 	—	 	
Ohio	 	 	39	 	 	4	 	 	—	 	 	—	 	
Oklahoma	 	 	13	 	 	1	 	 	—	 	 	—	 	
Oregon	 	 	12	 	 	3	 	 	—	 	 	—	 	
Pennsylvania	 	 	37	 	 	6	 	 	—	 	 	—	 	
Puerto Rico	 	 	5	 	 	—	 	 	—	 	 	—	 	
Rhode Island	 	 	2	 	 	—	 	 	—	 	 	—	 	
South Carolina	 	 	14	 	 	4	 	 	—	 	 	—	 	
South Dakota	 	 	2	 	 	1	 	 	—	 	 	—	 	
Tennessee	 	 	17	 	 	2	 	 	—	 	 	—	 	
Texas	 	 	109	 	 	13	 	 	—	 	 	—	 	
Utah	 	 	10	 	 	—	 	 	—	 	 	—	 	
Vermont	 	 	1	 	 	—	 	 	—	 	 	—	 	
Virginia	 	 	37	 	 	3	 	 	—	 	 	—	 	
Washington	 	 	20	 	 	2	 	 	—	 	 	2	 	
West Virginia	 	 	5	 	 	—	 	 	—	 	 	—	 	
Wisconsin	 	 	23	 	 	5	 	 	—	 	 	—	 	
Wyoming	 	 	1	 	 	—	 	 	—	 	 	—	 	
 	 	
Total	 	 	1,099	 	 	177	 	 	35	 	 	6	 	
 	 	
22

Table of Contents
The following table summarizes the ownership status and total square footage of our Domestic segment store locations at the end of fiscal 2011:

 	 	U.S. Best Buy
Stores	 	U.S. Best Buy
Mobile Stores	 	Pacific Sales
Stores	 	Magnolia
Audio
Video Stores	 	
 	 	
Owned store locations	 	 	24	 	 	—	 	 	—	 	 	—	 	
Owned buildings and leased land	 	 	37	 	 	—	 	 	—	 	 	—	 	
Leased store locations	 	 	1,038	 	 	177	 	 	35	 	 	6	 	
 	 	
Square footage (in thousands)	 	 	42,388	 	 	250	 	 	944	 	 	78	 	
 	 	
The following table summarizes the location, ownership status and total square footage of space utilized for distribution centers, service centers and corporate offices by our Domestic segment at the end of fiscal 2011:

 	 	 	 	Square Footage (in thousands)	 	
 	 	Location	 	Leased	 	Owned	 	
 	 	
Distribution centers	 	24 locations in 17 U.S. states	 	 	7,932	 	 	3,182	 	
Geek Squad service centers (1)	 	Louisville, Kentucky	 	 	237	 	 	—	 	
Principal corporate headquarters (2)	 	Richfield, Minnesota	 	 	—	 	 	1,452	 	
Territory field offices	 	28 locations throughout the U.S.	 	 	156	 	 	—	 	
Pacific Sales corporate office space	 	Whittier, California	 	 	15	 	 	—	 	
Napster corporate office space	 	Los Angeles, California	 	 	15	 	 	—	 	
(1)
The leased space utilized by our Geek Squad operations is used primarily to service notebook and desktop computers.

(2)
Our principal corporate headquarters is an owned facility consisting of four interconnected buildings. Accenture, who manages our information technology and human resources operations and conducts certain procurement activities for us, and certain other of our vendors who provide us with a variety of corporate services, occupy a portion of our principal corporate headquarters.
23

Table of Contents
International Segment
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.
The following table summarizes the location of our International segment stores at the end of fiscal 2011:

 	 	Europe	 	Canada	 	China	 	Mexico	 	Turkey	 	
 	 	Best Buy
Stores	 	The
Carphone
Warehouse
Stores	 	The Phone
House
Stores	 	Future
Shop
Stores	 	Best Buy
Stores	 	Best Buy
Mobile
Stores	 	Best Buy
Stores (1)	 	Five Star
Stores	 	Best Buy
Stores	 	Best Buy
Stores (1)	 	
 	 	
Europe	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Belgium	 	 	—	 	 	—	 	 	83	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	France	 	 	—	 	 	—	 	 	335	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Germany	 	 	—	 	 	—	 	 	225	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Ireland	 	 	—	 	 	77	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Netherlands	 	 	—	 	 	—	 	 	190	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Portugal	 	 	—	 	 	—	 	 	145	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Spain	 	 	—	 	 	—	 	 	465	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Sweden	 	 	—	 	 	—	 	 	112	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	United Kingdom	 	 	6	 	 	808	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Canada	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Alberta	 	 	—	 	 	—	 	 	—	 	 	18	 	 	11	 	 	2	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	British Columbia	 	 	—	 	 	—	 	 	—	 	 	23	 	 	12	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Manitoba	 	 	—	 	 	—	 	 	—	 	 	5	 	 	2	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	New Brunswick	 	 	—	 	 	—	 	 	—	 	 	3	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Newfoundland	 	 	—	 	 	—	 	 	—	 	 	1	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Nova Scotia	 	 	—	 	 	—	 	 	—	 	 	6	 	 	1	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Ontario	 	 	—	 	 	—	 	 	—	 	 	57	 	 	32	 	 	7	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Prince Edward Island	 	 	—	 	 	—	 	 	—	 	 	1	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Quebec	 	 	—	 	 	—	 	 	—	 	 	29	 	 	11	 	 	1	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	Saskatchewan	 	 	—	 	 	—	 	 	—	 	 	3	 	 	2	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
China	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Anhui	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	13	 	 	—	 	 	—	 	
 	Hangzhou	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	1	 	 	—	 	 	—	 	 	—	 	
 	Henan	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	9	 	 	—	 	 	—	 	
 	Jiangsu	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	107	 	 	—	 	 	—	 	
 	Shandong	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	8	 	 	—	 	 	—	 	
 	Shanghai	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	6	 	 	—	 	 	—	 	 	—	 	
 	Sichuan	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	6	 	 	—	 	 	—	 	
 	Suzhou	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	1	 	 	—	 	 	—	 	 	—	 	
 	Yunnan	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	5	 	 	—	 	 	—	 	
 	Zhejiang	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	18	 	 	—	 	 	—	 	
Mexico	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Estado de Mexico	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	2	 	 	—	 	
 	Distrito Federal	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	2	 	 	—	 	
 	Guadalajara	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	2	 	 	—	 	
Turkey	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Izmir	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	1	 	
 	Ankara	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	1	 	
 	 	
Total	 	 	6	 	 	885	 	 	1,555	 	 	146	 	 	71	 	 	10	 	 	8	 	 	166	 	 	6	 	 	2	 	
 	 	
(1)
On February 21, 2011, we announced plans to exit the Turkey market and restructure the Best Buy branded stores in China during fiscal 2012.
24

Table of Contents
The following table summarizes the ownership status and total square footage of our International segment store locations at the end of fiscal 2011:

 	 	Europe	 	Canada	 	China	 	Mexico	 	Turkey	 	
 	 	Best Buy
Stores	 	The
Carphone
Warehouse
Stores	 	The Phone
House
Stores	 	Future Shop
Stores	 	Best Buy
Stores	 	Best Buy
Mobile
Stores	 	Best Buy
Stores (1)	 	Five Star
Stores	 	Best Buy
Stores	 	Best Buy
Stores (1)	 	
 	 	
Owned store locations	 	 	—	 	 	—	 	 	2	 	 	—	 	 	3	 	 	—	 	 	1	 	 	6	 	 	—	 	 	—	 	
Leased store locations	 	 	6	 	 	885	 	 	1,553	 	 	146	 	 	68	 	 	10	 	 	7	 	 	160	 	 	6	 	 	2	 	
 	 	
Square footage (in thousands)	 	 	196	 	 	695	 	 	810	 	 	3,864	 	 	2,250	 	 	13	 	 	279	 	 	5,931	 	 	327	 	 	80	 	
 	 	
(1)
On February 21, 2011, we announced plans to exit the Turkey market and restructure the Best Buy branded stores in China during fiscal 2012.
The following table summarizes the location, ownership status and total square footage of space utilized for distribution centers and corporate offices by our International segment at the end of fiscal 2011:

 	 	 	 	Square Footage (in thousands)	 	 	 	Square Footage (in thousands)	 	
 	 	Distribution Centers	 	Leased	 	Owned	 	Principal Corporate Offices	 	Leased	 	Owned	 	
 	 	
Europe	 	Throughout seven European countries	 	 	232	 	 	—	 	Acton, West London and throughout Europe	 	 	773	 	 	—	 	
Canada	 	Brampton and Bolton, Ontario	 	 	1,763	 	 	—	 	Burnaby, British Columbia	 	 	141	 	 	—	 	
 	 	Vancouver, British Columbia	 	 	639	 	 	—	 	—	 	 	—	 	 	—	 	
Five Star	 	Jiangsu Province, China	 	 	1,320	 	 	—	 	Corporate headquarters, Jiangsu Province, China	 	 	26	 	 	46	 	
 	 	Throughout the Five Star retail chain	 	 	527	 	 	—	 	District offices throughout the Five Star retail chain	 	 	181	 	 	5	 	
Best Buy China	 	Shanghai, China	 	 	129	 	 	—	 	Shanghai, China	 	 	81	 	 	—	 	
Mexico	 	Estado de Mexico, Mexico	 	 	45	 	 	—	 	Distrito Federal, Mexico	 	 	21	 	 	—	 	
Turkey	 	Gebze-Kocaeli, Turkey	 	 	11	 	 	—	 	Istanbul, Turkey	 	 	23	 	 	—	 	
Exclusive Brands
We lease approximately 32,000 square feet of office space in China to support our exclusive brands operations.
Operating Leases
Almost all of our stores and a majority of our distribution facilities are leased. Terms of the lease agreements generally range from 10 to 20 years. Most of the leases contain renewal options and rent escalation clauses.
Additional information regarding our operating leases is available in Note 9, Leases , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.

 Item 3. Legal Proceedings.
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.
25

Table of Contents
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.
Executive Officers of the Registrant
 (As of February 26, 2011)

Name	 	Age	 	Position With the Company	 	Years
With the
Company	 	
 	 	
Shari L. Ballard	 	 	44	 	Executive Vice President, President — Americas	 	 	18	 	
Brian J. Dunn	 	 	50	 	Chief Executive Officer	 	 	26	 	
Christopher K.K. Gould (1)	 	 	41	 	Vice President, Treasurer	 	 	—	 	
Susan S. Grafton	 	 	54	 	Vice President, Controller and Chief Accounting Officer	 	 	10	 	
Joseph M. Joyce	 	 	59	 	Senior Vice President, General Counsel and Assistant Secretary	 	 	20	 	
Barry Judge	 	 	48	 	Executive Vice President, Chief Marketing Officer	 	 	11	 	
James L. Muehlbauer	 	 	49	 	Executive Vice President, Finance and Chief Financial Officer	 	 	9	 	
Kalendu Patel	 	 	47	 	Executive Vice President, President — Asia	 	 	8	 	
Ryan D. Robinson	 	 	45	 	Senior Vice President, Chief Financial Officer — U.S.	 	 	9	 	
Richard M. Schulze	 	 	70	 	Founder and Chairman of the Board	 	 	45	 	
Timothy R. Sheehan	 	 	46	 	Executive Vice President, Chief Administrative Officer	 	 	26	 	
Carol A. Surface	 	 	45	 	Executive Vice President, Chief Human Resources Officer	 	 	1	 	
Michael A. Vitelli	 	 	55	 	Executive Vice President, President — Americas	 	 	7	 	
(1)
Mr. Gould joined us as Vice President, Treasurer, effective November 2010.
Shari L. Ballard was named Executive Vice President, President — Americas in March 2010. Previously, she served as Executive Vice President — Retail Channel Management from 2007 until being appointed to her current role, and as Executive Vice President — Human Resources and Legal from 2004 to 2007. Ms. Ballard joined us in 1993 and has served as Senior Vice President, Vice President, and General and Assistant Store Manager. Ms. Ballard is a member of the University of Minnesota Foundation board of trustees and sits on its executive and human resources committees.
Brian J. Dunn was named our Chief Executive Officer in 2009 when he was also appointed as a director. A 26-year veteran of our company, Mr. Dunn began his career with us as a store associate in 1985 when we operated only a dozen stores. From 2006 until being named to his current position, Mr. Dunn served as President and Chief Operating Officer. From 2004 to 2006, Mr. Dunn was President — Retail, North America. From 2002 to 2004, he served as Executive Vice President — Best Buy U.S. Retail. Prior to that, he served as Senior Vice President, Regional Vice President, Regional
26

Table of Contents

Manager, District Manager and Store Manager. Mr. Dunn also serves on the board of The Best Buy Children's Foundation. He previously served on the boards of Dick's Sporting Goods, a full-line sporting goods retailer, and the Greater Twin Cities United Way.
Christopher K.K. Gould joined us in 2010 when he was named Vice President, Treasurer. Prior to joining us, Mr. Gould spent eleven years at Wal-Mart Stores, Inc., a global retailer, most recently as vice president and head of the capital markets division from 2007 to 2010. From 2006 to 2007, he was a senior director and head of finance for the financial services division, and prior to that, Mr. Gould held other financial leadership roles in Wal-Mart in its international, corporate finance and investment analysis divisions. Earlier in his career, Mr. Gould worked with Wasatch Funds and Bankers Trust Company.
Susan S. Grafton was named Vice President, Controller and Chief Accounting Officer in 2006. From 2005 to 2006, she served as Vice President — Financial Operations and Controller, and from 2004 to 2005, she served as Vice President — Finance, Planning and Performance Management. Prior to joining us in 2000, she worked in finance and accounting positions with The Pillsbury Company and Pitney Bowes, Inc. Ms. Grafton is a member of Financial Executives International's Committee on Corporate Reporting and the Finance Leaders Council for the Retail Industry Leaders Association. She also serves on the board of Perspectives, Inc., a non-profit supportive housing program in Minneapolis, Minnesota.
Joseph M. Joyce was named Senior Vice President, General Counsel and Assistant Secretary in 1997. Mr. Joyce joined us in 1991 as Vice President — Human Resources and General Counsel. Prior to joining us, Mr. Joyce was with Tonka Corporation, a toy maker, having most recently served as vice president, secretary and general counsel. He also serves on the board of governors of the University of St. Thomas School of Law.
Barry Judge was named Executive Vice President, Chief Marketing Officer in 2009. He was appointed to the Chief Marketing Officer role in 2008. Prior to that appointment, Mr. Judge served as Senior Vice President — Marketing from 2007 to 2008 and as Senior Vice President — Consumer and Brand Marketing from 2004 to 2007. Mr. Judge joined us in 1999 as a member of our e-commerce team. Prior to joining us, he spent four years as vice president of marketing for Caribou Coffee Company. His professional career also includes marketing and management positions at Young & Rubicam, Coca-Cola USA, The Quaker Oats Company, and The Pillsbury Company.
James L. Muehlbauer was named Executive Vice President, Finance and Chief Financial Officer in 2008. In 2007, he was appointed Enterprise Chief Financial Officer (interim). From 2006 to 2007, he served as Senior Vice President and Chief Financial Officer — Best Buy U.S., and from 2003 to 2006, as Senior Vice President — Finance. Prior to joining us, Mr. Muehlbauer spent ten years with The Pillsbury Company, a consumer packaged goods company, where he held senior-level finance management positions, including vice president and worldwide controller, vice president of operations, divisional finance director, director of mergers and acquisitions and director of internal audit. A certified public accountant (inactive), Mr. Muehlbauer spent eight years with Coopers & Lybrand LLP (now PricewaterhouseCoopers) including senior manager positions in the firm's audit and consulting practices. He serves on the board of overseers of the University of Minnesota Carlson School of Management.
Kalendu Patel was named Executive Vice President, President — Asia in 2010. Mr. Patel joined us in 2003 and served as Executive Vice President — Emerging Business from 2009 until 2010, Executive Vice President — Strategy and International Development from 2005 to 2009, and Senior Vice President — Strategy and International Development from 2004 to 2005. Prior to joining us, Mr. Patel was a partner for four years at Strategos, a strategic consulting firm. Prior to that, he worked at KPMG Consulting Inc. and Courtaulds PLC in the U.K.
Ryan D. Robinson was named Senior Vice President, Chief Financial Officer — U.S. in 2010. He served as Senior Vice President, Chief Financial Officer — U.S. Strategic Business Unit and Treasurer from 2007 until his current appointment. Mr. Robinson joined us in 2002 and served as Senior Vice President and Chief Financial Officer — New Growth Platforms from 2006 to 2007, Senior Vice President — Finance and Treasurer from 2005 to 2006, and Vice President — Finance and Treasurer from 2002 to 2005. Prior to joining us, he spent 15 years at ABN AMRO Holding N.V., an international bank, where his most recent role there was senior vice president and director of its North American private equity unit.
27

Table of Contents

Mr. Robinson also held management positions in ABN AMRO Holding N.V.'s corporate finance, finance advisory, acquisitions and asset securitization divisions. Mr. Robinson is a member of the board of directors of Children's Hospitals and Clinics of Minnesota.
Richard M. Schulze is a founder of our company. He has been an officer and director from our inception in 1966 and currently serves as our Chairman of the Board. In 2002, he relinquished the duties of Chief Executive Officer, having served as our principal executive officer for more than 30 years. He is on the board of trustees of the University of St. Thomas, chairman of its executive and institutional advancement committee, and a member of its board affairs committee. Mr. Schulze is also chairman of the board of governors of the University of St. Thomas Business School and serves on the board of the Richard M. Schulze Family Foundation. He previously served on the board of Pentair, Inc., a diversified industrial manufacturing company, and The Best Buy Children's Foundation. Mr. Schulze holds an honorary doctorate of laws degree from the University of St. Thomas.
Timothy R. Sheehan was named Executive Vice President, Chief Administrative Officer in 2010. He previously served as Executive Vice President — Enterprise Retail Operations since 2009. From 2004 to 2009, he served as Senior Vice President — Customer Experience Creation, where he focused on our branding and consumer support. Mr. Sheehan joined us in 1985 as a part-time sales associate and steadily advanced his career as our company grew. He has served us as Regional Manager, District Manager and Store General Manager. Upon moving from the field into corporate, Mr. Sheehan served in positions in retail operations, consumer relations and store support.
Carol A. Surface joined us in 2010 when she was appointed Executive Vice President, Chief Human Resources Officer. Prior to joining us, Ms. Surface spent ten years at PepsiCo, Inc., a global food, snack and beverage company, where she served most recently as senior vice president of human resources and chief personnel officer for PepsiCo International. From 2009 to 2010, Ms. Surface served PepsiCo in Dubai where she was responsible for all human resources aspects across the Asia Pacific region, Middle East and Africa. Prior to that, Ms. Surface spent five years in Hong Kong, serving as PepsiCo's senior vice president of international human resources and chief personnel officer for the Asia region. Prior to her work at PepsiCo, her professional career included human resources and organization development positions with Kmart Corporation, Eaton Corporation and The Dow Chemical Company.
Michael A. Vitelli was named Executive Vice President, President — Americas in March 2010. He previously served as Executive Vice President — Customer Operating Groups since 2008. Mr. Vitelli joined us in 2004 and served as Senior Vice President and General Manager of Home Solutions from 2007 to 2008, and Senior Vice President — Merchandising from 2005 to 2007. Prior to joining us, he spent 23 years with Sony Electronics, Inc., serving in positions of increasing responsibility including executive vice president of Sony's Visual Products Company. Mr. Vitelli serves on the boards of the National Multiple Sclerosis Society, Minnesota Chapter, and the National Consumer Technology Industry chapter of the Anti-Defamation League, where he serves as the industry chair.

 Item 4. Reserved.
Not applicable.
28

Table of Contents
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded on the New York Stock Exchange under the ticker symbol BBY. The table below sets forth the high and low sales prices of our common stock as reported on the New York Stock Exchange — Composite Index during the periods indicated.

 	 	Sales Price	 	
 	 	High	 	Low	 	
 	 	
Fiscal 2011	 	 	 	 	 	 	 	
First Quarter	 	$	48.83	 	$	36.28	 	
Second Quarter	 	 	42.65	 	 	30.90	 	
Third Quarter	 	 	45.63	 	 	31.32	 	
Fourth Quarter	 	 	44.62	 	 	32.00	 	
Fiscal 2010	 	 	 	 	 	 	 	
First Quarter	 	$	42.06	 	$	23.97	 	
Second Quarter	 	 	39.98	 	 	31.25	 	
Third Quarter	 	 	44.32	 	 	35.66	 	
Fourth Quarter	 	 	45.55	 	 	35.01	 	
Holders
As of April 20, 2011, there were 3,305 holders of record of our common stock.
Dividends
In fiscal 2004, our Board initiated the payment of a regular quarterly cash dividend with respect to shares of our common stock. A quarterly cash dividend has been paid in each subsequent quarter. Our quarterly cash dividend for all of fiscal 2010 and for the first two quarters of fiscal 2011 was $0.14 per share, and for the last two quarters of fiscal 2011 was $0.15 per share. The payment of cash dividends is subject to customary legal and contractual restrictions.
Future dividend payments will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
From time to time, we repurchase our common stock in the open market pursuant to programs approved by our Board. We may repurchase our common stock for a variety of reasons, such as acquiring shares to offset dilution related to equity-based incentives, including stock options and our employee stock purchase plan, and optimizing our capital structure.
In June 2007, our Board authorized up to $5.5 billion of share repurchases. The program, which became effective on June 26, 2007, terminated and replaced a $1.5 billion share repurchase program authorized by our Board in June 2006. There is no expiration date governing the period over which we can repurchase shares under the June 2007 program. We made no share repurchases in fiscal 2010. During fiscal 2011, we repurchased and retired 32.6 million shares at a cost of $1.2 billion. At the end of fiscal 2011, $1.3 billion of the $5.5 billion share repurchases authorized by our Board in June 2007 was available for future share repurchases.
29

Table of Contents
We consider several factors in determining when to make share repurchases including, among other things, our cash needs, the availability of funding and the market price of our stock. We expect that cash provided by future operating activities, as well as available cash and cash equivalents and short-term investments, will be the sources of funding for our share repurchase program. Based on the anticipated amounts to be generated from those sources of funds in relation to the remaining authorization approved by our Board under the June 2007 share repurchase program, we do not expect that future share repurchases will have a material impact on our short-term or long-term liquidity.
The following table presents the total number of shares of our common stock that we purchased during the fourth quarter of fiscal 2011, the average price paid per share, the number of shares that we purchased as part of our publicly announced repurchase program, and the approximate dollar value of shares that still could have been purchased at the end of the applicable fiscal period, pursuant to our June 2007 share repurchase program:

Fiscal Period	 	Total Number
of Shares
Purchased	 	Average
Price Paid
per Share	 	Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)	 	Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under the Plans or Programs (1)	 	
 	 	
November 28, 2010, through January 1, 2011	 	 	—	 	$	—	 	 	—	 	$	1,372,000,000	 	
January 2, 2011, through January 29, 2011	 	 	—	 	 	—	 	 	—	 	 	1,372,000,000	 	
January 30, 2011, through February 26, 2011	 	 	1,855,740	 	 	35.66	 	 	1,855,740	 	 	1,307,000,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total Fiscal 2011 Fourth Quarter	 	 	1,855,740	 	 	35.66	 	 	1,855,740	 	 	1,307,000,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	
(1)
"Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs" reflects our $5.5 billion share repurchase program announced on June 27, 2007, less the $3.0 billion we purchased in fiscal 2008 under our accelerated share repurchase program and the $1.2 billion we purchased in fiscal 2011. There is no stated expiration for the June 2007 share repurchase program.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information about our common stock that may be issued under our equity compensation plans as of February 26, 2011.

Plan Category	 	Securities to Be Issued
Upon Exercise of
Outstanding
Options	 	Weighted
Average
Exercise Price
per Share (1)	 	Securities
Available
for Future
Issuance (2)	 	
 	 	
Equity compensation plans approved by security holders (3)	 	 	40,131,027	(4)	$	38.97	 	 	6,942,317	 	
Equity compensation plans not approved by security holders (5)	 	 	11,250	 	$	34.44	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	
Total	 	 	40,142,277	 	$	38.97	 	 	6,942,317	 	
 	 	 	 	 	 	 	 	 	
(1)
Includes weighted-average exercise price of outstanding stock options only.

(2)
Includes 3,525,553 shares of our common stock which have been reserved for issuance under our 2008 and 2003 Employee Stock Purchase Plans.

(3)
Includes our 1994 Full-Time Non-Qualified Stock Option Plan, as amended; our 1997 Directors' Non-Qualified Stock Option Plan, as amended; our 1997 Employee Non-Qualified Stock Option Plan, as amended; and our 2004 Omnibus Stock and Incentive Plan, as amended.

(4)
Includes grants of stock options and market-based, performance-based and time-based restricted stock.

(5)
Represents non-plan options issued to a former executive officer in April 2002 in consideration of his service to the Board prior to his employment with us. The options, which were fully vested upon grant, have an exercise price of $34.44 per share and expire on April 11, 2012.
30

Table of Contents
Best Buy Stock Comparative Performance Graph
The information contained in this Best Buy Stock Comparative Performance Graph section shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
The graph below compares the cumulative total shareholder return on our common stock for the last five fiscal years with the cumulative total return on the Standard & Poor's 500 Index ("S&P 500"), of which we are a component, and the Standard & Poor's Retailing Group Industry Index ("S&P Retailing Group"), of which we are also a component. The S&P Retailing Group is a capitalization-weighted index of domestic equities traded on the NYSE and NASDAQ, and includes high-capitalization stocks representing the retail sector of the S&P 500.
The graph assumes an investment of $100 at the close of trading on February 24, 2006, the last trading day of fiscal 2006, in our common stock, the S&P 500 and the S&P Retailing Group.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Best Buy Co., Inc., the S&P 500
and the S&P Retailing Group

																				
 	 	FY06	 	FY07	 	FY08	 	FY09	 	FY10	 	FY11	 	
 	 	
Best Buy Co., Inc.	 	$	100.00	 	$	86.35	 	$	80.89	 	$	55.04	 	$	70.78	 	$	63.74	 	
S&P 500	 	 	100.00	 	 	111.97	 	 	107.94	 	 	61.18	 	 	93.98	 	 	115.20	 	
S&P Retailing Group	 	 	100.00	 	 	110.66	 	 	91.21	 	 	61.78	 	 	106.55	 	 	132.89	 	
*
Cumulative total return assumes dividend reinvestment.
Source: Research Data Group, Inc.
31

Table of Contents

 Item 6. Selected Financial Data.
The following table presents our selected financial data. The table should be read in conjunction with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations , and Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Five-Year Financial Highlights
$ in millions, except per share amounts

Fiscal Year	 	2011 (1)	 	2010 (2)	 	2009 (3)(4)	 	2008	 	2007 (5)	 	
 	 	
Consolidated Statements of Earnings Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Revenue	 	$	50,272	 	$	49,694	 	$	45,015	 	$	40,023	 	$	35,934	 	
 	Operating income	 	 	2,114	 	 	2,235	 	 	1,870	 	 	2,161	 	 	1,999	 	
 	Net earnings including noncontrolling interests	 	 	1,366	 	 	1,394	 	 	1,033	 	 	1,410	 	 	1,378	 	
 	Net earnings attributable to Best Buy Co., Inc.	 	 	1,277	 	 	1,317	 	 	1,003	 	 	1,407	 	 	1,377	 	
Per Share Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net earnings	 	$	3.08	 	$	3.10	 	$	2.39	 	$	3.12	 	$	2.79	 	
 	Cash dividends declared and paid	 	 	0.58	 	 	0.56	 	 	0.54	 	 	0.46	 	 	0.36	 	
 	Common stock price:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	High	 	 	48.83	 	 	45.55	 	 	48.03	 	 	53.90	 	 	59.50	 	
 	 	Low	 	 	30.90	 	 	23.97	 	 	16.42	 	 	41.85	 	 	43.51	 	
Operating Statistics	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Comparable store sales (decline) gain (6)	 	 	(1.8	)%	 	0.6	%	 	(1.3	)%	 	2.9	%	 	5.0	%	
 	Gross profit rate	 	 	25.1	%	 	24.5	%	 	24.4	%	 	23.9	%	 	24.4	%	
 	Selling, general and administrative expenses rate	 	 	20.5	%	 	19.9	%	 	20.0	%	 	18.5	%	 	18.8	%	
 	Operating income rate	 	 	4.2	%	 	4.5	%	 	4.2	%	 	5.4	%	 	5.6	%	
Year-End Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Current ratio (7)	 	 	1.2	 	 	1.2	 	 	1.0	 	 	1.1	 	 	1.4	 	
 	Total assets	 	$	17,849	 	$	18,302	 	$	15,826	 	$	12,758	 	$	13,570	 	
 	Debt, including current portion	 	 	1,709	 	 	1,802	 	 	1,963	 	 	816	 	 	650	 	
 	Total equity (8)	 	 	7,292	 	 	6,964	 	 	5,156	 	 	4,524	 	 	6,236	 	
 	Number of stores	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Domestic	 	 	1,317	 	 	1,192	 	 	1,107	 	 	971	 	 	873	 	
 	 	International (9)	 	 	2,855	 	 	2,835	 	 	2,835	 	 	343	 	 	304	 	
 	 	Total (9)	 	 	4,172	 	 	4,027	 	 	3,942	 	 	1,314	 	 	1,177	 	
 	Retail square footage (000s)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Domestic	 	 	43,660	 	 	42,488	 	 	40,924	 	 	37,511	 	 	34,092	 	
 	 	International (9)	 	 	14,445	 	 	13,623	 	 	13,331	 	 	11,069	 	 	9,419	 	
 	 	Total (9)	 	 	58,105	 	 	56,111	 	 	54,255	 	 	48,580	 	 	43,511	 	
(1)
Included within our operating income and net earnings for fiscal 2011 is $222 ($147 net of taxes) of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our businesses. These charges resulted in a decrease in our operating income rate of 0.5% of revenue for the fiscal year.

(2)
Included within our operating income and net earnings for fiscal 2010 is $52 ($25 net of taxes and noncontrolling interest) of restructuring charges recorded in the fiscal first quarter related to measures we took to restructure our businesses. These charges resulted in a decrease in our operating income rate of 0.1% of revenue for the fiscal year.

(3)
Included within our operating income and net earnings for fiscal 2009 is $78 ($48 net of tax) of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our businesses. In addition, operating income is inclusive of goodwill and tradename impairment charges of $66 ($64 net of tax) related to our former Speakeasy business. Collectively, these charges resulted in a decrease in our operating income rate of 0.2% of revenue for the fiscal year.

(4)
Included within our net earnings for fiscal 2009 is $111 ($96 net of tax) of investment impairment charges related to our investment in the common stock of CPW.

(5)
Fiscal 2007 included 53 weeks. All other periods presented included 52 weeks.
32

Table of Contents
(6)
Comparable store sales is a measure commonly used in the retail industry, which indicates store performance by measuring the growth in revenue for certain stores for a particular period over the corresponding period in the prior year. Our comparable store sales is 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 the comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in the 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.

(7)
The current ratio is calculated by dividing total current assets by total current liabilities.

(8)
As a result of the adoption of new accounting guidance related to the treatment of noncontrolling interests in consolidated financial statements, we recharacterized minority interests previously reported on our consolidated balance sheets as noncontrolling interests and classified them as a component of shareholders' equity. As a result, we have reclassified total shareholders' equity for fiscal years 2009, 2008 and 2007 to include noncontrolling interests of $513, $40 and $35, respectively.

(9)
In the second quarter of fiscal 2009, we acquired 2,414 stores pursuant to our acquisition of a 50% interest in Best Buy Europe.
33

Table of Contents

 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. Our MD&A is presented in seven sections:
•
Overview 

•
Business Strategy and Core Philosophies 

•
Results of Operations 

•
Liquidity and Capital Resources 

•
Off-Balance-Sheet Arrangements and Contractual Obligations 

•
Critical Accounting Estimates 

•
New Accounting Standards
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. Consistent with such consolidation, the financial and non-financial information presented in our MD&A relative to these operations is also presented 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 million of restructuring charges related to our International segment were included in our fiscal 2011 results.
Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Our fiscal year ends on the Saturday nearest the end of February. Fiscal 2011, 2010 and 2009 each included 52 weeks.
Overview
We are a multi-national 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 all operations within the U.S. and its territories. The International segment is comprised of all operations outside the U.S. and its territories.
Our business, like that of many retailers, is seasonal. Historically, we have realized more of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Europe and Canada, than in any other fiscal quarter.
While some of the products and services we offer are viewed by consumers as essential, others continue to be viewed as discretionary purchases. Consequently, our results of operations are susceptible to changes in consumer confidence levels and macroeconomic factors such as unemployment, consumer credit availability and the condition of the housing market. Recently, consumers have maintained a cautious approach to discretionary spending due to continued economic pressures. Consequently, customer traffic and spending patterns continue to be difficult to predict. Other factors that directly impact our performance are product life-cycle shifts (including the adoption of new technology) and the competitive consumer electronics retail environment. As a result of these factors, predicting our future revenue and net
34

Table of Contents

earnings is difficult. Disciplined capital allocation and working capital management and expense control remain key priorities for us as we navigate through the current environment. By providing access to a wide selection of consumer electronics products and accessories; a vast array of service offerings, such as extended warranties, installation and repair; and a knowledgeable sales staff to help our customers select and connect their devices, we believe we offer our customers a differentiated value proposition.
Throughout this MD&A, we refer to comparable store sales. Comparable store sales is a measure commonly used in the retail industry, which indicates store performance by measuring the growth in revenue for certain stores for a particular period over the corresponding period in the prior year. Our comparable store sales is 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 the comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in the 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.
In our discussions of the operating results of our consolidated business and our International segment, we sometimes refer to the impact of changes in foreign currency exchange rates and currency exchange rate fluctuations, which are references to the differences between the foreign currency exchange rates we use to convert the International segment's operating results from local currencies into U.S. dollars for reporting purposes. The impact of foreign currency exchange rate fluctuations is typically calculated as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior-year period's currency exchange rates. We use this method for all countries where the functional currency is not the U.S. dollar.
Business Strategy and Core Philosophies
Broadly defined, our Connected World strategy is based on the goal to demystify and humanize technology to help customers get the most out of the rapidly expanding role that technology plays in their lives. The assets we leverage to bring this strategy to life include our approximately 180,000 employees around the world and the dedication and expertise they bring; valuable relationships with our vendors; our brand names and reputation; and our unique multi-channel model which provides customer touch point opportunities through retail store locations, Web sites, mobile applications and call centers.
The Connected World gives us access to a much larger addressable market than just the traditional consumer electronics hardware market. While a large part of the traditional focus of our business has been on consumer electronics products, we have significant incremental opportunities in selling accessories, content, connections and services.
Our three primary strategic priorities are:
Capture New Growth Opportunities and Target Online Opportunities .    The unrelenting pace of change in technology provides both opportunities and challenges for our customers, and we believe we are well positioned to help them navigate through these and to enrich their lives through the use of technology.
Our current growth priorities include continuing the recent expansion in Best Buy Mobile, mobile computing (particularly with the growing selection of tablet computers) and increasing our market share in appliances and gaming. In addition, we believe our customers will increasingly appreciate our Geek Squad service offerings and innovative purchase options, such as the recently-launched "Buy Back" program in the U.S. Finally, we foresee opportunities for increasing the number of connections we sell, a vital proposition to our customers wishing to access people and content such as streaming
35

Table of Contents

movies and music, internet and television. This opportunity is most prevalent today in mobile phones, but also in connecting computing devices to mobile broadband and televisions to broadband services.
We believe that our established multi-channel strategy provides us competitive advantages in that it allows customers to connect with us in a variety of ways. For example, customers can interact with us directly through our store, online, mobile application or call center channels or through a combination of channels, such as purchasing online for in-store pick up. We plan to continue to leverage these capabilities to offer consumers options that are flexible and convenient. Our online growth plans also include allowing external vendors and retailers to sell through our Web sites, extending our reach by allowing partners to market our products and services and leveraging online traffic to sell advertising.
Improve Growth and Returns in International Markets .    Our international strategy is focused on four key geographic areas (Canada, China, Europe and Mexico), where we believe we can leverage size, scale and economics to succeed. In China, we expect to continue investment in profitable growth as we look to grow our position in this fast growing market through our Five Star business. In our established businesses in Canada and Europe (small-format stores), we plan to continue our evolution into Connected World solutions. In our relatively new markets such as the U.K. (large-format stores) and Mexico, our growth will likely be more measured, as we increase our understanding and appreciation for customers' needs in these markets.
Drive Structural Opportunities to Improve Returns .    In order to provide value to our customers and to fund growth opportunities that we are targeting, we must operate efficiently and effectively. We have a disciplined approach to managing our costs and capital allocation. We require each of our businesses to meet sufficient ROIC levels over appropriate time horizons. Our growth strategies require that we continue to increase our points of presence in order to fully realize the benefits of our multi-channel strategy. Our plans to continue the expansion of our U.S. Best Buy Mobile stand-alone stores is expected to increase our presence and allow us to reduce our large-format store footprint.
We also seek to improve store productivity through actions such as expansion of our "Connected Store" model roll-out, increasing our presence in pre-owned and pre-order games and expanding our Pacific Sales store-within-a-store appliances model.
Results of Operations
Fiscal 2011 Summary
•
Net earnings decreased 3.0% in fiscal 2011 compared to fiscal 2010. The decrease in net earnings was the result of decreases in both the Domestic and International segments' operating income, driven primarily by the $222 million ($147 million net of tax) of restructuring charges recorded in the fourth quarter of fiscal 2011, compared to $52 million ($25 million net of taxes and noncontrolling interest) of restructuring charges recorded in fiscal 2010. Earnings per diluted share of $3.08 in fiscal 2011 was essentially flat compared to $3.10 in fiscal 2010. 

•
Revenue increased 1.2% to $50.3 billion. The increase was driven primarily by the net addition of 147 new stores during fiscal 2011 and the favorable impact of foreign currency exchange rate fluctuations, partially offset by a comparable store sales decline of 1.8%. 

•
Our gross profit rate increased by 0.6% of revenue to 25.1% of revenue. The increase was driven by an increase in our Domestic segment's gross profit rate primarily due to strong sales of higher-margin smartphones as a result of the continued growth of Best Buy Mobile. 

•
Our SG&A rate increased by 0.6% of revenue to 20.5% of revenue. The increase was due primarily to the deleveraging impact of lower comparable store sales in our Domestic segment, as well as a change in the form of vendor funding. Partially offsetting these increases was a decrease in incentive compensation in our Domestic segment. 

•
In the fourth quarter of fiscal 2011, we recorded $222 million in restructuring charges related to our plans to exit the Turkey market, restructure the Best Buy branded stores in China and improve efficiencies in our Domestic operations,
36

Table of Contents
which resulted in charges for inventory write-downs, property and equipment impairments, employee termination benefits, intangible asset impairments and facility closure costs.
•
We ended fiscal 2011 with $1.1 billion of cash and cash equivalents, compared to $1.8 billion at the end of fiscal 2010. Operating cash flow decreased to $1.2 billion in fiscal 2011 compared to fiscal 2010 operating cash flow of $2.2 billion due primarily to changes in working capital, while capital expenditures increased 21.0% to $744 million. 

•
During fiscal 2011, we made four dividend payments totaling $0.58 per share, or $237 million in the aggregate. 

•
We repurchased and retired 32.6 million shares at a cost of $1.2 billion during fiscal 2011.
Consolidated Results
The following table presents selected consolidated financial data for each of the past three fiscal years ($ in millions, except per share amounts):

Consolidated Performance Summary	 	2011 (1)	 	2010 (2)	 	2009 (3)(4)	 	
 	 	
Revenue	 	$	50,272	 	$	49,694	 	$	45,015	 	
Revenue gain %	 	 	1.2	%	 	10.4	%	 	12.5	%	
Comparable store sales % (decline) gain	 	 	(1.8	)%	 	0.6	%	 	(1.3	)%	
Gross profit as % of revenue (5)	 	 	25.1	%	 	24.5	%	 	24.4	%	
SG&A as % of revenue (5)	 	 	20.5	%	 	19.9	%	 	20.0	%	
Operating income	 	$	2,114	 	$	2,235	 	$	1,870	 	
Operating income as % of revenue	 	 	4.2	%	 	4.5	%	 	4.2	%	
Net earnings	 	$	1,277	 	$	1,317	 	$	1,003	 	
Diluted earnings per share	 	$	3.08	 	$	3.10	 	$	2.39	 	
(1)
Included within our operating income and net earnings for fiscal 2011 is $222 million ($147 million net of taxes) of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our businesses. These charges resulted in a decrease in our operating income of 0.5% of revenue for the fiscal year.

(2)
Included within our operating income and net earnings for fiscal 2010 is $52 million ($25 million net of taxes and noncontrolling interest) of restructuring charges recorded in the fiscal first quarter related to measures we took to restructure our businesses. These charges resulted in a decrease in our operating income of 0.1% of revenue for the fiscal year.

(3)
Included within our operating income and net earnings for fiscal 2009 is $78 million ($48 million net of tax) of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our businesses. In addition, operating income is inclusive of goodwill and tradename impairment charges of $66 million ($64 net of tax) related to our former Speakeasy business. Collectively, these charges resulted in a decrease in our operating income of 0.2% of revenue for the fiscal year.

(4)
Included within our net earnings for fiscal 2009 is $111 million ($96 million net of tax) of investment impairment charges related to our investment in the common stock of CPW.

(5)
Because retailers vary in how they record costs of operating their supply chain between cost of goods sold and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers' corresponding rates. For additional information regarding costs classified in cost of goods sold and SG&A, refer to Note 1, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Fiscal 2011 Results Compared With Fiscal 2010
Throughout fiscal 2011, the majority of geographic markets in which we operate generally continued to endure difficult and uncertain economic conditions. In addition, customer appetite for certain product categories was below industry expectations. Both of these factors had a direct bearing on our revenue. We have responded to the current economic environment by closely managing our SG&A, as well as focusing on efforts to improve our gross profit.
The 1.2% revenue increase in fiscal 2011 resulted primarily from the net addition of 147 new stores during fiscal 2011 and the positive impact of foreign currency exchange rate fluctuations, partially offset by a comparable store sales decline.
37

Table of Contents
The components of the net revenue increase in fiscal 2011 were as follows:

Net new stores	 	 	2.6	%	
Impact of foreign currency exchange rate fluctuations	 	 	0.6	%	
Comparable store sales impact	 	 	(1.7	)%	
Non-comparable sales channels (1)	 	 	(0.2	)%	
One less week of revenue for Best Buy Europe (2)	 	 	(0.1	)%	
 	 	 	 	
Total revenue increase	 	 	1.2	%	
 	 	 	 	
(1)
Non-comparable sales channels primarily reflects the impact from revenue we earn from sales of merchandise to wholesalers and dealers as well as other non-comparable sales channels not included within our comparable store sales calculation.

(2)
Reflects the incremental revenue associated with Best Buy Europe in the first quarter of fiscal 2010, which had 14 weeks of activity, compared to 13 weeks in the first quarter of fiscal 2011.
Our gross profit rate increased 0.6% of revenue in fiscal 2011. Gross profit rate improvements in our Domestic segment accounted for an increase of 0.7% of revenue. The relatively flat gross profit rate in our International segment had no impact on the consolidated gross profit rate. In addition, restructuring charges in fiscal 2011 accounted for a decrease in the gross profit rate of 0.1% of revenue. For further discussion of each segment's gross profit rate changes, see Segment Performance Summary , below.
The 0.6% of revenue SG&A rate increase for fiscal 2011 was due to a 0.7% of revenue increase attributable to the increase in our Domestic segment's SG&A rate, partially offset by a 0.1% of revenue decrease attributable to the decrease in our International segment's SG&A rate. For further discussion of each segment's SG&A rate changes, see Segment Performance Summary, below.
Our operating income decreased $121 million, or 5.4%, and our operating income rate decreased to 4.2% of revenue in fiscal 2011, compared to 4.5% of revenue in fiscal 2010. The 0.3% of revenue operating income rate decrease was driven by an increase in our SG&A rate and increased restructuring charges, partially offset by an increase in our gross profit rate. Our operating income in fiscal 2011 included $222 million of restructuring charges recorded in the fiscal fourth quarter, compared to $52 million of restructuring charges recorded in fiscal 2010. The fiscal 2011 restructuring charges include plans to exit the Turkey market, restructure the Best Buy branded stores in China and improve efficiencies in our Domestic segment, which resulted in charges for inventory write-downs, property and equipment impairments, employee termination benefits, intangible asset impairments and facility closure costs. The fiscal 2010 restructuring charges related primarily to updating our U.S. Best Buy store operating model, which included eliminating certain positions, as well as employee termination benefits and business reorganization costs in Best Buy Europe.
Fiscal 2010 Results Compared With Fiscal 2009
The 10.4% revenue increase resulted primarily from the acquisition impact of Best Buy Europe in the second quarter of fiscal 2009, which contributed no revenue in the first six months of fiscal 2009 and $2.6 billion of revenue in the first six months of fiscal 2010, as well as the net addition of 85 new stores during fiscal 2010.
The components of the net revenue increase in fiscal 2010 were as follows:

Acquisition of Best Buy Europe	 	 	5.8	%	
Net new stores	 	 	4.3	%	
Comparable store sales impact	 	 	0.6	%	
Favorable effect of foreign currency	 	 	0.1	%	
Non-comparable sales channels (1)	 	 	(0.4	)%	
 	 	 	 	
Total revenue increase	 	 	10.4	%	
 	 	 	 	
(1)
Non-comparable sales channels primarily reflects the impact from revenue we earn from sales of merchandise to wholesalers and dealers as well as other non-comparable sales channels not included within our comparable store sales calculation.
38

Table of Contents
The 0.1% of revenue gross profit rate increase for fiscal 2010 was due to a 0.4% of revenue increase from our International segment's gross profit rate, partially offset by a 0.3% of revenue decrease from our Domestic segment's gross profit rate. Of the 0.4% of revenue increase from our International segment, the impact of the acquisition of Best Buy Europe, which carries a normally higher gross profit rate and contributed no gross profit in the first six months of fiscal 2009 compared to a full year of gross profit in fiscal 2010, increased our fiscal 2010 gross profit rate by 0.3% of revenue. For further discussion of each segment's gross profit rate changes, see Segment Performance Summary, below.
The 0.1% of revenue SG&A rate decrease for fiscal 2010 was due to a 0.4% of revenue decrease from our Domestic segment's SG&A rate, partially offset by a 0.3% of revenue increase from our International segment's SG&A rate. Included within the 0.3% of revenue increase from our International segment is the impact of the acquisition of Best Buy Europe, which increased our fiscal 2010 SG&A rate by 0.6% of revenue. For further discussion of each segment's SG&A rate changes, see Segment Performance Summary, below.
Our operating income in fiscal 2010 also included $52 million of restructuring charges recorded in the fiscal first quarter, compared to $78 million of restructuring charges recorded in fiscal 2009. The 2010 restructuring charge related primarily to updating our U.S. Best Buy store operating model, which included eliminating certain positions, as well as employee termination benefits and business reorganization costs in Best Buy Europe, whereas the fiscal 2009 restructuring charges related primarily to employee termination benefits offered pursuant to voluntary and involuntary separation plans at our corporate headquarters and certain other locations.
39

Table of Contents
Segment Performance Summary
Domestic
The following table presents selected financial data for our Domestic segment for each of the past three fiscal years ($ in millions):

Domestic Segment Performance Summary	 	2011 (1)	 	2010 (2)	 	2009 (3)	 	
 	 	
Revenue	 	$	37,186	 	$	37,314	 	$	35,070	 	
Revenue (decline) gain %	 	 	(0.3	)%	 	6.4	%	 	5.2	%	
Comparable store sales % (decline) gain	 	 	(3.0	)%	 	1.7	%	 	(1.3	)%	
Gross profit as % of revenue	 	 	25.1	%	 	24.2	%	 	24.6	%	
SG&A as % of revenue	 	 	19.6	%	 	18.6	%	 	19.2	%	
Operating income	 	$	2,031	 	$	2,071	 	$	1,758	 	
Operating income as % of revenue	 	 	5.5	%	 	5.6	%	 	5.0	%	
(1)
Included within our Domestic segment's operating income for fiscal 2011 is $51 million of restructuring charges recorded in the fiscal fourth quarter related to measures we took to increase our efficiency. These charges resulted in a decrease in our Domestic segment's operating income of 0.1% of revenue for the fiscal year.

(2)
Included within our Domestic segment's operating income for fiscal 2010 is $25 million of restructuring charges recorded in the fiscal first quarter related to measures we took to update our U.S. Best Buy store operating model. These charges resulted in a decrease in our Domestic segment's operating income of less than 0.1% of revenue for the fiscal year.

(3)
Included within our Domestic segment's operating income for fiscal 2009 is $72 million of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our businesses. In addition, operating income is inclusive of goodwill and tradename impairment charges of $66 million related to our former Speakeasy business. Collectively, these charges resulted in a decrease in our Domestic segment's operating income of 0.4% of revenue for the fiscal year.
The following table reconciles our Domestic segment stores open at the end of each of the last three fiscal years:

 	 	Fiscal 2009	 	Fiscal 2010	 	Fiscal 2011	 	
 	 	Total Stores
at End of
Fiscal Year	 	Stores
Opened	 	Stores
Closed	 	Total Stores
at End of
Fiscal Year	 	Stores
Opened	 	Stores
Closed	 	Total Stores
at End of
Fiscal Year	 	
 	 	
Best Buy	 	 	1,023	 	46	 	 	—	 	 	1,069	 	 	31	 	 	(1	)	 	1,099	 	
Best Buy Mobile	 	 	38	 	36	 	 	—	 	 	74	 	 	103	 	 	—	 	 	177	 	
Pacific Sales	 	 	34	 	1	 	 	—	 	 	35	 	 	—	 	 	—	 	 	35	 	
Magnolia Audio Video	 	 	6	 	—	 	 	—	 	 	6	 	 	—	 	 	—	 	 	6	 	
Geek Squad	 	 	6	 	—	 	 	—	 	 	6	 	 	—	 	 	(6	)	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Domestic segment stores	 	 	1,107	 	83	 	 	—	 	 	1,190	 	 	134	 	 	(7	)	 	1,317	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fiscal 2011 Results Compared With Fiscal 2010
Our Domestic segment's gross profit improved in fiscal 2011, as compared to fiscal 2010, with a continued rate improvement partially offset by a revenue decline. These factors, combined with an increase in SG&A and restructuring charges, led to a modest decline in operating income.
We believe the revenue decline resulted primarily from a combination of weakness in several key consumer electronics industry product categories and a decline in our estimated domestic market share. Consumers continue to be highly selective and cautious about how and when they make consumer electronics purchases. As a specialty retailer in the consumer electronics industry, the adoption of new technology and the timing of product life-cycles continue to play an important role in revenue trends. For example, the demand for new television technologies did not materialize as the industry anticipated. Similarly, we saw a shift in consumer demand within mobile computing, as increased sales of tablets resulted in a lower overall sales mix of notebook computers throughout fiscal 2011.
40

Table of Contents
The 0.3% revenue decline in fiscal 2011 was due primarily to a comparable store sales decline of 3.0%, partially offset by the impact of net new stores opened during fiscal 2011. The components of the net revenue decrease in the Domestic segment in fiscal 2011 were as follows:

Comparable store sales impact	 	 	(2.9	)%	
Non-comparable sales channels (1)	 	 	(0.1	)%	
Net new stores	 	 	2.7	%	
 	 	 	 	
Total revenue decrease	 	 	(0.3	)%	
 	 	 	 	
(1)
Non-comparable sales channels reflects the impact from revenue we earn from sales channels not included within our comparable store sales calculation.
The following table presents the Domestic segment's revenue mix percentages and comparable store sales percentage changes by revenue category in fiscal 2011 and 2010:

 	 	Revenue Mix Summary	 	Comparable Store Sales Summary	 	
 	 	Year Ended	 	Year Ended	 	
 	 	February 26, 2011	 	February 27, 2010	 	February 26, 2011	 	February 27, 2010	 	
 	 	
Consumer electronics	 	 	37	%	 	39	%	 	(6.3	)%	 	1.1	%	
Home office	 	 	37	%	 	34	%	 	3.6	%	 	12.8	%	
Entertainment	 	 	14	%	 	16	%	 	(13.3	)%	 	(13.2	)%	
Appliances	 	 	5	%	 	4	%	 	7.0	%	 	(4.2	)%	
Services	 	 	6	%	 	6	%	 	0.5	%	 	(1.1	)%	
Other	 	 	1	%	 	1	%	 	n/a	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	100	%	 	100	%	 	(3.0	)%	 	1.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	
The products having the largest impact on our comparable store sales decline in fiscal 2011 were entertainment hardware and software (which includes video gaming hardware and software, CDs and DVDs) and televisions. Comparable store sales gains in mobile phones, mobile computing (consisting of notebook computers, netbooks and tablets) partially offset these declines. Revenue from our Domestic segment's online operations increased 13% in fiscal 2011 and is incorporated in the table above.
The 6.3% comparable store sales decline in the consumer electronics revenue category was driven primarily by a decrease in the sales of televisions and cameras and camcorders, partially offset by strong sales from our expanded assortment of e-Readers. The 3.6% comparable store sales gain in the home office revenue category was primarily the result of increased sales of mobile phones due to the continued growth of Best Buy Mobile, as well as gains in the sales of mobile computing. The 13.3% comparable store sales decline in the entertainment revenue category was mainly the result of declining sales in video gaming hardware and software, partially caused by industry-wide softness combined with a decline in our market share, as well as the continued decline in the sales of DVDs and CDs as consumers shift to digital content. The 7.0% comparable store sales gain in the appliances revenue category was due to an increase in unit sales with relatively flat average selling prices, with particular strength in kitchen and small appliances. The 0.5% comparable store sales gain in the services revenue category was due primarily to a gain in the sales of computer services, partially offset by a decline in the sales of repair and home theater installation services, due in part to the decrease in television sales noted above.
Despite a modest decline in revenue, our Domestic segment experienced gross profit growth in fiscal 2011 of $324 million, or 3.6%, compared to fiscal 2010, due to rate improvements. The 0.9% of revenue increase in the gross profit rate was due to favorable rate and mix impacts of 0.7% of revenue and 0.2% of revenue, respectively, and resulted primarily from the following factors collectively:
•
increased sales of higher-margin mobile phones as a result of the growth in Best Buy Mobile;
41

Table of Contents
•
a change in the form of vendor funding for fiscal 2011, shifting more dollars to gross profit than SG&A; and 

•
improved attachment of services, particularly in the mobile computing product category; 

•
partially offset by declining average selling prices of televisions.
Our Domestic segment's SG&A grew $348 million, or 5.0%, in fiscal 2011 compared to fiscal 2010. The increase in SG&A was driven by the opening of new stores and an increase in the Best Buy Mobile profit share-based management fee, partially offset by lower incentive compensation costs. The following factors collectively contributed to the Domestic segment's SG&A rate increase of 1.0% of revenue:
•
deleverage due to the comparable store sales decline; 

•
continued growth in Best Buy Mobile (including the profit share-based management fee we paid to Best Buy Europe, which is offset in the International segment SG&A results and, therefore, has no net impact on our consolidated operating income); and 

•
the change in the form of vendor funding as discussed above; 

•
partially offset by lower incentive compensation costs.
The $40 million decrease in our Domestic segment's operating income for fiscal 2011 was due to an increase in restructuring charges, a modest decline in revenue, and higher SG&A spending, partially offset by increased gross profit due to an improvement in the gross profit rate. Our Domestic segment's operating income in fiscal 2011 included $51 million of restructuring charges recorded in the fiscal fourth quarter, compared to $25 million of restructuring charges recorded in fiscal 2010. The fiscal 2011 restructuring charges resulted from activities to improve efficiencies in our Domestic segment, which resulted in charges for inventory write-downs, property and equipment impairments, employee termination benefits and intangible asset impairments. The fiscal 2010 restructuring charges related primarily to updating our U.S. Best Buy store operating model, which resulted in the elimination of certain positions for which we incurred employee termination costs.
Fiscal 2010 Results Compared With Fiscal 2009
The 6.4% revenue increase in fiscal 2010 resulted primarily from the net addition of 85 new stores during fiscal 2010 and a comparable store sales gain of 1.7%.
The components of the net revenue increase in the Domestic segment in fiscal 2010 were as follows:

Net new stores	 	 	4.7	%	
Comparable store sales impact	 	 	1.7	%	
 	 	 	 	
Total revenue increase	 	 	6.4	%	
 	 	 	 	
42

Table of Contents
The following table presents the Domestic segment's revenue mix percentages and comparable store sales percentage changes by revenue category in fiscal 2010 and 2009:

 	 	Revenue Mix Summary	 	Comparable Store Sales Summary	 	
 	 	Year Ended	 	Year Ended	 	
 	 	February 27, 2010	 	February 28, 2009	 	February 27, 2010	 	February 28, 2009	 	
 	 	
Consumer electronics	 	 	39	%	 	39	%	 	1.1	%	 	(5.8	)%	
Home office	 	 	34	%	 	31	%	 	12.8	%	 	10.4	%	
Entertainment	 	 	16	%	 	19	%	 	(13.2	)%	 	(5.9	)%	
Appliances	 	 	4	%	 	5	%	 	(4.2	)%	 	(15.4	)%	
Services	 	 	6	%	 	6	%	 	(1.1	)%	 	4.1	%	
Other	 	 	1	%	 	<1	%	 	n/a	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	100	%	 	100	%	 	1.7	%	 	(1.3	)%	
 	 	 	 	 	 	 	 	 	 	 	 	
Our Domestic segment's comparable store sales gain in fiscal 2010 improved sequentially each quarter of the fiscal year due primarily to an increase in average ticket and reflected our market share gains. The products having the largest effect on our Domestic segment's comparable store sales gain in fiscal 2010 were notebook computers, flat-panel televisions and mobile phones. Stronger sales in these product categories were partially offset by comparable store sales declines in our entertainment revenue category. Revenue from our Domestic segment's online operations increased 22% in fiscal 2010 and is incorporated in the table above.
The 1.1% comparable store sales gain in the consumer electronics revenue category was driven primarily by increases in the sales of flat-panel televisions as unit sales increases more than offset average selling price decreases, partially offset by declines in the sales of navigation products and MP3 players. The 12.8% comparable store sales gain in the home office revenue category was primarily the result of continued growth in the sales of notebook computers, which benefited from the launch of a new operating system, as well as mobile phones, which included a full year of our Best Buy Mobile store-within-a-store experience in all U.S. Best Buy stores, partially offset by declines in the sales of computer monitors. The 13.2% comparable store sales decline in the entertainment revenue category was due principally to a decline in sales of video gaming, partially caused by industry-wide softness and a maturing product platform, as well as a continued decline in sales of DVDs and CDs. The 4.2% comparable store sales decline in the appliances revenue category was due to a decrease in unit sales which more than offset increases in average selling prices. The 1.1% comparable store sales decline in the services revenue category was due primarily to a decline in home theater installation, partially offset by modest increases in our sales of extended warranties.
Our Domestic segment experienced gross profit growth of $407 million in fiscal 2010, or 4.7% compared to fiscal 2009, due to increased revenue volumes. The 0.4% of revenue decrease in the gross profit rate was due primarily to a change in revenue mix, which reduced the gross profit rate by 0.5% of revenue and resulted from a continued shift in the revenue mix to sales of lower-margin notebook computers, partially offset by additional mix shift into higher-margin mobile phones. In addition, improved margin rate performance provided a 0.1% of revenue increase to the gross profit rate.
Despite revenue growth of 6.4%, our Domestic segment's SG&A grew only 3.1% or by $207 million. Continued store openings and significant year over year performance improvements drove higher SG&A spend in fiscal 2010 for incentive pay, payroll and benefits and rent, partially offset by lower SG&A spend in various discretionary categories such as information technology and supply chain project expenditures, store reset and transformation costs, advertising and travel. The 0.6% of revenue SG&A rate decline was primarily due to the reductions in discretionary categories discussed above, which collectively reduced the SG&A rate by 1.0% of revenue. The overall leveraging impact of higher comparable store sales on payroll and benefits further reduced the SG&A rate by 0.2% of revenue. However, we had higher incentive pay expense due to improvements in performance in fiscal 2010 and no incentive pay expense in the prior year, which collectively offset the SG&A rate improvement by 0.6% of revenue.
43

Table of Contents
The increase in our Domestic segment's operating income for fiscal 2010 was due to higher gross profit dollars from net new store openings and comparable store sales growth, while SG&A dollars grew only 3.1% despite revenue growth of 6.4%, as shown by the decrease in the SG&A rate of 0.6% of revenue. A decrease in restructuring and no goodwill and tradename impairment charges further contributed to the additional operating income.
Our Domestic segment's operating income in fiscal 2010 included $25 million of restructuring charges recorded in the first fiscal quarter, compared to $72 million of restructuring charges recorded in fiscal 2009. The fiscal 2010 restructuring charges were primarily the result of updates to our Domestic segment's Best Buy branded store operating model, which resulted in the elimination of certain positions for which we incurred employee termination costs, whereas the fiscal 2009 restructuring charges related primarily to employee termination benefits offered pursuant to voluntary and involuntary separation plans at our principal corporate headquarters and certain other locations.
International
The following table presents selected financial data for our International segment for each of the past three fiscal years ($ in millions):

International Segment Performance Summary	 	2011 (1)	 	2010 (2)	 	2009 (3)	 	
 	 	
Revenue	 	$	13,086	 	$	12,380	 	$	9,945	 	
Revenue gain %	 	 	5.7	%	 	24.5	%	 	48.6	%	
Comparable store sales % gain (decline)	 	 	2.4	%	 	(3.7	)%	 	(0.9	)%	
Gross profit as % of revenue	 	 	25.1	%	 	25.3	%	 	23.9	%	
SG&A as % of revenue	 	 	23.3	%	 	23.8	%	 	22.7	%	
Operating income	 	$	83	 	$	164	 	$	112	 	
Operating income as % of revenue	 	 	0.6	%	 	1.3	%	 	1.1	%	
(1)
Included within our International segment's operating income in fiscal 2011 is $171 million of restructuring charges recorded in the fiscal fourth quarter, primarily related to our plans to exit the Turkey market and restructure our Best Buy branded stores in China. These charges resulted in a decrease in our International segment's operating income of 1.3% of revenue for the fiscal year.

(2)
Included within our International segment's operating income in fiscal 2010 is $27 million of restructuring charges recorded in the fiscal first quarter, primarily related to employee termination benefits and business reorganization costs in Best Buy Europe. These charges resulted in a decrease in our International segment's operating income of 0.2% of revenue for the fiscal year.

(3)
Included within our International segment's operating income in fiscal 2009 is $6 million of restructuring charges recorded in the fiscal fourth quarter related to measures we took to restructure our Canada business. The charges represent termination benefits in our Canada business. These charges resulted in a decrease in our International segment's operating income of 0.1% of revenue for the fiscal year.
44

Table of Contents
The following table reconciles our International segment stores open at the end of each of the last three fiscal years:

 	 	Fiscal 2009	 	Fiscal 2010	 	Fiscal 2011	 	
 	 	Total Stores
at End of
Fiscal Year	 	Stores
Opened	 	Stores
Closed	 	Total Stores
at End of
Fiscal Year	 	Stores
Opened	 	Stores
Closed	 	Total Stores
at End of
Fiscal Year	 	
 	 	
Best Buy Europe — small box (1)	 	 	2,465	 	82	 	 	(94	)	 	2,453	 	 	86	 	 	(99	)	 	2,440	 	
Best Buy Europe — big box (2)	 	 	—	 	—	 	 	—	 	 	—	 	 	6	 	 	—	 	 	6	 	
Canada	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Future Shop	 	 	139	 	5	 	 	—	 	 	144	 	 	2	 	 	—	 	 	146	 	
 	Best Buy	 	 	58	 	6	 	 	—	 	 	64	 	 	7	 	 	—	 	 	71	 	
 	Best Buy Mobile	 	 	3	 	1	 	 	—	 	 	4	 	 	6	 	 	—	 	 	10	 	
China	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Five Star	 	 	164	 	6	 	 	(12	)	 	158	 	 	12	 	 	(4	)	 	166	 	
 	Best Buy (3)	 	 	5	 	1	 	 	—	 	 	6	 	 	2	 	 	—	 	 	8	 	
Mexico	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Best Buy	 	 	1	 	4	 	 	—	 	 	5	 	 	1	 	 	—	 	 	6	 	
Turkey	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Best Buy (3)	 	 	—	 	1	 	 	—	 	 	1	 	 	1	 	 	—	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total International segment stores	 	 	2,835	 	106	 	 	(106	)	 	2,835	 	 	123	 	 	(103	)	 	2,855	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(1)
Represents The Carphone Warehouse and The Phone House small-format stores.

(2)
Represents Best Buy branded large-format stores in the U.K.

(3)
On February 21, 2011, we announced plans to exit the Turkey market and restructure the Best Buy branded stores in China during fiscal 2012.
Fiscal 2011 Results Compared With Fiscal 2010
While challenging economic conditions persisted in fiscal 2011 in many of the countries in which we operate, our International segment continued to grow revenue and experienced a comparable store sales gain for the year. A decline in operating income was due principally to the impact of the restructuring activities in fiscal 2011. Excluding the impact of foreign currency exchange rate fluctuations, the International segment experienced gross profit improvements with only a modest increase in SG&A. Continued growth in consumer spending and temporary government stimulus programs contributed to stronger sales and improved operating income in our China operations, particularly in our Five Star business. Our Canada operations faced many of the same market conditions and factors affecting the U.S. consumer electronics industry, with the adoption of new technology and the timing of product life-cycles continuing to play an important role in revenue trends. Similarly, our Europe operations saw the impacts from a constrained economy, but continued to benefit from higher Best Buy Mobile profit share-based management fees paid in fiscal 2011.
The 5.7% increase in revenue for fiscal 2011 was due to the positive impact of foreign currency exchange rate fluctuations (mainly related to the Canadian dollar), the impact of net new stores opened during fiscal 2011, and a 2.4% comparable store sales gain, partially offset by the impact of having one less week of revenue in Europe and a decline in sales in non-comparable sales channels. The increase in comparable store sales in fiscal 2011 was the result of gains in China and Europe, partially offset by a decline in Canada.
45

Table of Contents
The components of the net revenue increase in fiscal 2011 were as follows:

Impact of foreign currency exchange rate fluctuations	 	 	2.4	%	
Net new stores	 	 	2.3	%	
Comparable store sales impact	 	 	2.0	%	
One less week of revenue for Best Buy Europe (1)	 	 	(0.6	)%	
Non-comparable sales channels (2)	 	 	(0.4	)%	
 	 	 	 	
Total revenue increase	 	 	5.7	%	
 	 	 	 	
(1)
Reflects the incremental revenue associated with Best Buy Europe in the first quarter of fiscal 2010, which had 14 weeks of activity, compared to 13 weeks in the first quarter of fiscal 2011.

(2)
Non-comparable sales channels primarily reflects the impact from revenue we earn from sales of merchandise to wholesalers and dealers as well as other non-comparable sales channels not included within our comparable store sales calculation.
The following table presents the International segment's revenue mix percentages and comparable store sales percentage changes by revenue category in fiscal 2011 and 2010:

 	 	Revenue Mix Summary	 	Comparable Store Sales Summary	 	
 	 	Year Ended	 	Year Ended	 	
 	 	February 26, 2011	 	February 27, 2010	 	February 26, 2011	 	February 27, 2010	 	
 	 	
Consumer electronics	 	 	21	%	 	20	%	 	(2.5	)%	 	(12.0	)%	
Home office	 	 	55	%	 	53	%	 	5.0	%	 	(0.8	)%	
Entertainment	 	 	6	%	 	7	%	 	(12.4	)%	 	(12.4	)%	
Appliances	 	 	9	%	 	8	%	 	15.2	%	 	7.3	%	
Services	 	 	9	%	 	12	%	 	(1.6	)%	 	6.2	%	
Other	 	 	<1	%	 	<1	%	 	n/a	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	100	%	 	100	%	 	2.4	%	 	(3.7	)%	
 	 	 	 	 	 	 	 	 	 	 	 	
The products having the largest impact on our International segment's comparable store sales gain in fiscal 2011 were mobile phones, appliances and mobile computing. Increased sales in these product categories were partially offset by declines in the sales of entertainment hardware and software, including video gaming hardware and software, DVDs and CDs.
The 2.5% comparable store sales decline in the consumer electronics revenue category resulted primarily from declines in the sales of navigation products and MP3 players and accessories. Televisions remained essentially flat, as gains in the sales of televisions in China, were offset by declines in Canada, which faced market conditions similar to the U.S. The 5.0% comparable store sales gain in the home office revenue category resulted primarily from gains in the sales of mobile phones and mobile computing, partially offset by declines in sales of desktop computers, monitors and accessories. The 12.4% comparable store sales decline in the entertainment revenue category reflected a decrease in the sales of video gaming hardware and software and continued decreases in sales of DVDs and CDs. The 15.2% comparable store sales gain in the appliances revenue category resulted primarily from increases in the sales of appliances within our Five Star operations, where growth in consumer spending and temporary government stimulus programs continued to contribute to stronger sales. The 1.6% comparable store sales decline in the services revenue category was due primarily to a decrease in the sales of extended warranties driven by declines in the sales of televisions and notebook computers in Canada.
Our International segment experienced gross profit growth in fiscal 2011 of $153 million, or 4.9%. The increase in gross profit in fiscal 2011 was due to an increase in revenue and the favorable impact of foreign currency exchange rate fluctuations, as the gross profit rate decreased slightly. The 0.2% of revenue decrease in the gross profit rate in fiscal 2011 reflects an unfavorable mix impact of 0.5% of revenue, partially offset by a favorable rate impact of 0.3% of revenue. The unfavorable mix impact resulted primarily from growth in our lower-margin China business and a decrease in the mix of our higher-margin Europe business. The favorable rate impact was mainly the result of gains in Canada, with improved
46

Table of Contents

margins in all product categories, especially mobile computing and entertainment hardware and software. In addition, restructuring charges in fiscal 2011 had an unfavorable impact of 0.1% of revenue.
In fiscal 2011, our International segment's SG&A increased $104 million, or 3.5%, driven primarily by the unfavorable impact of foreign currency exchange rate fluctuations and increased spending associated with new store openings across the segment, partially offset by a decrease in Europe due to the higher Best Buy Mobile profit share-based management fee. Excluding the impact of foreign currency exchange rate fluctuations, our International segment's SG&A increased $35 million. The 0.5% of revenue improvement in the SG&A rate was driven primarily by a rate decline in Europe due to the higher Best Buy Mobile profit share-based management fee and the favorable mix impact from both growth in our lower-rate China business and a decrease in the sales mix of our higher-rate Europe business. These improvements were partially offset by a rate increase in Canada caused by the deleveraging impact of its comparable store sales decline and increased advertising costs to drive traffic.
The decrease in our International segment's operating income in fiscal 2011 resulted primarily from higher restructuring charges and costs associated with the operation of new large-format stores in Europe, China, Mexico and Turkey, partially offset by higher operating income in Europe and from Five Star. Our International segment's operating income in fiscal 2011 included $171 million of restructuring charges recorded in the fourth fiscal quarter, compared to $27 million of restructuring charges recorded in fiscal 2010. The fiscal 2011 restructuring charges primarily related to inventory write-downs, property and equipment impairments, employee termination benefits and facility closure costs as a result of our plans to exit the Turkey market and restructure the Best Buy branded stores in China. The fiscal 2010 restructuring charges were related primarily to employee termination benefits and business reorganization costs at Best Buy Europe.
Fiscal 2010 Results Compared With Fiscal 2009
The 24.5% increase in revenue for fiscal 2010 was due to the inclusion of Best Buy Europe, which contributed no revenue in the first six months of fiscal 2009 and $2.6 billion of revenue in the first six months of fiscal 2010, and the impact of net new stores opened during fiscal 2010, partially offset by the comparable store sales decline of 3.7% and decreases in our non-comparable sales channels. The decrease in comparable store sales was the result of a comparable store sales decline in Canada, partially offset by comparable store sales gains in Europe and China. Fluctuations in foreign currency exchange rates did not have a significant impact on revenue for fiscal 2010.
The components of the net revenue increase in fiscal 2010 were as follows:

Acquisition of Best Buy Europe	 	 	25.8	%	
Net new stores	 	 	3.5	%	
Impact of foreign currency	 	 	0.4	%	
Comparable store sales impact	 	 	(3.3	)%	
Non-comparable sales channels (1)	 	 	(1.9	)%	
 	 	 	 	
Total revenue increase	 	 	24.5	%	
 	 	 	 	
(1)
Non-comparable sales channels primarily reflects the impact from revenue we earn from sales of merchandise to wholesalers and dealers as well as other non-comparable sales channels not included within our comparable store sales calculation.
47

Table of Contents
The following table presents the International segment's revenue mix percentages and comparable store sales percentage changes by revenue category in fiscal 2010 and 2009:

 	 	Revenue Mix Summary	 	Comparable Store Sales Summary	 	
 	 	Year Ended (1)	 	Year Ended (2)	 	
 	 	February 27, 2010	 	February 28, 2009	 	February 27, 2010	 	February 28, 2009	 	
 	 	
Consumer electronics	 	 	20	%	 	26	%	 	(12.0	)%	 	(0.9	)%	
Home office	 	 	53	%	 	45	%	 	(0.8	)%	 	(2.7	)%	
Entertainment	 	 	7	%	 	9	%	 	(12.4	)%	 	3.3	%	
Appliances	 	 	8	%	 	10	%	 	7.3	%	 	(2.2	)%	
Services	 	 	12	%	 	10	%	 	6.2	%	 	3.1	%	
Other	 	 	<1	%	 	<1	%	 	n/a	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	100	%	 	100	%	 	(3.7	)%	 	(0.9	)%	
 	 	 	 	 	 	 	 	 	 	 	 	
(1)
The International segment's revenue mix changed beginning in the third quarter of fiscal 2009 due to our acquisition of Best Buy Europe, whose business primarily relates to the sale of mobile phones and voice and data service plans, which are included in our home office revenue category. In addition, Best Buy Europe offers mobile phone insurance and other mobile and fixed-line telecommunication services, which are included in our services revenue category. As a result, the International segment's home office and services revenue categories grew in fiscal 2010, resulting in a lower mix percentage for the segment's consumer electronics, entertainment and appliances revenue categories.

(2)
The comparable store sales figures for the fiscal year ended February 27, 2010, included six months of Best Buy Europe's comparable store sales. However, comparable store sales for the fiscal year ended February 28, 2009, did not include Best Buy Europe as the third quarter of fiscal 2010 was the first period in which Best Buy Europe was included in our comparable store sales calculation.
The products having the largest impact on our International segment's comparable store sales decline in fiscal 2010 were flat-panel televisions, video gaming and digital cameras and camcorders. Weaker sales of these products were partially offset by comparable store sales gains in appliances, notebook computers and services. Our International segment's comparable store sales improved sequentially each quarter of fiscal 2010 amidst improving global economic conditions and temporary government stimulus programs in China.
The 12.0% comparable store sales decline in the consumer electronics revenue category resulted primarily from declines in the sales of flat-panel televisions, digital cameras and camcorders, and navigation products. The 0.8% comparable store sales decline in the home office revenue category resulted primarily from comparable store sales declines in computer monitors and accessories, partially offset by gains in the sales of notebook computers and mobile phones. The 12.4% comparable store sales decline in the entertainment revenue category reflected a decrease in the sales of video gaming hardware and software and continued decreases in sales of DVDs and CDs. The 7.3% comparable store sales gain in the appliances revenue category resulted from increases in the sales of major appliances and small electrics, notably within our Canada and China operations where promotions and temporary government stimulus programs in China helped to fuel stronger sales. The 6.2% comparable store sales gain in the services revenue category was due primarily to an increase in revenue from our product repair business.
Our International segment experienced gross profit growth of $755 million in fiscal 2010, or 31.7%, driven predominantly by the acquisition of Best Buy Europe. The acquisition impact of Best Buy Europe of 1.4% of revenue was the principal driver behind the International segment's 1.4% of revenue gross profit rate increase for fiscal 2010, with an additional 0.2% of revenue increase from gross profit rate improvements in Europe due primarily to negotiation of more favorable vendor terms across the European business in the second half of fiscal 2010. An increase in Canada's gross profit rate also contributed a 0.1% of revenue increase. Offsetting these increases to the International segment's gross profit rate was a 0.3% of revenue decrease from China due primarily to heavier promotions and clearances.
48

Table of Contents
Our International segment's SG&A grew 30.2%, or an increase of $682 million. In the first six months of fiscal 2010, Europe's SG&A spend was $775 million with no comparable expenses in the same period one year ago. Europe's lower SG&A in the last six months of fiscal 2010 compared to the same period one year ago partially offset the first-half year over year increase. New store start-up costs in Mexico and Turkey also increased SG&A, while SG&A spend in Canada and China remained relatively flat in fiscal 2010 compared to the prior fiscal year.
The acquisition impact of Best Buy Europe of 1.7% of revenue was the principal driver behind the International segment's 1.1% of revenue SG&A rate increase for fiscal 2010. In addition, the deleveraging impact of the comparable store sales decline on payroll, benefits and overhead costs in Canada contributed a 0.2% of revenue increase. Start-up costs, rent expense and incremental staffing for new store openings in Mexico and Turkey further contributed a 0.3% of revenue increase to the International segment's SG&A rate. Offsetting these increases in the SG&A rate was a 0.8% of revenue decrease in Europe in the second half of fiscal 2010, due in part to lower payroll costs stemming from their restructuring in the fiscal first quarter, as well as a 0.3% of revenue decrease in China, caused primarily by cost-cutting measures to reduce overhead, payroll and marketing expenses.
The increase in our International segment's operating income resulted primarily from higher operating income in Europe and China, partially offset by increased new store investments in Mexico and Turkey, $27 million of restructuring charges and slightly lower operating income in Canada.
Our International segment's operating income in fiscal 2010 included $27 million of restructuring charges recorded in the first fiscal quarter, compared to $6 million of restructuring charges recorded in fiscal 2009. The fiscal 2010 restructuring charges were related primarily to employee termination benefits and business reorganization costs at Best Buy Europe, whereas the fiscal 2009 restructuring charges were employee termination benefits in our Canada business.
Additional Consolidated Results
Other Income (Expense)
Our investment income and other in fiscal 2011 was $51 million, compared to $54 and $35 million in fiscal 2010 and 2009, respectively. The relatively flat investment income in fiscal 2011 compared to fiscal 2010 was principally the result of lower returns on our deferred compensation assets, partially offset by the gain on the sale of our former Speakeasy business in fiscal 2011. The increase in fiscal 2010 compared to fiscal 2009 was due primarily to the gains we recorded in fiscal 2010 on our deferred compensation assets, which experienced better returns when compared to the prior year. Gains on these assets have no impact on our net earnings, as they are offset by expense recorded within SG&A. Partially offsetting the increase was the impact of lower interest rates earned on our cash and investment balances in fiscal 2010.
Interest expense in fiscal 2011 was $87 million, compared to $94 million in both fiscal 2010 and 2009. The decrease in interest expense in fiscal 2011, compared to fiscal 2010, was the result of lower average short-term borrowings throughout fiscal 2011, partially offset by higher average interest rates on outstanding short-term borrowings. The relatively flat interest expense from fiscal 2009 to 2010 was the result of lower average short-term borrowings during the year, which was fully offset by a full year of higher interest-bearing long-term debt.
Effective Income Tax Rate
Our effective income tax rate ("ETR") was 34.4% in fiscal 2011, compared to 36.5% in fiscal 2010 and 39.6% in fiscal 2009. The decrease in the ETR in fiscal 2011 compared to fiscal 2010 was due primarily to the impact of increased tax benefits from foreign operations, tax benefits resulting from the sale of our former Speakeasy business and the favorable resolution of certain non-recurring items. Excluding the impact of various fiscal 2011 non-recurring items, the ETR would have been approximately 36.5%.
The decrease in the ETR in fiscal 2010 compared to fiscal 2009 was due principally to the fiscal 2009 impacts of the other-than-temporary impairment of our investment in the common stock of CPW and the non-deductibility of our $62 million goodwill impairment charge, as well as the favorable net impact of certain discrete foreign tax matters in the
49

Table of Contents

third quarter of fiscal 2010. Excluding the impact of the fiscal 2010 discrete foreign tax matters, the fiscal 2010 ETR would have been 38.3%. Additionally, excluding the impact of the fiscal 2009 impairment charges, the fiscal 2009 ETR would have been 36.8%.
Net Earnings Attributable to Noncontrolling Interests
The increase in net earnings attributable to noncontrolling interests in fiscal 2011 compared to fiscal 2010 was due to the higher net earnings of Best Buy Europe, in which Carphone Warehouse Group plc has a 50% noncontrolling interest. The increase in net earnings attributable to noncontrolling interests in fiscal 2010 compared to fiscal 2009 was due to having a full year of earnings from Best Buy Europe in fiscal 2010, as we did not acquire Best Buy Europe until the second quarter of fiscal 2009.
Impact of Inflation and Changing Prices
Highly competitive market conditions and the general economic environment minimized inflation's impact on the selling prices of our products and services, and on our expenses. In addition, price deflation and the continued commoditization of key technology products limited our ability to increase our gross profit rate.
Liquidity and Capital Resources
Summary
We continue to closely manage our liquidity and capital resources. The key variables we use to manage liquidity requirements and investments to support our growth strategies include discretionary SG&A spending, capital expenditures, credit facilities and short-term borrowing arrangements, working capital and our share repurchase program.
Capital expenditures, particularly with respect to opening new stores and remodeling existing stores, is a component of our cash flow and capital management strategy which, to a large extent, we can adjust in response to economic and other changes in our business environment. In both fiscal 2011 and 2010, we moderated our capital spending in response to the challenging economic environment relative to our recent historical trend.
We ended fiscal 2011 with $1.1 billion of cash and cash equivalents and short-term investments, compared to $1.9 billion at the end of fiscal 2010. The decrease in cash and cash equivalents was due primarily to the $1.2 billion of cash utilized in fiscal 2011 to repurchase shares of our common stock, as well as decreased cash generated from operations in fiscal 2011 as compared to fiscal 2010. Working capital, the excess of current assets over current liabilities, was $1.8 billion at the end of fiscal 2011, an increase from $1.6 billion at the end of fiscal 2010. Operating cash flow decreased 46.1% to $1.2 billion in fiscal 2011 compared to fiscal 2010, while capital expenditures increased 21.0% to $744 million.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for each of the past three fiscal years ($ in millions):

 	 	2011	 	2010	 	2009	 	
 	 	
Total cash provided by (used in):	 	 	 	 	 	 	 	 	 	 	
 	Operating activities	 	$	1,190	 	$	2,206	 	$	1,877	 	
 	Investing activities	 	 	(569	)	 	(540	)	 	(3,427	)	
 	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	)	
 	 	 	 	 	 	 	 	
50

Table of Contents
Operating Activities
The decrease in cash provided by operating activities in fiscal 2011 compared to fiscal 2010 was due primarily to an increase in cash used for accounts payable, as well as a decrease in cash provided by accounts receivable. The increase in cash used for accounts payable was due primarily to the timing and level of inventory receipts compared to vendor payments as we approached fiscal 2011 year-end. As we reduced inventory receipts in January and February 2011 in response to lower holiday sales trends, our total accounts payable declined. Cash used for inventory was also lower in fiscal 2011 compared to fiscal 2010 because the fiscal 2011 year-over-year increase in inventory was lower than in the prior year due to focused efforts to manage inventory levels in light of comparable store sales declines. The decrease in cash provided by accounts receivable was due primarily to the timing of several large payments due from our vendors at the end of fiscal 2011. Other fluctuations in cash from operating activities were due primarily to higher incentive compensation payments in fiscal 2011 (relating to our fiscal 2010 performance) and other miscellaneous timing differences.
The increase in cash provided by operating activities in fiscal 2010 compared to 2009 was due primarily to increases in cash provided by net earnings, accounts receivable, other liabilities and accrued income taxes, partially offset by an increase in cash used for merchandise inventories. The increase in cash provided by accounts receivable was due primarily to the timing of receipt of customer and network carrier receivables in our Europe business, as well as network carrier receivables associated with Best Buy Mobile in the U.S. The increases in cash provided by other liabilities were due primarily to the timing and magnitude of transaction taxes payable in various jurisdictions, as well as accrued bonuses. Finally, the increase in cash provided by accrued income taxes was due to the timing and magnitude of tax accruals as a result of higher net earnings. These changes were largely offset by the increase in cash used for merchandise inventories due to increased inventory levels in fiscal 2010, notably in notebook computers and flat-panel televisions, as a result of increased consumer demand and a strengthening economy, compared to fiscal 2009 when we tightened inventory levels amidst a weaker economy and lower holiday sales.
Investing Activities
Cash used in investing activities was relatively flat in fiscal 2011 compared to fiscal 2010, as an increase in cash used for capital expenditures was offset by an increase in cash provided by the sale of a portion of our auction rate securities ("ARS") during fiscal 2011. See Auction Rate Securities and Restricted Cash and Capital Expenditures below for additional information.
The decrease in cash used in investing activities in fiscal 2010 compared to fiscal 2009 was due primarily to the $2.2 billion of net cash associated with the acquisition of businesses in fiscal 2009, largely Best Buy Europe. Also contributing to the decrease was a decrease in capital expenditures to $615 million in fiscal 2010, compared to $1.3 billion in fiscal 2009.
Financing Activities
The increase in cash used in financing activities in fiscal 2011 compared to fiscal 2010 was primarily the result of $1.2 billion of cash we used to repurchase our common stock in fiscal 2011. We had no repurchases in fiscal 2010.
The change in cash used in financing activities in fiscal 2010, compared to cash provided by financing activities in fiscal 2009, was primarily the result of a $1.1 billion decrease in borrowings, net of repayments, compared to the prior year. Larger borrowings in the prior year were associated with the acquisition of Best Buy Europe and normal working capital needs. In addition, our increased operating cash flows in fiscal 2010 allowed us to reduce our short-term borrowings.
Sources of Liquidity
Funds generated by operating activities, available cash and cash equivalents, and our credit facilities continue to be our most significant sources of liquidity. We believe our sources of liquidity will be sufficient to sustain operations and to finance anticipated expansion plans and strategic initiatives in fiscal 2012. However, in the event our liquidity is
51

Table of Contents

insufficient, we may be required to limit our future expansion plans or we may not be able to pursue business opportunities. There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our existing credit facilities or obtain additional financing, if necessary, on favorable terms.
We have a $2.3 billion five-year unsecured revolving credit facility, as amended (the "Credit Facility"), with a syndicate of banks, with no borrowings outstanding at February 26, 2011. The Credit Facility expires in September 2012. At April 20, 2011, we had no borrowings outstanding under the Credit Facility.
We have $813 million available under secured and unsecured revolving credit facilities related to our International segment operations, of which $557 million was outstanding at February 26, 2011.
We previously had a revolving credit line with UBS AG and its affiliates (collectively, "UBS") secured by the par value of our UBS-brokered ARS. However, pursuant to the settlement described in Note 3, Investments , of the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K, 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.
Our ability to access our credit facilities is subject to our compliance with the terms and conditions of our facilities, including financial covenants. The financial covenants require us to maintain certain financial ratios. At February 26, 2011, we were in compliance with all such financial covenants. If an event of default were to occur with respect to any of our other debt, it would likely constitute an event of default under our credit facilities as well.
An interest coverage ratio represents the ratio of pre-tax earnings before fixed charges (interest expense and the interest portion of rent expense) to fixed charges. Our interest coverage ratio, calculated as reported in Exhibit No. 12.1 of this Annual Report on Form 10-K, was 5.78 and 6.08 in fiscal 2011 and 2010, respectively.
Our credit ratings and outlooks at April 20, 2011, are summarized below and are consistent with the ratings and outlooks reported in our Annual Report on Form 10-K for the fiscal year ended February 27, 2010.

Rating Agency	 	Rating	 	Outlook	
 	
Fitch Ratings Ltd.	 	BBB+	 	Negative	
Moody's Investors Service, Inc.	 	Baa2	 	Stable	
Standard & Poor's Ratings Services	 	BBB-	 	Stable	
Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the retail and consumer electronics industries, our financial position, and changes in our business strategy. We are not aware of any current circumstances which could cause our credit ratings to be significantly downgraded. If a downgrade were to occur, it could adversely impact, among other things, our future borrowing costs, access to capital markets, vendor financing terms and future new-store occupancy costs. In addition, the conversion rights of the holders of our convertible debentures could be accelerated if our credit ratings were to be downgraded.
Auction Rate Securities and Restricted Cash
At February 26, 2011, and February 27, 2010, we had $110 million and $280 million, respectively, invested in ARS recorded at fair value within short-term investments and equity and other investments (long-term) in our consolidated balance sheets. The majority of our ARS portfolio is AAA/Aaa-rated and collateralized by student loans, which are guaranteed 95% to 100% by the U.S. government. Due to the auction failures that began in mid-February 2008, we have been unable to liquidate some of our ARS. The investment principal associated with our ARS subject to 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 issues, 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.
52

Table of Contents
Our liquidity is also affected by restricted cash balances that are pledged as collateral or restricted to use for vendor payables, general liability insurance, workers' compensation insurance and customer warranty and insurance programs. Restricted cash and cash equivalents, which are included in other current assets, were $488 million and $482 million at February 26, 2011, and February 27, 2010, respectively.
Capital Expenditures
A component of our long-term strategy is our capital expenditure program. This program includes, among other things, investments in new stores, store remodeling, store relocations and expansions, new distribution facilities and information technology enhancements. During fiscal 2011, we invested $744 million in property and equipment, including opening 147 new stores, expanding and remodeling certain stores, and upgrading our information technology systems and capabilities. The 21.0% increase in our capital expenditures compared to the prior fiscal year was due primarily to increased spending on information technology and additional store-related projects.
The following table presents our capital expenditures for each of the past three fiscal years ($ in millions):

 	 	2011	 	2010	 	2009	 	
 	 	
New stores	 	$	193	 	$	229	 	$	387	 	
Store-related projects (1)	 	 	208	 	 	90	 	 	333	 	
Information technology	 	 	327	 	 	275	 	 	494	 	
Other	 	 	16	 	 	21	 	 	89	 	
 	 	 	 	 	 	 	 	
Total capital expenditures (2)	 	$	744	 	$	615	 	$	1,303	 	
 	 	 	 	 	 	 	 	
(1)
Includes store remodels and expansions, as well as various merchandising projects.

(2)
Total capital expenditures exclude non-cash capital expenditures of $81, $9 and $42 for fiscal 2011, 2010, and 2009, respectively. Non-cash capital expenditures are comprised of capitalized leases of $52, $9 and $35, as well as additions to property and equipment included in accounts payable of $29, $0 and $7, respectively, for each fiscal year.
Refer to Note 13, Contingencies and Commitments , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for further information regarding our significant commitments for capital expenditures at February 26, 2011.
Debt and Capital
2013 Notes
In June 2008, we sold $500 million 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 million, after an initial issuance discount of approximately $1 million 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 debt.
53

Table of Contents
Convertible Debentures
In January 2002, we sold convertible subordinated debentures having an aggregate principal amount of $402 million. The proceeds from the offering, net of $6 million in offering expenses, were $396 million. 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 $1,000 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.
2016 Notes and 2021 Notes
Subsequent to fiscal 2011, we sold $350 million principal amount of notes due March 15, 2016 (the "2016 Notes") and $650 million 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 million, resulted in net proceeds from the sale of the Notes of $990 million.
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.
Other
At the end of fiscal 2011, we had $170 million outstanding under financing lease obligations.
Share Repurchases and Dividends
From time to time, we repurchase our common stock in the open market pursuant to programs approved by our Board. We may repurchase our common stock for a variety of reasons, such as acquiring shares to offset dilution related to equity-based incentives, including stock options and our employee stock purchase plan, and optimizing our capital structure.
54

Table of Contents
In June 2007, our Board authorized up to $5.5 billion in share repurchases. The program, which became effective on June 26, 2007, terminated and replaced a $1.5 billion share repurchase program authorized by our Board in June 2006. There is no expiration date governing the period over which we can repurchase shares under the June 2007 program.
We repurchased and retired 32.6 million shares at a cost of $1.2 billion in fiscal 2011. We made no share repurchases in fiscal 2010 or 2009. At the end of fiscal 2011, $1.3 billion of the $5.5 billion share repurchase program authorized by our Board in June 2007 was available for future share repurchases.
We consider several factors in determining when to make share repurchases including, among other things, our cash needs, the availability of funding and the market price of our stock. We expect that cash provided by future operating activities, as well as available cash and cash equivalents and short-term investments, will be the sources of funding for our share repurchase program. Based on the anticipated amounts to be generated from those sources of funds in relation to the remaining authorization approved by our Board under the June 2007 share repurchase program, we do not expect that future share repurchases will have a material impact on our short-term or long-term liquidity.
In fiscal 2004, our Board initiated the payment of a regular quarterly cash dividend on our common stock. A quarterly cash dividend has been paid in each subsequent quarter. Effective with the quarterly cash dividend paid in the third quarter of fiscal 2009, we increased our quarterly cash dividend per share by 8% to $0.14 per share, and maintained our cash dividend at that rate for the balance of fiscal 2009 and throughout fiscal 2010. We increased our quarterly cash dividend per share by 7% to $0.15 per share effective with the quarterly cash dividend paid in the third quarter of fiscal 2011. The payment of cash dividends is subject to customary legal and contractual restrictions. During fiscal 2011, we made four cash dividend payments totaling $0.58 per share, or $237 million in the aggregate.
Other Financial Measures
Our debt to earnings ratio was 1.3 at the end of both fiscal 2011 and 2010. Our adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent ("EBITDAR") ratio, which includes capitalized operating lease obligations in its calculation, was 2.5 at the end of both fiscal 2011 and 2010, as an increase in operating lease obligations in fiscal 2011 was offset by an increase in the amount of depreciation and amortization (including impairments).
Our adjusted debt to EBITDAR ratio is considered a non-GAAP financial measure and should be considered in addition to, rather than as a substitute for, the most directly comparable ratio determined in accordance with accounting principles generally accepted in the U.S. ("GAAP"). We have included this information in our MD&A as we view the adjusted debt to EBITDAR ratio as an important indicator of our creditworthiness. Furthermore, we believe that our adjusted debt to EBITDAR ratio is important for understanding our financial position and provides meaningful additional information about our ability to service our long-term debt and other fixed obligations and to fund our future growth. We also believe our adjusted debt to EBITDAR ratio is relevant because it enables investors to compare our indebtedness to that of retailers who own, rather than lease, their stores. Our decision to own or lease real estate is based on an assessment of our financial liquidity, our capital structure, our desire to own or to lease the location, the owner's desire to own or to lease the location, and the alternative that results in the highest return to our shareholders.
Our adjusted debt to EBITDAR ratio is calculated as follows:

Adjusted debt to EBITDAR =	 	Adjusted debt

EBITDAR	
55

Table of Contents
The most directly comparable GAAP financial measure to our adjusted debt to EBITDAR ratio is our debt to net earnings ratio, which excludes capitalized operating lease obligations from debt in the numerator of the calculation and does not adjust net earnings in the denominator of the calculation.
The following table presents a reconciliation of our debt to net earnings ratio to our adjusted debt to EBITDAR ratio ($ in millions):

 	 	2011 (1)	 	2010 (1)	 	
 	 	
Debt (including current portion)	 	$	1,709	 	$	1,802	 	
Capitalized operating lease obligations (8 times rental expense) (2)	 	 	9,271	 	 	9,013	 	
 	 	 	 	 	 	
Adjusted debt	 	$	10,980	 	$	10,815	 	
 	 	 	 	 	 	
Net earnings including noncontrolling interests (3)	 	$	1,366	 	$	1,394	 	
Interest expense, net	 	 	36	 	 	40	 	
Income tax expense	 	 	714	 	 	802	 	
Depreciation and amortization expense (4)	 	 	1,145	 	 	930	 	
Rental expense	 	 	1,159	 	 	1,127	 	
 	 	 	 	 	 	
EBITDAR	 	$	4,420	 	$	4,293	 	
 	 	 	 	 	 	
Debt to net earnings ratio	 	 	1.3	 	 	1.3	 	
Adjusted debt to EBITDAR ratio	 	 	2.5	 	 	2.5	 	
(1)
Debt is reflected as of the balance sheet dates for each of the respective fiscal year-ends, while rental expense and the other components of EBITDAR represent activity for the 12 months ended as of each of the respective balance sheet dates.

(2)
The multiple of eight times annual rental expense in the calculation of our capitalized operating lease obligations is the multiple used for the retail sector by one of the nationally recognized credit rating agencies that rate our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio.

(3)
We utilize net earnings including noncontrolling interests within our calculation as such net earnings and related cash flows attributable to noncontrolling interests are available to service our debt and operating lease commitments.

(4)
Depreciation and amortization expense includes impairments of fixed assets, investments, goodwill and intangible assets (including impairments associated with our fiscal 2011 restructuring).
Off-Balance-Sheet Arrangements and Contractual Obligations
Other than operating leases, we do not have any off-balance-sheet financing. A summary of our operating lease obligations by fiscal year is included in the "Contractual Obligations" table below. Additional information regarding our operating leases is available in Item 2, Properties , and Note 9, Leases , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
56

Table of Contents
The following table presents information regarding our contractual obligations by fiscal year ($ in millions):

 	 	 	 	Payments Due by Period	 	
Contractual Obligations	 	Total	 	Less Than
1 Year	 	1-3 Years	 	3-5 Years	 	More Than
5 Years	 	
 	 	
Short-term debt obligations	 	$	557	 	$	557	 	$	—	 	$	—	 	$	—	 	
Long-term debt obligations	 	 	903	 	 	402	 	 	500	 	 	—	 	 	1	 	
Capital lease obligations	 	 	79	 	 	14	 	 	27	 	 	20	 	 	18	 	
Financing lease obligations	 	 	170	 	 	25	 	 	47	 	 	45	 	 	53	 	
Interest payments	 	 	686	 	 	128	 	 	183	 	 	127	 	 	248	 	
Operating lease obligations (1)	 	 	8,247	 	 	1,208	 	 	2,245	 	 	1,864	 	 	2,930	 	
Purchase obligations (2)	 	 	1,989	 	 	1,135	 	 	446	 	 	393	 	 	15	 	
Unrecognized tax benefits (3)	 	 	359	 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred compensation (4)	 	 	64	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	13,054	 	$	3,469	 	$	3,448	 	$	2,449	 	$	3,265	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Note: For additional information refer to Note 6, Debt ; Note 9, Leases ; Note 11, Income Taxes and Note 13, Contingencies and Commitments , in the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
(1)
Operating lease obligations do not include payments to landlords covering real estate taxes and common area maintenance. These charges, if included, would increase total operating lease obligations by $2.2 billion at February 26, 2011.

(2)
Purchase obligations include agreements to purchase goods or services that are enforceable, are legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations do not include agreements that are cancelable without penalty. Additionally, although they are not legally binding agreements, we included open purchase orders in the table above. Substantially all open purchase orders are fulfilled within 30 days.

(3)
Unrecognized tax benefits relate to uncertain tax positions recorded under accounting guidance that we adopted on March 4, 2007. As we are not able to reasonably estimate the timing of the payments or the amount by which the liability will increase or decrease over time, the related balances have not been reflected in the "Payments Due by Period" section of the table.

(4)
Included in other long-term liabilities on our consolidated balance sheet at February 26, 2011, was a $64 million obligation for deferred compensation. As the specific payment dates for the deferred compensation are unknown, the related balances have not been reflected in the "Payments Due by Period" section of the table.
Additionally, we have $2.5 billion in undrawn capacity on our credit facilities at February 26, 2011, which if drawn upon, would be included as liabilities in our consolidated balance sheets.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 1, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. We have reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board.
57

Table of Contents

Description	 	Judgments and Uncertainties	 	Effect if Actual Results Differ From Assumptions	

 	

 	
 	
Inventory	 	 	 	 	

We value our inventory at the lower of the cost or market through the establishment of markdown and inventory loss adjustments.

Our inventory valuation 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.

Our inventory valuation also 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 markdown adjustment contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding inventory aging, forecasted consumer demand, the promotional environment and technological obsolescence.

Our inventory loss adjustment contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding a number of factors, including historical results and current inventory loss trends.	
 	
We have not made any material changes in the accounting methodology we use to establish our markdown or inventory loss adjustments during the past three fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our markdowns. However, if estimates regarding consumer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to losses or gains that could be material. A 10% difference in our actual markdowns at February 26, 2011, would have affected net earnings by approximately $12 million in fiscal 2011.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our inventory loss adjustment. However, if our estimates regarding physical inventory losses are inaccurate, we may be exposed to losses or gains that could be material. A 10% difference in actual physical inventory loss adjustments at February 26, 2011, would have affected net earnings by approximately $6 million in fiscal 2011.	

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.	
 	
Based on the provisions of our vendor agreements, we develop vendor fund accrual rates by estimating the point at which we will have completed our performance under the agreement and the deferred amounts will be earned. During the year, due to the complexity and diversity of the individual vendor agreements, we perform analyses and review historical trends to ensure the deferred amounts earned are appropriately recorded. As a part of these analyses, we apply rates negotiated with our vendors to actual purchase volumes to determine the amount of funds accrued and receivable from the vendor. Certain of our vendor agreements contain purchase volume incentives that provide for increased funding when graduated purchase volumes are met. Amounts accrued throughout the year could be impacted if actual purchase volumes differ from projected annual purchase volumes.	
 	
We have not made any material changes in the accounting methodology we use to record different forms of vendor allowances or vendor receivables during the past three fiscal years.

If actual results are not consistent with the assumptions and estimates used, we may be exposed to additional adjustments that could materially, either positively or negatively, impact our gross profit rate and inventory. However, substantially all receivables associated with these activities are collected within the following fiscal year and all amounts deferred against inventory turnover within the following fiscal year and therefore do not require subjective long-term estimates. Adjustments to our gross profit rate and inventory in the following fiscal year have historically not been material.

A 10% difference in our vendor receivables at February 26, 2011, would have affected net earnings by approximately $22 million in fiscal 2011.	
58

Table of Contents

Description	 	Judgments and Uncertainties	 	Effect if Actual Results Differ From Assumptions	

 	

 	

Long-Lived Assets	

 	

Long-lived assets other than goodwill and indefinite-lived intangible assets, which are separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset's estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset.	
 	
Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.	
 	
We have not made any material changes in the accounting methodology we use to assess impairment loss during the past three fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.	
59

Table of Contents

Description	 	Judgments and Uncertainties	 	Effect if Actual Results Differ From Assumptions	

 	

 	

Goodwill and Intangible Assets	

 	

We evaluate goodwill and other indefinite-lived intangible assets for impairment annually in the fiscal fourth quarter and whenever events or changes in circumstances indicate their carrying value may not be recoverable.

We test for goodwill impairment at the reporting unit level, which is at the operating segment level or one level below the operating segment. Our impairment evaluation 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 it is concluded 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, SG&A rates, working capital fluctuations, capital expenditures and terminal growth rates, as well as an appropriate discount rate. We determine discount rates separately for each reporting unit using the capital asset pricing model. For fiscal 2011, such discount rates 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.

These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. It is our policy to conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as our future expectations.	
 	
We have not made any material changes in the accounting methodology we use to assess impairment loss on goodwill and other intangible assets during the past three fiscal years.

The carrying values of goodwill and indefinite-lived intangible assets at February 26, 2011, were $2.5 billion and $105 million, respectively.

In fiscal 2011, we identified no goodwill impairments. We determined that the excess of fair value over carrying value for each of our reporting units was substantial.

As part of our fiscal 2011 restructuring, we recorded an impairment charge of $10 million related to certain indefinite-lived tradenames in our Domestic segment

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to test for impairment losses on goodwill and other intangible assets. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.	
60

Table of Contents

Description	 	Judgments and Uncertainties	 	Effect if Actual Results Differ From Assumptions	

 	

 	

Tax Contingencies	

 	

Our income tax returns, like those of most companies, are periodically audited by domestic 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 exposures associated with our various tax filing positions, we record a liability for such exposures. A number of years may elapse before a particular matter, for which we have established a liability, is audited and fully resolved or clarified. We adjust our liability for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available.	
 	
Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions.

Our effective income tax rate is also affected by changes in tax law, the tax jurisdiction of new stores or business ventures, the level of earnings and the results of tax audits.	
 	
Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material.

To the extent we prevail in matters for which a liability has been established, or are required to pay amounts in excess of our established liability, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction in our effective income tax rate in the period of resolution.	
61

Table of Contents

Description	 	Judgments and Uncertainties	 	Effect if Actual Results Differ From Assumptions	

 	

 	

Revenue Recognition	

 	

See Note 1, Summary of Significant Accounting Policies , to the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K, for a complete discussion of our revenue recognition policies.

We recognize revenue, net of estimated returns, at the time the customer takes possession of the merchandise or receives services. We estimate the liability for sales returns based on our historical return levels.

We record an allowance for doubtful accounts receivable for amounts due from third parties that we do not expect to collect. We estimate the allowance based on historical write offs and chargebacks as well as aging trends.

We sell gift cards to customers in our retail stores, through our Web sites and through selected third parties. A liability is initially established for the cash value of the gift card. We recognize revenue from gift cards when: (i) the card is redeemed by the customer; or (ii) the likelihood of the gift card being redeemed by the customer is remote ("gift card breakage"). We determine our gift card breakage rate based upon historical redemption patterns, which show that after 24 months, we can determine the portion of the liability for which redemption is remote.

We have customer loyalty programs which allow members to earn points for each purchase completed at any of our Best Buy branded stores, or through our related Web sites or when using our co-branded credit cards in the U.S. and Canada. Points earned enable members to receive a certificate that may be redeemed on future purchases at Best Buy branded stores and Web sites. The value of points earned by our loyalty program members is included in accrued liabilities and recorded as a reduction in revenue at the time the points are earned, based on the value of points that are projected to be redeemed.	
 	
Our revenue recognition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the amount and timing of future sales returns, uncollectible accounts and redemptions of gift cards and certificates. Our estimate of the amount and timing of sales returns, uncollectible accounts and redemptions of gift cards and certificates is based primarily on historical transaction experience.	
 	
We have not made any material changes in the accounting methodology we use to measure sales returns or doubtful accounts or to recognize revenue for our gift card and customer loyalty programs during the past three fiscal years. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to measure sales returns and doubtful accounts or to recognize revenue for our gift card and customer loyalty programs. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

A 10% change in our sales return reserve at February 26, 2011, would have affected net earnings by approximately $1 million in fiscal 2011.

A 10% change in our allowance for doubtful accounts receivable at February 26, 2011, would have affected net earnings by approximately $8 million in fiscal 2011.

A 10% change in our gift card breakage rate at February 26, 2011, would have affected net earnings by approximately $14 million in fiscal 2011.

A 10% change in our customer loyalty program liability at February 26, 2011, would have affected net earnings by approximately $6 million in fiscal 2011.	
62

Table of Contents

Description	 	Judgments and Uncertainties	 	Effect if Actual Results Differ From Assumptions	

 	

 	

Costs Associated With Exit Activities	

 	

We occasionally vacate stores and other locations prior to the expiration of the related lease. For vacated locations with remaining lease commitments, we record an expense for the difference between the present value of our future lease payments and related costs (e.g., real estate taxes and common area maintenance) from the date of closure through the end of the remaining lease term, net of expected future sublease rental income.

Our estimate of future cash flows is based on historical experience; our analysis of the specific real estate market, including input from independent real estate firms; and economic conditions that can be difficult to predict. Cash flows are discounted using a risk-free interest rate that coincides with the remaining lease term.	
 	
The liability recorded for location closures contains uncertainties because management is required to make assumptions and to apply judgment to estimate the duration of future vacancy periods, the amount and timing of future settlement payments, and the amount and timing of potential sublease rental income. When making these assumptions, management considers a number of factors, including historical settlement experience, the owner of the property, the location and condition of the property, the terms of the underlying lease, the specific marketplace demand and general economic conditions.	
 	
We have not made any material changes in the accounting methodology we use to establish our location closing liability during the past three fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate our location closing liability. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

A 10% change in our location closing liability at February 26, 2011, would have affected net earnings by approximately $5 million in fiscal 2011.	

Stock-Based Compensation	

 	

We have a stock-based compensation plan, which includes non-qualified stock options and nonvested share awards, and an employee stock purchase plan. See Note 1, Summary of Significant Accounting Policies , and Note 8, Shareholders' Equity , to the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K, for a complete discussion of our stock-based compensation programs.

We determine the fair value of our non-qualified stock option awards at the date of grant using option-pricing models. Non-qualified stock option awards are primarily valued using a lattice model.

We determine the fair value of our market-based and performance-based nonvested share awards at the date of grant using generally accepted valuation techniques and the closing market price of our stock.

Management reviews its assumptions and the valuations provided by independent third-party valuation advisors to determine the fair value of stock-based compensation awards.	
 	
Option-pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and judgments include estimating the future volatility of our stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors. Changes in these assumptions can materially affect the fair value estimate.

Performance-based nonvested share awards require management to make assumptions regarding the likelihood of achieving company or personal performance goals.	
 	
We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in stock-based compensation expense that could be material.

If actual results are not consistent with the assumptions used, the stock-based compensation expense reported in our financial statements may not be representative of the actual economic cost of the stock-based compensation.

A 10% change in our stock-based compensation expense for the year ended February 26, 2011, would have affected net earnings by approximately $7 million in fiscal 2011.	
63

Table of Contents

Description	 	Judgments and Uncertainties	 	Effect if Actual Results Differ From Assumptions	

 	

 	

Self-Insured Liabilities	

 	

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. We maintain wholly-owned insurance captives to manage a portion of these self-insured liabilities.

When estimating our self-insured liabilities, we consider a number of factors, including historical claims experience, demographic factors, severity factors and valuations provided by independent third-party actuaries.

Periodically, we review our assumptions and the valuations provided by independent third-party actuaries to determine the adequacy of our self-insured liabilities.	
 	
Our self-insured liabilities contain uncertainties because management is required to make assumptions and to apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported at the balance sheet date.	
 	
We have not made any material changes in the accounting methodology we use to establish our self-insured liabilities during the past three fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate our self-insured liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

A 10% change in our self-insured liabilities at February 26, 2011, would have affected net earnings by approximately $8 million in fiscal 2011.	

Acquisitions — Purchase Price Allocation	

In accordance with accounting guidance for business combinations, we allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values. Noncontrolling interests' proportionate ownership of assets and liabilities are recorded at historical carrying values. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill.

We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets such as tradenames and any other significant assets or liabilities. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain more information regarding asset valuations and liabilities assumed.	
 	
Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.	
 	
During the last three fiscal years, we completed three significant acquisitions:

    •  In February 2009, we acquired the remaining 25% interest in Five Star for $196 million, after having acquired a 75% interest in Five Star in June 2006.

    •  In October 2008, we acquired Napster for $122 million, including transaction costs.

    •  In June 2008, we acquired a 50% interest in Best Buy Europe for $2.2 billion, including transaction costs.

See Note 2, Acquisitions, to the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K, for the final purchase price allocations completed in fiscal 2010 for such acquisitions.	
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.
64

Table of Contents
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.

 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
In addition to the risks inherent in our operations, we are exposed to certain market risks, including adverse changes in foreign currency exchange rates and interest rates.
Foreign Currency Exchange Rate Risk
We have market risk arising from changes in foreign currency exchange rates related to our International segment operations. On a limited basis, we use forward foreign exchange contracts to hedge the impact of fluctuations in foreign currency exchange rates. Our Canada and Europe businesses enter into the contracts primarily to hedge certain non-functional currency transaction exposures.
The aggregate notional amount related to our foreign exchange forward contracts outstanding at February 26, 2011, and February 27, 2010, was $757 million and $1.1 billion, respectively. The fair value recorded on our consolidated balance sheet related to our foreign exchange forward contracts outstanding at February 26, 2011, and February 27, 2010, was $(1) million and $4 million, respectively. The amount recorded in our consolidated statement of net earnings related to all contracts settled and outstanding was a gain of $24 million in fiscal 2011, and a loss of $1 million in fiscal 2010.
The overall weakness of the U.S. dollar compared to the Canadian dollar since the end of fiscal 2010 has had a positive overall impact on our revenue and net earnings as the foreign denominations translated into more U.S. dollars. However, the strength of the U.S. dollar compared to the U.K. pound has had a negative overall impact on our revenue. It is not possible to determine the exact impact of foreign currency exchange rate fluctuations; however, the effect on reported revenue and net earnings can be estimated. We estimate that foreign currency exchange rate fluctuations had a net favorable impact on our revenue and net earnings in fiscal 2011 of approximately $297 million and $6 million, respectively. Similarly, we estimate that the overall weakness of the U.S. dollar had a favorable impact on our revenue and net earnings in fiscal 2010 of approximately $41 million and $12 million, respectively.
Interest Rate Risk
Short- and long-term debt
At February 26, 2011, our short- and long-term debt was comprised primarily of credit facilities, our convertible debentures and our 2013 Notes. We do not manage the interest rate risk on our debt through the use of derivative instruments.
Our credit facilities' interest rates may be reset due to fluctuations in a market-based index, such as the federal funds rate, LIBOR, or the base rate or prime rate of our lenders. A hypothetical 100-basis-point change in the interest rates on the outstanding balance of our credit facilities at February 26, 2011, and February 27, 2010, would change our annual pre-tax earnings by $6 million and $7 million, respectively.
There is no interest rate risk associated with our convertible debentures or 2013 Notes, as the interest rates are fixed at 2.25% and 6.75%, respectively, per annum.
65

Table of Contents
Long-term investments in debt securities
At February 26, 2011, our long-term investments in debt securities were comprised of ARS. These investments are not subject to material interest rate risk. A hypothetical 100-basis-point change in the interest rate on such investments at February 26, 2011, and February 27, 2010, would change our annual pre-tax earnings by $1 million and $3 million, respectively. We do not manage interest rate risk on our investments in debt securities through the use of derivative instruments.
Other Market Risks
Investments in auction rate securities
At February 26, 2011, we held $110 million in investments in ARS, which includes a $5 million pre-tax temporary impairment, compared to $280 million in investments in ARS and a $5 million pre-tax temporary impairment at February 27, 2010. Given current conditions in the ARS market as described above in the Liquidity and Capital Resources section, included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report on Form 10-K, we may incur additional temporary unrealized losses or other-than-temporary realized losses in the future if market conditions were to persist and we were unable to recover the cost of our ARS investments. A hypothetical 100-basis-point loss from the par value of these investments at February 26, 2011, and February 27, 2010, would result in an impairment of $1 million and $3 million, respectively.

 Item 8. Financial Statements and Supplementary Data.
Management's Report on the Consolidated Financial Statements
Our management is responsible for the preparation, integrity and objectivity of the accompanying consolidated financial statements and the related financial information. The consolidated financial statements have been prepared in conformity with GAAP and necessarily include certain amounts that are based on estimates and informed judgments. Our management also prepared the related financial information included in this Annual Report on Form 10-K and is responsible for its accuracy and consistency with the consolidated financial statements.
The accompanying consolidated financial statements have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, which conducted its audits in accordance with the standards of the Public Company Accounting Oversight Board (U.S.). The independent registered public accounting firm's responsibility is to express an opinion as to the fairness with which such financial statements present our financial position, results of operations and cash flows in accordance with GAAP.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed under the supervision of our principal executive officer and principal financial officer, and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that:
(1)
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets;

(2)
Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board; and

(3)
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
66

Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of February 26, 2011, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on our assessment, we have concluded that our internal control over financial reporting was effective as of February 26, 2011. During our assessment, we did not identify any material weaknesses in our internal control over financial reporting. Deloitte & Touche LLP, the independent registered public accounting firm that audited our consolidated financial statements for the year ended February 26, 2011, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, has issued an unqualified attestation report on our internal control over financial reporting as of February 26, 2011.

	 		
Brian J. Dunn
 Chief Executive Officer
(duly authorized and principal executive officer)	 	James L. Muehlbauer
 Executive Vice President — Finance
and Chief Financial Officer
(duly authorized and principal financial officer)	
67

Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Best Buy Co., Inc.:
We have audited the accompanying consolidated balance sheets of Best Buy Co., Inc. and subsidiaries (the "Company") as of February 26, 2011 and February 27, 2010, and the related consolidated statements of earnings, changes in shareholders' equity, and cash flows for the each of the three years in the period ended February 26, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Best Buy Co., Inc. and subsidiaries as of February 26, 2011 and February 27, 2010, and the results of their operations and their cash flows for each of the three years in the period ended February 26, 2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, during the year ended February 27, 2010, the Company changed its method of accounting for noncontrolling interests for all periods presented with the adoption of Financial Accounting Standards Board Accounting Standards Codification 810, Consolidation .
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of February 26, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 25, 2011, expressed an unqualified opinion on the Company's internal control over financial reporting.

Minneapolis, Minnesota
April 25, 2011
68

Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Best Buy Co., Inc.:
We have audited the internal control over financial reporting of Best Buy Co., Inc. and subsidiaries (the "Company") as of February 26, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 26, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended February 26, 2011 of the Company and our report dated April 25, 2011 expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph relating to the Company's change in its method of accounting for noncontrolling interests with the adoption of Financial Accounting Standards Board Accounting Standards Codification 810, Consolidation .

Minneapolis, Minnesota
April 25, 2011
69

Table of Contents
Consolidated Balance Sheets
$ in millions, except per share and share amounts

 	 	February 26, 2011	 	February 27, 2010	 	
 	 	
Assets	 	 	 	 	 	 	 	
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	 	
 	 	 	 	 	 	
	 	 	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	 	
 	 	 	 	 	 	
Liabilities and Equity	 	 	 	 	 	 	 	
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	 	
 	Short-term debt	 	 	557	 	 	663	 	
 	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)	 	 	 	 	 	 	 	
Equity	 	 	 	 	 	 	 	
 	Best Buy Co., Inc. Shareholders' Equity	 	 	 	 	 	 	 	
 	 	Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none	 	 	—	 	 	—	 	
 	 	Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 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	 	
 	 	 	 	 	 	
See Notes to Consolidated Financial Statements.
70

Table of Contents
Consolidated Statements of Earnings
$ in millions, except per share amounts

Fiscal Years Ended	 	February 26, 2011	 	February 27, 2010	 	February 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	 	 	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	 	 	2	 	 	1	 	 	7	 	
 	 	 	 	 	 	 	 	
Net earnings including noncontrolling interests	 	 	1,366	 	 	1,394	 	 	1,033	 	
Net earnings attributable to noncontrolling interests	 	 	(89	)	 	(77	)	 	(30	)	
 	 	 	 	 	 	 	 	
Net earnings attributable to Best Buy Co., Inc.	 	$	1,277	 	$	1,317	 	$	1,003	 	
 	 	 	 	 	 	 	 	
Earnings per share attributable to Best Buy Co., Inc.	 	 	 	 	 	 	 	 	 	 	
 	Basic	 	$	3.14	 	$	3.16	 	$	2.43	 	
 	Diluted	 	$	3.08	 	$	3.10	 	$	2.39	 	
Weighted-average common shares outstanding (in millions)	 	 	 	 	 	 	 	 	 	 	
 	Basic	 	 	406.1	 	 	416.8	 	 	412.5	 	
 	Diluted	 	 	416.5	 	 	427.5	 	 	422.9	 	
See Notes to Consolidated Financial Statements.
71

Table of Contents
Consolidated Statements of Cash Flows
$ in millions

Fiscal Years Ended	 	February 26,
2011	 	February 27,
2010	 	February 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	 	 	4	 	 	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	 	 	1	 	 	(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, net of $81, $9 and $42 non-cash capital expenditures in fiscal 2011, 2010 and 2009, respectively	 	 	(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	 	 	7	 	 	6	 	
 	Other, net	 	 	3	 	 	(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	 	
See Notes to Consolidated Financial Statements.
72

Table of Contents
Consolidated Statements of Changes in Shareholders' Equity
$ and shares in millions

 	 	Common
Shares	 	Common
Stock	 	Additional
Paid-In
Capital	 	Retained
Earnings	 	Accumulated
Other
Comprehensive
Income (Loss)	 	Total
Best Buy
Co., Inc.
Shareholders'
Equity	 	Non
controlling
Interests	 	Total
Equity	 	
 	 	
Balances at March 1, 2008	 	 	411	 	$	41	 	$	8	 	$	3,933	 	$	502	 	$	4,484	 	$	40	 	$	4,524	 	
Net earnings	 	 	—	 	 	—	 	 	—	 	 	1,003	 	 	—	 	 	1,003	 	 	30	 	 	1,033	 	
Other comprehensive (loss) income, net of tax:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign currency translation adjustments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(830	)	 	(830	)	 	(175	)	 	(1,005	)	
 	Unrealized losses on available-for-sale investments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(19	)	 	(19	)	 	—	 	 	(19	)	
 	Reclassification adjustment for impairment loss on available-for-sale security included in net earnings	 	 	—	 	 	—	 	 	—	 	 	—	 	 	30	 	 	30	 	 	—	 	 	30	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	184	 	 	(145	)	 	39	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition of business	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	666	 	 	666	 	
Acquisition of noncontrolling interest	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(48	)	 	(48	)	
Stock options exercised	 	 	2	 	 	—	 	 	34	 	 	—	 	 	—	 	 	34	 	 	—	 	 	34	 	
Tax benefit from stock options, restricted stock and employee stock purchase plan	 	 	—	 	 	—	 	 	4	 	 	—	 	 	—	 	 	4	 	 	—	 	 	4	 	
Issuance of common stock under employee stock purchase plan	 	 	1	 	 	—	 	 	49	 	 	—	 	 	—	 	 	49	 	 	—	 	 	49	 	
Stock-based compensation	 	 	—	 	 	—	 	 	110	 	 	—	 	 	—	 	 	110	 	 	—	 	 	110	 	
Common stock dividends, $0.54 per share	 	 	—	 	 	—	 	 	—	 	 	(222	)	 	—	 	 	(222	)	 	—	 	 	(222	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances at February 28, 2009	 	 	414	 	 	41	 	 	205	 	 	4,714	 	 	(317	)	 	4,643	 	 	513	 	 	5,156	 	
Net earnings	 	 	—	 	 	—	 	 	—	 	 	1,317	 	 	—	 	 	1,317	 	 	77	 	 	1,394	 	
Other comprehensive income, net of tax:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign currency translation adjustments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	329	 	 	329	 	 	76	 	 	405	 	
 	Unrealized gains on available-for-sale investments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	28	 	 	28	 	 	—	 	 	28	 	
 	Cash flow hedging instruments — unrealized gain (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,674	 	 	153	 	 	1,827	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase accounting adjustments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(22	)	 	(22	)	
Stock options exercised	 	 	4	 	 	1	 	 	95	 	 	—	 	 	—	 	 	96	 	 	—	 	 	96	 	
Tax loss from stock options, restricted stock and employee stock purchase plan	 	 	—	 	 	—	 	 	(19	)	 	—	 	 	—	 	 	(19	)	 	—	 	 	(19	)	
Issuance of common stock under employee stock purchase plan	 	 	1	 	 	—	 	 	42	 	 	—	 	 	—	 	 	42	 	 	—	 	 	42	 	
Stock-based compensation	 	 	—	 	 	—	 	 	118	 	 	—	 	 	—	 	 	118	 	 	—	 	 	118	 	
Common stock dividends, $0.56 per share	 	 	—	 	 	—	 	 	—	 	 	(234	)	 	—	 	 	(234	)	 	—	 	 	(234	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances at February 27, 2010	 	 	419	 	 	42	 	 	441	 	 	5,797	 	 	40	 	 	6,320	 	 	644	 	 	6,964	 	
Net earnings	 	 	—	 	 	—	 	 	—	 	 	1,277	 	 	—	 	 	1,277	 	 	89	 	 	1,366	 	
Other comprehensive income (loss), net of tax:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Foreign currency translation adjustments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	76	 	 	76	 	 	(42	)	 	34	 	
 	Unrealized gains on available-for-sale investments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	58	 	 	58	 	 	—	 	 	58	 	
 	Cash flow hedging instruments — unrealized gain (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(1	)	 	(1	)	 	(1	)	 	(2	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,410	 	 	46	 	 	1,456	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock options exercised	 	 	4	 	 	—	 	 	134	 	 	—	 	 	—	 	 	134	 	 	—	 	 	134	 	
Vesting of restricted stock	 	 	1	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Tax benefits from stock options, restricted stock and employee stock purchase plan	 	 	—	 	 	—	 	 	3	 	 	—	 	 	—	 	 	3	 	 	—	 	 	3	 	
Issuance of common stock under employee stock purchase plan	 	 	1	 	 	—	 	 	45	 	 	—	 	 	—	 	 	45	 	 	—	 	 	45	 	
Stock-based compensation	 	 	—	 	 	—	 	 	121	 	 	—	 	 	—	 	 	121	 	 	—	 	 	121	 	
Common stock dividends, $0.58 per share	 	 	—	 	 	—	 	 	—	 	 	(238	)	 	—	 	 	(238	)	 	—	 	 	(238	)	
Repurchase of common stock	 	 	(32	)	 	(3	)	 	(726	)	 	(464	)	 	—	 	 	(1,193	)	 	—	 	 	(1,193	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances at February 26, 2011	 	 	393	 	$	39	 	$	18	 	$	6,372	 	$	173	 	$	6,602	 	$	690	 	$	7,292	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See Notes to Consolidated Financial Statements.
73

Table of Contents

 Notes to Consolidated Financial Statements

$ in millions, except per share amounts or as otherwise noted
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.
74

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
75

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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
76

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
77

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
78

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
79

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	)	
 	 	 	 	 	 	 	 	 	 	
80

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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
81

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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
82

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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
83

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
84

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
85

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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
86

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
87

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
88

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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
89

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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
90

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
91

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
92

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
93

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
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.
94

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	 	—	 	
95

Table of Contents

$ in millions, except per share amounts or as otherwise noted

																
 	 	 	 	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	 	
 	 	 	 	 	 	 	 	 	 	
96

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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
97

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
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
98

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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
99

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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	 	$	—	 	$	—	 	$	—	 	
 	 	 	 	 	 	 	 	
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%	 	
100

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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
101

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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
102

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
103

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
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
104

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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	)	
 	 	 	 	 	 	
105

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	
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	 	
 	 	 	 	 	 	 	 	
106

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
107

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
108

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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
109

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
110

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	
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	 	
 	 	 	 	 	 	 	 	
111

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
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.
112

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	
113

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
114

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
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 .
115

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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%	 	
 	 	 	 	 	 	 	 	
116

Table of Contents

$ in millions, except per share amounts or as otherwise noted

												
 	 	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	 	
 	 	 	 	 	 	 	 	
117

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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 .
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
118

Table of Contents

$ in millions, except per share amounts or as otherwise noted

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.
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	 	
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.
119

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
120

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
121

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
122

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
123

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
124

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
125

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
126

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
127

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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	 	
 	 	 	 	 	 	 	 	 	 	 	 	
128

Table of Contents

$ in millions, except per share amounts or as otherwise noted
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.
129

Table of Contents

 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

 Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. Our Disclosure Committee meets on a quarterly basis and more often if necessary.
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act), as of February 26, 2011. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of February 26, 2011, our disclosure controls and procedures were effective.
Management's Report on Internal Control Over Financial Reporting
Management's report on our internal control over financial reporting is included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Attestation Report of the Independent Registered Public Accounting Firm
The attestation report of Deloitte & Touche LLP, our independent registered public accounting firm, on the effectiveness of our internal control over financial reporting is included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting during the fiscal fourth quarter ended February 26, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Certifications
The certifications of our Chief Executive Officer and our Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibits No. 31.1 and No. 31.2, respectively, to this Annual Report on Form 10-K. As required by section 303A.12(a) of the New York Stock Exchange Listed Company Manual, our Chief Executive Officer has certified to the New York Stock Exchange that he is not aware of any violation by us of the NYSE's Corporate Governance listing standards.

 Item 9B. Other Information.
There was no information required to be disclosed in a Current Report on Form 8-K during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that was not reported.
130

Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors
The information provided under the caption "Nominees and Directors" in the Proxy Statement is incorporated herein by reference.
Executive Officers
Information regarding our executive officers is furnished in a separate item captioned "Executive Officers of the Registrant" included in Part I of this Annual Report on Form 10-K.
Family Relationships
The nature of all family relationships between any director, executive officer or person nominated to become a director is stated under the captions "Nominees and Directors" and "Certain Relationships and Related Party Transactions" in the Proxy Statement and is incorporated herein by reference.
Audit Committee Financial Expert and Identification of the Audit Committee
The information provided under the caption "Audit Committee Report" in the Proxy Statement, regarding the Audit Committee financial experts and the identification of the Audit Committee members, is incorporated herein by reference.
Director Nomination Process
The information provided under the caption "Director Nomination Process" in the Proxy Statement is incorporated herein by reference. There have been no material changes to the procedures by which shareholders may recommend nominees to our Board.
Compliance with Section 16(a) of the Exchange Act
The information provided under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement is incorporated herein by reference.
Code of Ethics
We adopted a Code of Business Ethics that applies to our directors and all of our employees, including our principal executive officer, our principal financial officer and our principal accounting officer. Our Code of Business Ethics is available on our Web site, www.bby.com  — select the "Investor Relations" link and then the "Corporate Governance" link.
A copy of our Code of Business Ethics may also be obtained, without charge, upon written request to:
Best Buy Co., Inc.
Investor Relations Department
7601 Penn Avenue South
Richfield, MN 55423-3645
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of our Code of Business Ethics that applies to our principal executive officer, principal financial officer or principal accounting officer by posting such information within two business days of any such amendment or waiver on our Web site, www.bby.com  — select the "Investor Relations" link and then the "Corporate Governance" link.
131

Table of Contents

 Item 11. Executive Compensation.
The information set forth under the caption "Executive and Director Compensation" in the Proxy Statement is incorporated herein by reference.

 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Securities Authorized for Issuance Under Equity Compensation Plans
Information regarding securities authorized for issuance under equity compensation plans is furnished as a separate item captioned "Securities Authorized for Issuance Under Equity Compensation Plans" included in Part II of this Annual Report on Form 10-K.
Security Ownership of Certain Beneficial Owners and Management
The information provided under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement is incorporated herein by reference.

 Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information provided under the captions "Director Independence," "Nominees and Directors" and "Certain Relationships and Related Party Transactions" in the Proxy Statement is incorporated herein by reference.

 Item 14. Principal Accounting Fees and Services.
The information provided under the caption "Ratification of Appointment of our Independent Registered Public Accounting Firm — Principal Accountant Services and Fees" in the Proxy Statement is incorporated herein by reference.
132

Table of Contents
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as part of this report:

1.
Financial Statements:
All financial statements as set forth under Item 8 of this report.
2.
Supplementary Financial Statement Schedules:
Schedule II — Valuation and Qualifying Accounts
Other schedules have not been included because they are not applicable or because the information is included elsewhere in this report.
3.
Exhibits:

 	 	 	 	Incorporated by Reference	 	 	
Exhibit
No.	 	 			 	Filed Herewith	
	 	Exhibit Description	 	Form	 	SEC File No.	 	Exhibit	 	Filing Date			
 	
 	2.1	 	Sale and Purchase Agreement, dated May 7, 2008, as amended, among The Carphone Warehouse Group PLC, CPW Retail Holdings Limited; Best Buy Co., Inc. and Best Buy Distributions Limited	 	 	8-K/A	 	 	001-09595	 	 	1.1	 	 	5/13/2008	 	 	
 	2.2	 	Agreement and Plan of Merger, dated September 14, 2008, by and among Best Buy Co., Inc., Puma Cat Acquisition Corp. and Napster, Inc.	 	 	8-K	 	 	001-09595	 	 	2.1	 	 	9/15/2008	 	 	
 	3.1	 	Restated Articles of Incorporation	 	 	DEF 14A	 	 	001-09595	 	 	n/a	 	 	5/12/2009	 	 	
 	3.2	 	Amended and Restated By-Laws	 	 	8-K	 	 	001-09595	 	 	3.1	 	 	9/22/2010	 	 	
 	4.1	 	Indenture by and among Best Buy Co., Inc., Best Buy Stores, L.P. and Wells Fargo Bank Minnesota, National Association, dated January 15, 2002, as amended and supplemented	 	 	S-3	 	 	333-83562	 	 	4.1	 	 	2/28/2002	 	 	
 	4.2	 	Offer Letter Agreement between Royal Bank of Canada and Best Buy Canada Ltd. Magasins Best Buy Ltee dated March 9, 2004	 	 	10-K	 	 	001-09595	 	 	4.3	 	 	4/29/2004	 	 	
 	4.3	 	Credit Agreement dated September 19, 2007 among Best Buy Co., Inc., the Subsidiary Guarantors, the Lenders, and JPMorgan Chase Bank, N.A., as administrative agent	 	 	8-K	 	 	001-09595	 	 	4	 	 	9/25/2007	 	 	
 	4.4	 	First Amendment, dated as of June 17, 2008, to the Credit Agreement, dated as of September 19, 2007, among Best Buy Co., Inc., the Subsidiary Guarantors named therein, the Lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent	 	 	8-K	 	 	001-09595	 	 	4.1	 	 	6/18/2008	 	 	
133

Table of Contents

 	 	 	 	Incorporated by Reference	 	 	
Exhibit
No.	 	 			 	Filed Herewith	
	 	Exhibit Description	 	Form	 	SEC File No.	 	Exhibit	 	Filing Date			
 	
 	4.5	 	Indenture, dated as of June 24, 2008, between Best Buy Co., Inc. and Wells Fargo Bank, N.A., as Trustee	 	 	8-K	 	 	001-09595	 	 	4.1	 	 	6/24/2008	 	 	
 	4.6	 	Supplemental Indenture, dated as of June 24, 2008, between Best Buy Co., Inc. and Wells Fargo Bank, N.A., as Trustee	 	 	8-K	 	 	001-09595	 	 	4.2	 	 	6/24/2008	 	 	
 	4.7	 	Registration Rights Agreement, dated as of June 24, 2008, by and among Best Buy Co., Inc., J.P. Morgan Securities Inc. and Goldman, Sachs & Co. for themselves and on behalf of the other initial purchasers of the Notes	 	 	8-K	 	 	001-09595	 	 	4.3	 	 	6/24/2008	 	 	
 	4.8	 	Shareholders Agreement, dated June 30, 2008, as amended, between The Carphone Warehouse Group Plc; CPW Retail Holdings Limited; Best Buy Co., Inc.; and Best Buy Distributions Limited	 	 	8-K	 	 	001-09595	 	 	4.1	 	 	7/3/2008	 	 	
 	4.9	 	Receivables Financing Agreement dated July 3, 2009, between a subsidiary of Best Buy Europe and Barclays Bank PLC, as administrative agent, and a syndication of banks	 	 	10-Q	 	 	001-09595	 	 	5.0	 	 	10/8/2009	 	 	
 	4.10	 	Facility Agreement, dated January 27, 2010, between Best Buy Europe Distributions Limited, Best Buy Distributions Limited, The Carphone Warehouse Group PLC and New Carphone Warehouse PLC	 	 	8-K	 	 	001-09595	 	 	4.1	 	 	1/29/2010	 	 	
 	4.11	 	Form of Indenture, to be dated as of March 11, 2011, between Best Buy Co., Inc. and Wells Fargo Bank, N.A., as Trustee	 	 	8-K	 	 	001-09595	 	 	4.1	 	 	3/11/2011	 	 	
 	4.12	 	Form of First Supplemental Indenture, to be dated as of March 11, 2011, between Best Buy Co., Inc. and Wells Fargo Bank, N.A., as Trustee	 	 	8-K	 	 	001-09595	 	 	4.2	 	 	3/11/2011	 	 	
 	*10.1	 	1994 Full-Time Employee Non-Qualified Stock Option Plan, as amended	 	 	10-K	 	 	001-09595	 	 	10.1	 	 	5/2/2007	 	 	
 	*10.2	 	1997 Employee Non-Qualified Stock Option Plan, as amended	 	 	10-Q	 	 	001-09595	 	 	10.1	 	 	10/6/2005	 	 	
 	*10.3	 	1997 Directors' Non-Qualified Stock Option Plan, as amended	 	 	10-K	 	 	001-09595	 	 	10.3	 	 	5/2/2007	 	 	
 	*10.4	 	Service Agreement between Best Buy Europe Distributions Limited and Jonathan Scott Wheway	 	 	10-K	 	 	001-09595	 	 	10.4	 	 	4/28/2010	 	 	
134

Table of Contents

 	 	 	 	Incorporated by Reference	 	 	
Exhibit
No.	 	 			 	Filed Herewith	
	 	Exhibit Description	 	Form	 	SEC File No.	 	Exhibit	 	Filing Date			
 	
 	*10.5	 	2000 Restricted Stock Award Plan, as amended	 	 	10-Q	 	 	001-09595	 	 	10.2	 	 	10/6/2005	 	 	
 	*10.6	 	Best Buy Co., Inc. 2004 Omnibus Stock and Incentive Plan, as amended	 	 	S-8	 	 	333-160247	 	 	99	 	 	6/26/2009	 	 	
 	*10.7	 	2010 Long-Term Incentive Program Award Agreement, as approved by the Board of Directors	 	 	10-K	 	 	001-09595	 	 	10.7	 	 	4/28/2010	 	 	
 	*10.8	 	Best Buy Fifth Amended and Restated Deferred Compensation Plan, as amended	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
 	*10.9	 	Best Buy Co., Inc. Performance Share Award Agreement dated August 5, 2008	 	 	8-K	 	 	001-09595	 	 	10.1	 	 	8/8/2008	 	 	
 	12.1	 	Statements re: Computation of Ratios	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
 	21.1	 	Subsidiaries of the Registrant	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
 	23.1	 	Consent of Deloitte & Touche LLP	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
 	31.1	 	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
 	31.2	 	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
 	32.1	 	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
 	32.2	 	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	 	 	 	 	 	 	X	
135

Table of Contents

 	 	 	 	Incorporated by Reference	 	 	
Exhibit
No.	 	 			 	Filed Herewith	
	 	Exhibit Description	 	Form	 	SEC File No.	 	Exhibit	 	Filing Date			
 	
 	101	 	The following financial information from our Annual Report on Form 10-K for fiscal 2011, filed with the SEC on April 25, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the consolidated balance sheets at February 26, 2011 and February 27, 2010, (ii) the consolidated statements of earnings for the years ended February 26, 2011, February 27, 2010 and February 28, 2009, (iii) the consolidated statements of cash flows for the years ended February 26, 2011, February 27, 2010 and February 28, 2009, (iv) the consolidated statements of changes in shareholders' equity for the years ended February 26, 2011, February 27, 2010 and February 28, 2009 and (v) the Notes to Consolidated Financial Statements. (1)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
*
Management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 15(b) of Form 10-K.

(1)
The XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K under the Securities Act of 1933, as amended, the registrant has not filed as exhibits to this Annual Report on Form 10-K certain instruments with respect to long-term debt under which the amount of securities authorized does not exceed 10% of the total assets of the registrant. The registrant hereby agrees to furnish copies of all such instruments to the SEC upon request.
136

Table of Contents
 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 	 	Best Buy Co., Inc.
(Registrant)	

 	
By:	
 	
/s/ Brian J. Dunn

Brian J. Dunn
Chief Executive Officer
Date: April 25, 2011	
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature 	 	Title 	 	Date 	
/s/ Brian J. Dunn

Brian J. Dunn	 	Chief Executive Officer and Director
 (principal executive officer)	 	April 25, 2011	

/s/ James L. Muehlbauer

James L. Muehlbauer	
 	
Executive Vice President — Finance and Chief Financial Officer
 (principal financial officer)	
 	
April 25, 2011	

/s/ Susan S. Grafton

Susan S. Grafton	
 	
Vice President, Controller and Chief Accounting Officer
 (principal accounting officer)	
 	
April 25, 2011	

/s/ Lisa M. Caputo

Lisa M. Caputo	
 	
Director	
 	
April 25, 2011	

/s/ Kathy J. Higgins Victor

Kathy J. Higgins Victor	
 	
Director	
 	
April 25, 2011	

/s/ Ronald James

Ronald James	
 	
Director	
 	
April 25, 2011	

/s/ Elliot S. Kaplan

Elliot S. Kaplan	
 	
Director	
 	
April 25, 2011	

/s/ Sanjay Khosla

Sanjay Khosla	
 	
Director	
 	
April 25, 2011	

/s/ George L. Mikan III

George L. Mikan III	
 	
Director	
 	
April 25, 2011	

/s/ Matthew H. Paull

Matthew H. Paull	
 	
Director	
 	
April 25, 2011	

/s/ Rogelio M. Rebolledo

Rogelio M. Rebolledo	
 	
Director	
 	
April 25, 2011	

/s/ Richard M. Schulze

Richard M. Schulze	
 	
Chairman of the Board and Director	
 	
April 25, 2011	

/s/ Hatim A. Tyabji

Hatim A. Tyabji	
 	
Director	
 	
April 25, 2011	

/s/ Gérard R. Vittecoq

Gérard R. Vittecoq	
 	
Director	
 	
April 25, 2011	
137

Table of Contents
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.

Exhibit 10.8
 
Best Buy
Fifth Amended and Restated
Deferred Compensation Plan

Effective January 1, 2009

 
BEST BUY
FIFTH AMENDED AND RESTATED
DEFERRED COMPENSATION PLAN
 
Effective January 1, 2009
 
Purpose
 
The purpose of this Plan is to provide specified benefits to a select group of management and highly compensated Employees and Directors who contribute materially to the continued growth, development and future business success of Best Buy Co., Inc., a Minnesota corporation, and its subsidiaries.  This Plan shall be unfunded for federal income tax purposes and for purposes of Title I of ERISA and, as to covered Employees, is described in Section 201 of Title I of ERISA.
 
The Plan was initially adopted effective as of April 1, 1998.  The Plan was amended and restated effective each of October 1, 1998, July 1, 1999 and January 1, 2001, was amended effective January 1, 2003, and was last amended and restated effective April 1, 2004.  The Plan is being amended and restated effective January 1, 2009 to reflect the provisions of Section 409A of the Code and Treasury Regulations thereunder.
 
ARTICLE 1
Definitions
 
For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:
 
1.1           “Account Balance” shall mean, with respect to a Participant, a credit on the records of the Plan equal to the sum of (i) the Deferral Account balance and (ii) the Company Contribution Account balance.  The Account Balance, and any sub-account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant or Beneficiary pursuant to this Plan.  As and to the extent necessary to reflect the time and form of payment elections, or other provisions applicable to such amounts, Account Balances shall be separately tracked and maintained by Plan Year.
 
1.2           “Administrator” shall have the meaning described in Article 10.
 
1.3           “Annual Deferral Amount” shall mean that percentage or amount of a Participant’s Base Salary and Bonus or Directors Fees that a Participant timely elects to defer for a Plan Year in accordance with Article 2.  In the event of a Participant’s Retirement, Disability (if deferrals cease in accordance with Article 2), Unforeseeable Financial Emergency (if deferrals cease in accordance with Articles 2 and 3), death or a Termination of Employment prior to the end of a Plan Year, such year’s Annual Deferral Amount shall be the actual amount withheld for such period.
 
1 

 
1.4           “Base Salary” shall mean the annual cash compensation payable for services performed as an Employee by a Participant during a Plan Year, excluding bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, directors fees and other fees, automobile and other allowances, by a Participant, determined before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of an Employer; provided, however, the Committee may allow on a Plan Year prospective basis commissions (or similar items of recurring compensation) to be treated as Base Salary with respect to individuals for whom such items represent the principal component of basic compensation.
 
1.5           “Beneficiary” shall mean one or more individuals, trusts, estates or other persons, designated in accordance with Article 7, that are entitled to receive benefits under this Plan due to the death of a Participant.
 
1.6           “Beneficiary Designation” shall mean the form or other election procedures established from time to time by the Committee for a Participant to designate a Beneficiary.
 
1.7           “Board” shall mean the board of directors of the Company.
 
1.8           “Bonus” shall mean any cash compensation, not otherwise considered Base Salary, payable for services performed as an Employee by a Participant, for a performance period which is coincident with or begins in a Plan Year, under an Employer’s short-term bonus and cash incentive plans calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer.
 
1.9           “Change in Control” or “CIC” is any one of the following:
 
(i)             When a person, or more than one person acting as a group, acquires (whether by merger, consolidation, purchase or otherwise) more than fifty percent (50%) of the total fair market value or total voting power of the Company’s stock;
 
(ii)            When a person, or more than one person acting as a group, acquires within a twelve (12) month consecutive period, ending with the date of the most recent stock acquisition, stock of the Company possessing at least thirty percent (30%) of the total voting power of the Company’s stock;
 
(iii)           When a majority of the members of the Board is replaced within a twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of such Board as constituted before such appointment or election; or
 
(iv)           When a person, or more than one person acting as a group, acquires within a twelve (12) month consecutive period assets from the Company or an entity controlled by the Company that have a total gross fair market value equal to seventy-five percent (75%) of the total fair market value of the assets of the Company and all such entities.
 
2 

 
Once a person or group acquires stock meeting the thresholds set forth in paragraphs (i) and (ii) immediately preceding, additional acquisitions of such stock by that person or group shall be ignored in determining whether another CIC has occurred.  Asset transfers between or among controlled entities as determined before such transfers shall not be considered in applying paragraph (iv) immediately preceding.
 
1.10         “Claimant” shall have the meaning described in Article 8.
 
1.11         “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.
 
1.12         “Committee” shall mean the committee described in Article 12.
 
1.13         “Company” shall mean Best Buy Co., Inc., a Minnesota corporation, and any successor to all or substantially all of the Company’s assets or businesses.
 
1.14         “Company Contribution Account” shall mean (i) the Participant’s Company Contribution Amount, plus or minus (ii) amounts credited or debited to such account pursuant to Article 2, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to such account.
 
1.15         “Company Contribution Amount” shall mean the amount, if any, determined in accordance with Section 2.4 for a Plan Year.
 
1.16         “Deferral Account” shall mean (i) a Participant’s Annual Deferral Amount, plus or minus (ii) amounts credited or debited to such account pursuant to Article 2, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to such account.
 
1.17         “Director” shall mean a non-employee member of the Board.
 
1.18         “Directors Fees” shall mean the annual cash retainer and committee fees payable by the Company as compensation for serving on the Board, and such other amounts available for deferral hereunder, if any, as are determined by the Committee prior to the beginning of the applicable deferral period, calculated before reduction for fees deferred hereunder or any other plan or program.
 
1.19         “Disabled” or “Disability” shall mean a physical or mental condition, resulting from physical or mental sickness or injury, which prevents the individual while an Employee or Director from engaging in any substantial gainful activity, and which condition can be expected to last for a continuous period of not less than six (6) months.
 
1.20         “Election Form and Plan Agreement” shall mean the annual enrollment forms and procedures established from time to time by the Committee that a Participant completes to indicate participation in the Plan for a Plan Year and to make elections under the Plan.
 
1.21         “Employee” shall mean any individual who is a common law or statutory employee and for whom the Employer pays Social Security taxes.  This term shall not include individuals who
 
3 

 
are not treated as Employees for purposes of the Plan, even though they may be so treated or considered under applicable law (e.g., individuals whom an Employer treats as employees of a third party or as self-employed).
 
1.22         “Employer” is the Company and each other corporation or unincorporated business which is a member of a controlled group of corporations or a group of trades or businesses under common control (within the meaning of Code Section 414(b) or (c)) which includes the Company, but with respect to other business entities during only the periods of such common control with the Company.
 
1.23         “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
 
1.24         “Grandfathered Account Balance” shall have the meaning described in Article 13.
 
1.25         “In-Service Distribution” shall mean the payout described in Section 3.1.
 
1.26         “Key Employee” is an Employee who (i) at any time during that Key Employee Measuring Period owns at least five percent (5%) of the stock (or capital or profits interest) of an Employer, (ii) owns one percent (1%) of the stock (or capital or profits interest) of an Employer and whose compensation exceeds the dollar limit for such period described in Code Section 416(1)(iii), or (iii) is an officer of an Employer and whose compensation exceeds the dollar limit for such period described in Code Section 416(1)(i), as adjusted.  No more than the lesser of fifty (50) employees and ten percent (10%) of all employees shall be treated as officers for that period by reason of clause (iii) immediately preceding.  In the event the number of officers exceeds such number, the employees included in such number will be those with the highest compensation for that period.
 
For purposes of this definition, compensation shall mean compensation as determined in accordance with Treasury Regulation Section 1.415(c)-1(d)(2) and shall take into account the items which made up Code Section 415 compensation under the Company’s tax-qualified 401(k) plan; provided, however, compensation for purposes of this definition (i) shall not include any items described in Treasury Regulation Section 1.415(c)-2(g)(5)(ii) (e.g., salary or wages earned abroad by an individual who is not a Participant and who is not a citizen or resident of the United States) and (ii) no change to the definition of items included or not included in Code Section 415 compensation under such 401(k) plan shall take effect until the next Key Employee Measuring Period used to determine a Key Employee.
 
1.27         “Key Employee Measuring Period” is the calendar year.
 
1.28         “Participant” shall mean an eligible Employee or Director who has validly elected to participate hereunder and elected to defer amounts under the Plan or who has been or is entitled to be allocated a Company Contribution Amount, or both.  An individual who has become a Participant shall continue as a Participant until the earlier of his or her death and the date his or her entire Account Balances have been paid.
 
4 

 
1.29         “Plan” shall mean the Company’s Deferred Compensation Plan described in this document and as it may be amended from time to time.  References to the Plan by year, period or other date shall be to the Plan document as then in effect.
 
1.30         “Plan Year” shall mean the calendar year.
 
1.31         “Pre-Retirement Survivor Benefit” shall mean the benefit described in Article 6.
 
1.32         “Quarterly Installment Method” shall be a quarterly installment payment over the number of quarters selected by the Participant in accordance with this Plan, calculated as follows: The Account Balance of the Participant shall be calculated as of the close of business on the last business day of the quarter preceding the quarter for which the installment is being determined; provided, however, for each of the four (4) consecutive quarterly installment periods which begin with a January, such balance shall be calculated as of the close of business as of a month-end in the immediately preceding quarterly period.  Each quarterly installment for such year shall be calculated by multiplying this balance by a fraction, the numerator of which is one, and the denominator of which is the remaining number of quarterly payments due the Participant as of the beginning of such year.  Each quarterly installment shall be paid within sixty (60) days of the beginning of the applicable quarter.  Unless the Committee determines otherwise, quarterly installment payments shall be drawn on a pro-rata basis from each of the applicable Investment Funds used to determine amounts to be credited or debited to the Participant’s Account Balance pursuant to Article 2.  In no event, however, shall the amount payable in all such installments exceed or be less than the Account Balance to which such installments relate and any adjustment in amount necessary to achieve such results shall be taken in order of the last installment to the earliest installment.
 
1.33         “Retirement,” “Retire” or “Retired” shall mean a Termination of Employment for any reason, other than death, on or after the attainment of age sixty (60) in the case of an Employee, and on or after the attainment of age seventy (70) in the case of a Director.
 
1.34         “Retirement Benefit” shall mean the benefit described in Article 4.
 
1.35         “Specified Employee” is a Participant who is a Key Employee for a Key Employee Measuring Period, with such status as to that period becoming effective as of April 1st next following such period and lasting until the following April 1st.
 
1.36         “Termination Benefit” shall mean the benefit described in Article 5.
 
1.37         “Termination of Employment” shall mean the separation from service as an Employee with all business entities that comprise the Employer, or the cessation of services as a Director, for reasons other than death.  An individual on a bona fide leave of absence shall be considered to have incurred a Termination of Employment no later than the six (6) month anniversary of the absence (twenty-nine (29) months in the event of an absence due to a Disability); provided, however, such Termination shall not be considered to have been incurred while and for the period the individual has the right by law or agreement to return to employment with an Employer or serve as a Director upon the expiration of the leave.  In the
 
5 

 
event an individual continues to render substantial services for an Employer as an independent contractor, other than as a Director, immediately after ceasing to be an Employee, no such Termination shall occur until such independent contractor services cease.  The Committee may prescribe such rules as may be appropriate to cover situations as to whether and when a reduction in hours worked, an anticipated temporary assignment or the like shall be treated as a Termination of Employment; provided, however, unless otherwise permissible under Code Section 409A and Treasury Regulations thereunder, any such rules shall be effective with respect to deferrals hereunder and other contributions for the Plan Year which begins after the year such rules are adopted.
 
1.38         “Trust” shall mean one or more trusts established pursuant to that certain Master Trust Agreement, dated as of April 1, 1998, between the Company and the trustee named therein, as amended from time to time.
 
1.39         “Unforeseeable Financial Emergency” shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant, and which cannot be relieved through other reasonable means available to the Participant, resulting from (i) a sudden and unexpected illness or accident of the Participant or his or her spouse or a dependent of the Participant, (ii) a loss of the Participant’s property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the discretion of the Committee.
 
ARTICLE 2
Selection, Enrollment, Commencement of Participation
 
2.1           Selection by Committee .   As determined by the Committee in its discretion, participation in the Plan shall be limited to Directors and a select group of management and highly compensated Employees.
 
2.2           Enrollment Requirements .
 
(a)            General .  As a condition to participation, each eligible Employee or Director shall complete an Election Form and Plan Agreement and comply with such other procedures as the Committee may establish from time to time as necessary for enrollment.
 
(b)            Base Salary .  An Employee may elect to defer hereunder his or her Base Salary.  A Director may elect to defer his or her Director Fees.  Except as otherwise provided here, to be effective for a Plan Year any such election shall be made as of the time the Committee may prescribe but in no event later than December 31 of the year immediately preceding the Plan Year during which the Base Salary or Director Fees would be otherwise earned and paid.
 
(c)            Bonus Compensation .  An Employee may elect to defer hereunder his or her Bonus.  Except as provided herein, to be effective for a Plan Year such election shall be made
 
6 

as of the time the Committee may prescribe but in no event later than December 31 of the year immediately prior to the Plan Year the Bonus is earned or the performance period relative to the Bonus begins.
 
(d)                                  Participation During Plan Year .
 
(i)                                Initial Participation .  An Employee or Director who first becomes eligible to participate in the Plan during a Plan Year may elect, within thirty (30) days of becoming so eligible, to defer hereunder (x) his or her Base Salary or Director Fees for that Plan Year earned and paid after such election and (y) to the extent allowed by the Committee with respect to the type or amount of bonus concerned, to defer hereunder his or her eligible bonus for the incentive period coincident with or starting in that Plan Year and earned and paid after such election.  In the event an individual’s active participation in the Plan is cancelled pursuant to Section 2.3(c), or such individual otherwise ceases to be such a participant, and subsequently the individual is eligible to resume active participation in the Plan, then the provision of this Section 2.1(d) shall apply only if (x) such resumption occurs in a Plan Year after the Plan Year of cancellation and (y) the individual is treated as a newly eligible Employee or Director under paragraph (d)(ii) immediately following.
 
(ii)                             Former Participant .  An individual who has been eligible to participate in the Plan, who loses such eligibility by reason of a Termination of Employment or otherwise, and who again becomes eligible to participate in the Plan in a later Plan Year, shall not be eligible to participate in the Plan for purposes of authorizing an Annual Deferral Amount for the Plan Year in which he or she again becomes so eligible unless he or she (x) has not been eligible to make an Annual Deferral Amount election for two (2) or more consecutive years or (y) has previously incurred a Termination of Employment and been paid all benefits under the Plan after such Termination and before again becoming eligible for the Plan.
 
(e)                                   Later Deferral Elections .  If and to the extent allowed by the Committee, a deferral election with respect to Bonus Compensation which is:
 
(i)                                performance-based compensation, may be made no later than six (6) months before the end of the performance period, or
 
(ii)                             earned over a period of one (1) year or more and which is subject to a substantial risk of forfeiture, no later than one (1) year before the date such risk of forfeiture would lapse for reasons other than by reason of the Employee’s death, Disability, or a CIC.
 
2.3                              Amount of Participant’s Annual Deferral Amount .
 
(a)                                   Deferral Elections .  At the time a Participant elects an Annual Deferral Amount for a Plan Year, he or she shall designate the rate or amount to be withheld from Base
 
7 

 
Salary, Bonus Compensation, and Director Fees as applicable.  Except as described in Section 2.2 or in subsection (c) immediately following, once elected, the Annual Deferral Amount shall be irrevocable with respect to the covered compensation earned during the Plan Year or other period to which such election applies.  No amount will be deferred under the Plan from such compensation in the absence of a timely deferral election for a Plan Year.
 
(b)                                  Maximum Deferrals .  The maximum percentage or amount of covered compensation which may be deferred hereunder by a Participant for a Plan Year shall be established from time to time by the Committee and may be expressed as a maximum amount or percentage.  Different maximums may be applied to Base Salary and Bonus Compensation, or items of Bonus Compensation, and Director Fees.  Such maximums shall be established before the Plan Year to which they relate and shall apply throughout that year.
 
(c)                                   Intra-Year Cancellation of Deferrals .  In the event a Participant becomes Disabled or, as directed by the Committee, applies for and is granted cancellation of deferrals pursuant to Article 3.3, additional deferrals on behalf of such Participant for the balance of the Plan Year shall be cancelled.  The cancellation shall be effective as relevant no later than two and one-half (2-1/2) months after the Participant becomes Disabled or the second payroll period ending after the Committee approves the distribution and directs the cancellation.
 
2.4                              Company Contribution Amount .
 
(a)                                   General .  For each Plan Year, the Company may, but is not required to, credit any amount it desires to any Participant’s Company Contribution Account under this Plan, which amount shall be for that Participant the Company Contribution Amount for that Plan Year.  In no event, however, shall any such contribution be in lieu of or otherwise in replacement for an amount otherwise due to or on behalf of a Participant apart from the Plan.  The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Company Contribution Amount for that Plan Year.  The Company Contribution Amount, if any, shall be credited as of the date selected by the Company.
 
(b)                                  Time and Form of Payment .  The Account Balance attributable to a Company Contribution Account for a Plan Year shall be paid upon the same events and in the same way and proportions as elected by the Participant with respect to the Deferral Account for such year.  In the event no such election is made, such balance shall be paid in a lump sum within sixty (60) days after the end of the Plan Year in which the Participant dies or incurs a Termination of Employment.
 
2.5                              Crediting and Debiting of Account Balances .   In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, amounts shall be
 
8 

 
credited or debited to a Participant’s Account Balance in accordance with the following rules:
 
(a)                                   Election of Investment or Measurement Funds .   A Participant, in connection with his or her commencement of participation in the Plan, shall elect one or more investment funds as a measurement to be used to determine the additional amounts to be credited or debited to his or her Account Balance.  Commencing with the first day that follows such commencement and continuing thereafter for each subsequent day in which the Participant participates in the Plan, the Participant may elect to add or delete one or more available investment funds or measures to be used to determine the additional amounts to be credited or debited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to any such fund. The Participant may change the percentage of a current year Deferral and Company Contribution Accounts to be invested in each investment fund or elect to have all or part of the Participant’s Account Balance from prior years transferred among the investment funds at any time, or both.  Any such election shall be effective as soon as administratively practicable after the election is made.  Any such election shall continue in effect thereafter unless and until a new election is made.
 
(b)                                  Proportionate Allocation .   In making an election the Participant shall specify, in increments of one percentage point (1%), the percentage of his or her Account Balance to be allocated to an investment fund or measure.
 
(c)                                   Measurement Funds . The Participant may elect one or more available investment or measurement funds made available for this purpose, for the purpose of crediting or debiting additional amounts to his or her Account Balance.  As necessary, the Committee may, in its discretion, discontinue, substitute or add any such fund.  Each such action will take effect as of a date determined by the Committee so long as such date is under the circumstances reasonably after the date the Committee gives Participants advance written notice of such change.
 
(d)                                  Crediting or Debiting Method .   The performance of each elected investment or measurement fund (either positive or negative) will be determined by the Committee, in its reasonable discretion, based on the performance of such funds themselves.  A Participant’s Account Balance shall be credited or debited on a business daily basis based on the performance of such fund selected by the Participant, as determined by the Committee in its discretion, as though a Participant’s Account Balance were invested in such funds selected by the Participant, in the percentages applicable to such day, at the closing price on such date.
 
(e)                                   No Actual Investment .   Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the funds are to be used for measurement purposes only, and a Participant’s election of any fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in such fund.  Without limiting the foregoing, a Participant’s Account Balance and any sub-account
 
9 

 
balance thereof shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company, other Employer or the Trust; the Participant shall at all times remain an unsecured creditor of the Company or other Employer.
 
(f)                                     Participant’s Investment Elections .
 
(1)                                   General .  The availability of investment funds for purposes of crediting or debiting additional amounts to Account Balances is not a recommendation to designate a deemed investment in any such investment fund.  The selection of deemed investments is solely the responsibility of each Participant.  No officer, employee or other agent of the Company or other Employer or the Trustee is authorized to advise or make any recommendation concerning the selection of such funds and no such person is responsible for determining the suitability or advisability of any such selection.
 
(2)                                   Participant Responsibility .  Participants shall be solely responsible for selecting, monitoring, and changing the investment funds in or by which their Account Balances are invested.  Neither the Company, other Employer, Committee member, nor the Administrator shall be responsible for such investment decisions.  To the extent a Participant does not affirmatively elect one or more investment funds with respect to his or her Account Balance, he or she shall be deemed to have elected one or more funds designated for this purpose by the Committee.
 
2.6                              Vesting .  A Participant shall be fully vested in his or her Account Balance.
 
2.7                              Payment of Withholdings to Trustees or Custodian .  Except as otherwise provided hereunder or unless otherwise directed by the Committee, an Employer shall remit amounts withheld from Participants and any Company Contribution Amount to the Trustee or other authorized custodian as soon as administratively feasible after such amounts are withheld or otherwise determined and payable.
 
ARTICLE 3
In-Service Distribution; Unforeseeable Financial Emergencies
 
3.1                              In-Service Distribution .   In connection with and at the time of each Annual Deferral Amount election, a Participant may irrevocably elect to receive a future In-Service Distribution from the Plan with respect to all or a portion of such Deferral Account.  The In-Service Distribution shall be a lump sum payment in an amount that is equal to the portion of the Deferral Account for which the Participant has elected to receive such distribution, adjusted as provided for in Section 2.5 to the time of such distribution.  The In-Service Distribution shall be paid within the first sixty (60) days of the Plan Year that begins two Plan Years after the end of the Plan Year to which the Annual Deferral Amount relates or such later Plan Year as is timely elected by the Participant.  By way of example, if the
 
10 

 
minimum two year In-Service Distribution is elected for Annual Deferral Amounts that are deferred in the Plan Year commencing January 1, 2009, a minimum two year In-Service Distribution would be payable during the sixty (60) day period commencing January 1, 2012.
 
3.2                              Other Benefits Take Precedence Over In-Service Distribution .   Should an event occur before the In-Service Distribution date that triggers a benefit under Article 4, 5, or 6, the Deferral Account that is subject to an In-Service Distribution election shall not be paid in accordance with Section 3.1 but shall be paid in accordance with the other applicable Article.
 
3.3                              Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies .   If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) cancel any deferrals required to be made by a Participant or (ii) receive a partial or full payout from the Plan, or both.  The payout shall not exceed the lesser of the Participant’s Account Balance or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency.  If, subject to the discretion of the Committee, the petition for a cancellation or payout, or both, is approved, cancellation of deferrals shall take effect as described in Section 2.3(c)  and any payout shall be made within sixty (60) days of the date of approval.
 
ARTICLE 4
Retirement Benefit
 
4.1                              Retirement Benefit .   A Participant who Retires shall receive his or her Account Balance as a Retirement Benefit.
 
4.2                              Payment of Retirement Benefit .   In connection with and at the time of each Annual Deferral Amount election, a Participant shall irrevocably elect to receive the Retirement Benefit in a lump sum or in a Quarterly Installment Method of twenty (20), forty (40) or sixty (60) quarters and when such benefit shall be paid or shall commence to be paid.  If the Participant’s Account Balance at the time of Retirement is less than $10,000, the Retirement Benefit shall be paid in a lump sum notwithstanding the election made; provided, however, the $10,000 threshold shall be based on the then existing Account Balances for all years or other periods of participation, including periods before 2005.  If a Participant does not affirmatively elect otherwise, the Retirement Benefit shall be paid in a lump sum.  The lump sum shall be paid, or installment payments shall commence, within the first sixty (60) days after the last day of the Plan Year in which the Participant Retires or, if otherwise allowed and affirmatively elected by the Participant, within the first sixty (60) days of a later Plan Year designated by the Participant.
 
4.3                              Death Prior to Completion of Retirement Benefit .   If a Participant dies after Retirement but before the Retirement Benefit is paid in full, the Participant’s unpaid Retirement Benefit payments shall continue and shall be paid to the Participant’s Beneficiary at the same time and in the same form as that benefit would have been paid to the Participant had the Participant survived, except as described in Section 4.4.
 
11 

 
4.4                              Specified Employees .   In the event the Participant is a Specified Employee at Retirement, however, no lump sum shall be paid and no Quarterly Installment Method shall commence earlier than the six (6) month anniversary of the Retirement date.  In the case of a lump sum so delayed, the Account Balance shall be paid in a lump sum within sixty (60) days after such anniversary.  In the case of a Quarterly Installment Method where an installment would be due within such six (6) months if the Participant were not a Specified Employee, such installment shall be paid within sixty (60) days of such anniversary and the remaining installments shall be paid as and when otherwise due.  In the event the Specified Employee dies during such six (6) months, Section 4.3 shall be applied as if the date of death was the six (6) month anniversary.
 
ARTICLE 5
Termination Benefit
 
5.1                              Termination Benefit .   A Participant who experiences a Termination of Employment which is not a Retirement shall receive his or her Account Balance as a Termination Benefit.
 
5.2                              Payment of Termination Benefit .   In connection with and at the time of each Annual Deferral Amount election, a Participant shall irrevocably elect to receive the Termination Benefit in a lump sum or in a Quarterly Installment Method of twenty (20) quarters and when such benefit shall be paid or shall commence to be paid.  If the Participant’s Account Balance at the time of Termination is less than $25,000, the Termination Benefit shall be paid in a lump sum notwithstanding the election made; provided, however, the $25,000 threshold shall be based on the then existing Account Balances for all years or other periods of participation, including periods before 2005.  If a Participant does not affirmatively elect otherwise, the Termination Benefit shall be paid in a lump sum.  The lump sum shall be paid, or installment payments shall commence, within the first sixty (60) days after the last day of the Plan Year in which the Participant Terminates or, if otherwise allowed and affirmatively elected by the Participant, within the first sixty (60) days after the end of the month in which the Participant incurred a Termination of Employment.
 
5.3                              Death Prior to Completion of Termination Benefit .   If a Participant dies after Termination but before the Termination Benefit is paid in full, the Participant’s unpaid Termination Benefit payments shall continue and shall be paid to the Participant’s Beneficiary at the same time and in the same form as that benefit would have been paid to the Participant had the Participant survived, except as described in Section 5.4.
 
5.4                              Specified Employees .   In the event the Participant is a Specified Employee at such Termination, however, no lump sum shall be paid and no Quarterly Installment Method shall commence earlier than the six (6) month anniversary of such Termination date.  In the case of a lump sum so delayed, the Account Balance shall be paid in a lump sum within sixty (60) days after such anniversary.  In the case of a Quarterly Installment Method where an installment would be due within such six (6) months if the Participant were not a Specified Employee, such installment shall be paid within sixty (60) days of such anniversary and the remaining installments shall be paid as and when otherwise due.  In the event the Specified
 
12 

 
Employee dies during such six (6) months, Section 5.3 shall be applied as if the date of death was the six (6) month anniversary.
 
ARTICLE 6
Pre-Retirement Survivor Benefit
 
6.1                              Pre-Retirement Survivor Benefit .   The Participant’s Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant’s Account Balance if the Participant dies before he or she incurs a Termination of Employment.
 
6.2                              Payment of Pre-Retirement Survivor Benefit .   In connection with and at the time of each Annual Deferral Amount election, a Participant shall irrevocably elect whether the Pre-Retirement Survivor Benefit shall be received by his or her Beneficiary in a lump sum or in a Quarterly Installment Method of twenty (20) or forty (40) quarters.  If the Participant’s Account Balance at the time of his or her death is less than $25,000, payment of the Pre-Retirement Survivor Benefit shall be made in a lump sum; provided, however, the $25,000 threshold shall be based on the then existing Account Balances for all years or other periods of participation, including periods before 2005.  If a Participant does not affirmatively elect otherwise, the Pre-Retirement Survivor Benefit shall be paid in a lump sum.  The lump sum shall be paid, or installment payments shall commence, within the first sixty (60) days after the last day of the Plan Year in which the Participant dies or, if otherwise allowed and affirmatively elected by the Participant, within the first sixty (60) days of a later Plan Year designated by the Participant.
 
ARTICLE 7
Beneficiary Designation
 
7.1                              Beneficiary .   Each Participant shall have the right to designate his or her Beneficiary (both primary as well as contingent) to receive any benefits payable under the Plan to a Beneficiary upon the death of a Participant.  The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.
 
7.2                              Beneficiary Designation; Change; Spousal Consent .   A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee.  A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures for such purposes, as in effect from time to time.  If the Participant names someone other than his or her spouse as a Beneficiary of at least fifty percent (50%) of the Participant’s benefits,  a spousal consent, in the form designated by the Committee, must be signed by that Participant’s spouse and returned to the Committee.  Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled.  The Committee shall be
 
13 

 
entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted prior to his or her death.
 
7.3                              Acknowledgment .   No designation or change in designation of a Beneficiary shall be effective until received and acknowledged by the Committee.
 
7.4                              No Beneficiary Designation .   If a Participant fails to designate a Beneficiary if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary shall be deemed to be his or her surviving spouse.  If the Participant has no surviving spouse, the benefits remaining under the Plan shall be payable to the executor or personal representative of the Participant’s estate.
 
7.5                              Doubt as to Beneficiary .   If and to the extent the Committee has any reasonable doubt or a dispute exists as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause such payments to be suspended or otherwise sequestered until such matter is resolved to its satisfaction.
 
7.6                              Crediting and Debiting Account Balances .  After the death of a Participant, a Beneficiary shall be entitled to exercise the rights under the Plan of a Participant who has incurred a Termination of Employment (e.g., direct investments as described in Section 2.5) as and to the extent prescribed by the Committee and to the extent of the Account Balance payable to such Beneficiary.
 
ARTICLE 8
Claims Procedures
 
8.1                              Presentation of Claim .   Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan.  If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant.  All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred.  The claim must state with particularity the determination desired by the Claimant.
 
8.2                              Notification of Decision .   The Committee shall consider a Claimant’s claim within a reasonable time, and shall notify the Claimant in writing:
 
(a)                                   that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or
 
(b)                                  that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:
 
14 

 
(i)                                      the specific reason(s) for the denial of the claim, or any part of it;
 
(ii)                                   specific reference(s) to pertinent provisions of the Plan upon which such denial was based;
 
(iii)                                a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and
 
(iv)                               an explanation of the claim review procedure set forth in Section 12.3 below.
 
8.3                              Review of a Denied Claim .   Within sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim.  Thereafter, but not later than thirty (30) days after the review procedure began, the Claimant (or the Claimant’s duly authorized representative):
 
(a)                                   may review pertinent documents;
 
(b)                                  may submit written comments or other documents; and/or
 
(c)                                   may request a hearing, which the Committee, in its discretion, may grant.
 
8.4                              Decision on Review .   The Committee shall render its decision on review promptly, and not later than sixty (60) days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee’s decision must be rendered within one hundred twenty (120) days after such date.  Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain to the extent reasonably possible:
 
(a)                                   specific reasons for the decision;
 
(b)                                  specific reference(s) to the pertinent Plan provisions upon which the decision was based; and
 
(c)                                   such other matters as the Committee deems relevant.
 
8.5                              Subsequent Action; Mandatory Arbitration .
 
(a)                                   Subsequent Action .   A Claimant’s compliance with the foregoing provisions of this Article 8 is a mandatory prerequisite to a Claimant’s right to commence any subsequent action with respect to any claim for benefits under this Plan.
 
(b)                                  Mandatory Arbitration .   Any controversy or claim arising out of or relating to this Plan shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association.  Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the parties in accordance with the Commercial Arbitration Rules of the American Arbitration
 
15 

 
Association.  The arbitration shall be held in such place in Minneapolis, Minnesota, as may be specified by the arbitrator (or any place agreed to by the parties and the arbitrator).  The decision of the arbitrator shall be final and binding as to any matters submitted under this Article 8; provided, however, if necessary, such decision may be enforced in any court having jurisdiction over the subject matter or over any of the parties to this Plan.  All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys’ fees) shall be borne by the party against which the decision is rendered.  If the arbitrator’s decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator’s assessment of the relative merits of the parties’ positions.
 
ARTICLE 9
Establishment of The Trust
 
9.1                              Establishment and Funding of the Trust . The Company shall establish the Trust. Except as otherwise provided in the Plan, the Company shall at least annually transfer or cause to be transferred over to the Trust such assets as the Company determines, in its discretion, are necessary to provide, on a present value basis, for its respective future liabilities created with respect to the Account Balances for all periods prior to the transfer, taking into consideration the value of the assets in such Trust at the time of the transfer; provided, however, an Employer shall be entitled to offset or reduce the amount to be so transferred to the Trust by any unreimbursed benefit or expense payments made by the Employer from its funds which such benefit or expense payments were otherwise payable from the Trust.
 
9.2                              Interrelationship of the Plan and the Trust .   The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan.  The provisions of the Trust shall govern the rights of the Company, the Participants, and the creditors of the Company and, where applicable, creditors of Employers other than the Company, to the assets transferred to the Trust.  Except as inconsistent with the provisions of Sections 10.1(b) and 12.6(b), with such provisions applied by substituting the Trust for the Plan in such sections, the terms and provisions of the Trust agreement shall control in case of a conflict between such terms and provisions and the terms and provisions of the Plan.
 
9.3                              Distributions From the Trust .   The Company’s and other Employer’s obligations under the Plan may be paid or otherwise satisfied with assets of the Trust and any such payment or satisfaction shall reduce the Company’s or other Employer’s obligations under the Plan in the same amount.
 
16 

ARTICLE 10
Administration
 
10.1         Committee Duties .
 
(a)            General .  Except as otherwise provided in this Article 10, this Plan shall be administered by a Committee which shall consist of the Board, or such Committee as the Board shall appoint.  Members of the Committee may be Participants under this Plan.  The Committee shall have the exclusive responsibility for or to direct the general administration and operation of the Plan and the power to take any action necessary or appropriate to carry out such responsibilities.  In addition, the Committee shall provide generally for the operation of the Plan and be a liaison between Employers to assure uniform procedures as appropriate.  The duties of the Committee shall include, but not be limited to, the following:
 
(i)             to prescribe, require and use appropriate forms;
 
(ii)            to formulate, issue and apply rules and regulations;
 
(iii)           to prepare and file reports, notices and any other documents  relating  to the Plan which may be required by law;
 
(iv)           to interpret and apply the provisions of the Plan;
 
(v)            to authorize and direct benefit payments.
 
In exercising such powers and duties, and other powers and duties granted under the Plan or Trust to the Committee, the Committee is granted such discretion as appropriate or necessary to carry out the duties and powers so delegated.  This discretion necessarily follows from the fact that the Plan, the Trust and related documents do not, and are not intended to, prescribe all rules necessary to administer the Plan or anticipate all circumstances or events which may arise in the course of such administration.
 
(b)            Code Section 409A .  The Plan shall be administered, and the Committee shall exercise its discretionary authority under the Plan, in a manner consistent with Code Section 409A and Treasury Regulations thereunder.  Any permissible discretion to accelerate or defer a Plan payment under such Regulations, the power to exercise which is not otherwise assigned under the Plan, shall be exercised by the Committee.  In the event the matter over which such discretion may be exercised relates to a Committee member, or such member is otherwise unable to objectively exercise such discretion, such member shall not take part in the deliberations and decisions regarding that matter.
 
(c)            Allocation to Participating Employers .  To the extent practicable and necessary, the Committee shall provide for an accounting of the Trust assets in such manner as will permit the accurate allocation of Account Balances or parts thereof, including the deemed investment earnings and losses attributable thereto, to the relevant Employer.
 
17 

 
The Committee shall provide to each Employer all information necessary to permit each such Employer to prepare any reports or tax filings which may be required by reason of its status as an Employer.
 
10.2         Administration Upon Change In Control .
 
(a)            General .  For purposes of this Plan, the Committee, or an independent third party administrator appointed by the Committee, shall be the “Administrator” at all times prior to the occurrence of a Change in Control.  Upon and within one hundred twenty (120) days after a Change in Control, the individuals who comprised the Committee immediately prior to the Change in Control (whether or not such individuals are members of the Committee following the Change in Control) may, by written consent of a majority of such individuals, appoint an independent third party administrator, and such independent third party administrator shall have the power and authority reserved to the Committee hereunder except as otherwise provided.  The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan assets or assets of the Trust or select any investment manager or custodial firm for the Plan or Trust.  Upon and after the occurrence of a Change in Control, the Company shall pay all reasonable administrative expenses and fees of the Administrator and supply full and timely information to the Administrator or all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date of circumstances of the Retirement, Disability, death or Termination of Employment of the Participants, and such other pertinent information as the Administrator may reasonably require.  In the event the individuals who comprised the Committee immediately prior to the Change in Control appoint an independent third party administrator upon or after the Change in Control, the Administrator may be terminated (and a replacement appointed) thereafter only with the written consent of the majority of those Participants (or Beneficiaries for those Participants who are then deceased), per capita, who have an interest in the Plan on the date of such termination.
 
(b)           Change in Control .  Solely for the purpose of applying this Section 10.2, a Change in Control shall have the same meaning as such phrase has under the Trust.
 
10.3         Agents .   In the administration of this Plan, the Committee and Administrator may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer.
 
10.4         Binding Effect of Decisions .   The decision or action of the Committee and Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated
 
18 

 
hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.
 
10.5         Indemnity .   The Company shall indemnify and hold harmless the ex-CEO, the members of the Committee, and the Administrator, and any employee or other agent to whom the duties of the Committee or Administrator may be delegated, against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of gross negligence or willful misconduct by such person.
 
10.6         Employer Information .   The Company and each Employer shall supply full and timely information to the Committee or Administrator on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require to administer the Plan.
 
ARTICLE 11
Termination, Amendment or Modification
 
11.1         Termination .
 
(a)            General .  Although the Company anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that the Company will continue the Plan or will not terminate the Plan at any time in the future.  Accordingly, the Company reserves the right to discontinue its sponsorship of the Plan or to suspend or terminate the Plan at any time with respect to any or all of the participating Employees and Directors.  Except as otherwise provided or allowed for herein, however, such action shall not cancel an Annual Deferral Amount election for the year of such suspension or Termination or accelerate or defer the payment (determined without regard to such suspension or termination) of Account Balances.
 
(b)            Change in Control .  Upon or effective with a Change in Control, the Plan shall be terminated effective no later than the end of the Plan Year in which such event occurs and, to the extent and manner allowed under Code Section 409A and Treasury Regulations thereunder, all Account Balances of affected Participants remaining at the final liquidation of the Plan and Trust shall be paid in a lump sum notwithstanding the payment elections made by Participants.  To the extent such liquidation and acceleration of payment is not so possible, however, Account Balances shall be paid at the times and in the manner otherwise provided under the Plan.
 
11.2         Amendment .   The Company may, at any time, amend or modify the Plan in whole or in part; provided, however, that no such amendment shall (i) reduce the value of a Participant’s Account Balance determined as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification, (ii) adversely affect any benefits to which a Participant or Beneficiary has become entitled as of the date of the amendment or modification, or (iii) amend or modify substantively this Section 11.2 or
 
19 

 
Section 10.2 coincident with or after a Change in Control, no matter when such amendment or modification is otherwise purportedly effective.
 
ARTICLE 12
Miscellaneous
 
12.1         Non-Guarantee of Employment .  Nothing contained in this Plan shall be construed as a contract of employment or other service between an Employer and a Participant, or as a right of any Participant to be continued in the employment or service of an Employer, or as a limitation on the right of an Employer to discharge any Participant with or without notice or with or without cause.
 
12.2         Rights to Trust Asset .  No Participant or any other person shall have any right to, or interest in, any part of the Trust assets upon Termination of employment or otherwise, except as otherwise provided under the Plan.  If the assets of the Trust are insufficient to pay a Participant’s benefits, the Participant’s Employer shall pay any such amounts from its other general assets.  If such Employer does not timely pay such benefits, the sole recourse of a claimant Participant or Beneficiary shall be against such Employer and neither the Company nor any other Employer shall be responsible to pay or provide for the payment of such benefits or liable for the nonpayment thereof.
 
12.3         Suspension of Rules .
 
(a)            Federal Securities and Other Laws .  Notwithstanding anything in the Plan to the contrary, and to the extent and for the time reasonably necessary to comply with federal securities laws (or other applicable laws or regulations), deferrals, Participant investment-direction, and payment dates and forms under the Plan may be suspended, changed, or delayed as necessary to comply with such laws or regulations; provided, however, any payments so delayed shall be paid to the Participant or Beneficiary as of the earliest date the Committee determines that such payment will not cause a violation of any such laws or regulations.
 
(b)            Section 162(m) .  If the Committee reasonably determines that a scheduled payment of benefits under the Plan will not be deductible by an Employer by reason of Code Section 162(m), it shall suspend all such payments to the extent not so deductible.  Payments so suspended shall be paid within sixty (60) days after the affected Participant dies or incurs a Termination of Employment; provided, however, if the Participant is a Specified Employee when he or she incurs a Termination of Employment, payments suspended pursuant to this subsection shall be paid as described in Section 4.4 or 5.4, as the case may be, as if the amounts so suspended were payable as a lump sum on the date of such Termination.
 
(c)            Offset for Amounts Due .  A Participant’s Account Balance may be reduced by one or more offsets to repay any amounts then due and owing to an Employer, unless another means of repayment is agreed to by the Committee.  Except for the right to
 
20 

 
immediate offset for an amount up to $5,000, or such higher amount as allowed by Treasury Regulations or other directives under or related to Code Section 409A, the Account Balance shall not be so offset before it is otherwise scheduled to be paid to the Participant or Beneficiary and the amount then offset shall not exceed the amount that would be otherwise so paid.
 
12.4         Requirement of Proof .  In discharging their duties and responsibilities under the Plan, the Committee or other individual may require proof of any matter concerning this Plan, and no person shall acquire any rights or be entitled to receive any benefits under this Plan until such proof is furnished.
 
12.5         Non-Alienation and Taxes .
 
(a)            General .  Except as otherwise expressly provided herein or as otherwise required by law, no right or interest of any Participant or Beneficiary in the Plan and the Trust shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, attachment,  garnishment, execution, levy, bankruptcy, or any other disposition of any kind, either voluntary or involuntary, prior to actual receipt of payment by the person entitled to such right or interest under the provisions hereof, and any such disposition or attempted disposition shall be void.
 
(b)            Tax Withholdings .
 
(1)            General .  Benefits earned under the Plan and payment of such benefits shall be subject to tax reporting and withholding as required by law and the amount of such withholding may be determined by treating such benefits as being in the nature of supplemental wages.  If tax withholdings must be made before such benefits are paid to a Participant or Beneficiary (e.g., FICA taxes on deferrals), they shall be made from other wages paid to such individual apart from the Plan to the extent reasonably possible; provided, however, if such other wages are insufficient for that purpose, the withholdings shall be made from and reduce deferrals or other contributions, as applicable, for the individual concerned or, if no such contributions are available, the relevant Employer shall advance the withholdings, the appropriate Account Balance of the individual concerned shall be reduced in the same amount, and upon the direction of the Committee the Trustee or other custodian shall remit to the Employer an amount equal to such reduction.
 
(2)            Tax Consequences .  Neither the Company nor any other Employer represents or guarantees that any particular federal, foreign, state or local income, payroll, or other tax consequence will result from participation in this Plan or payment of benefits under the Plan.
 
12.6         Savings Clause .
 
(a)            General .  If any term, covenant, or condition of this Plan, or the application thereof to any person or circumstance, shall to any extent be held to be invalid or
 
21 

 
unenforceable, the remainder of this Plan, or the application of any such term, covenant, or condition to persons or circumstances other than those as to which it has been held to be invalid or unenforceable, shall not be affected thereby, and, except to the extent of any such invalidity or unenforceability, this Plan and each term, covenant, and condition hereof shall be valid and shall be enforced to the fullest extent permitted by law.
 
(b)            Section 409A .  If any term, covenant, or condition of this Plan, or the application thereof to any person or circumstance, shall be considered not to be in compliance with Code Section 409A and Treasury Regulations thereunder, such as would cause all or part of the Participant’s Account Balance to be currently taxable under such provisions, then such term, covenant, condition or application shall be considered modified to the extent necessary to achieve its design and purpose and without such noncompliance or stricken if such modification is not reasonably possible.
 
12.7         Facility of Payment .  If the Committee shall determine a Participant or Beneficiary entitled to a distribution hereunder is incapable of caring for his or her own affairs because of illness or otherwise, it may direct any distribution from such Participant’s Account Balances be made, in such shares as it shall determine, to the spouse, child, parent or other blood relative of such Participant or Beneficiary, or any of them, or to such other person or persons as the Committee may determine, until such date as it shall determine such incapacity no longer exists; provided, however, the exercise of this discretion shall not cause an acceleration or delay in the time of payment of Plan benefits except to the extent, and only for the duration of, the time reasonably necessary to resolve such matters or otherwise protect the interests of the Plan.  The Committee shall be under no obligation to see to the proper application of the distributions so made to such person or persons and any such distribution shall be a complete discharge of any liability under the Plan to such Participant or Beneficiary, to the extent of such distribution.
 
12.8         Requirement of Releases .  If, in the opinion of the Committee, any present or former spouse or dependent of a Participant or other person shall by reason of the law of any jurisdiction appear to have any bona fide interest in Plan benefits that may become payable to a Participant or with respect to a deceased Participant, or otherwise has asserted such a claim, the Committee may direct such benefits be withheld pending receipt of such written releases as it deems necessary to prevent or avoid any conflict or multiplicity of claims with respect to the payment of such benefits, but only to the extent and for the duration reasonably necessary to resolve such matters or otherwise protect the interests of the Plan.
 
12.9         Board Action .  Any action which is required or permitted to be taken by the Board of Directors of the Company under the Plan may be taken by the Compensation Committee of such Board or any other authorized committee of such Board.
 
12.10       Computational Errors .  In the event mathematical, accounting, or similar errors are made in processing or paying a benefit under the Plan,  the Committee may make such equitable adjustments as it deems appropriate (which may be retroactive) to correct such errors.
 
22 

 
12.11       Communications .  The Committee shall prescribe such forms of communication, including forms for benefit application and the like, with respect to the Plan and Fund as it deems appropriate.  Except as otherwise prescribed by such persons or otherwise provided by applicable law or regulation, any such communication and assent or consent thereto may be handled by electronic means.
 
12.12       Terms .   Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.
 
12.13       Captions .   The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
 
12.14       Governing Law .   Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Minnesota without regard to its conflicts of laws principles.
 
12.15       Notice .   Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

 	Best Buy Co., Inc.	
 	Office of the General Counsel	
 	7601 Penn Avenue South	
 	Richfield, MN 55423	
 
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
 
Any notice or filing required or permitted to be given to a Participant or other Claimant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of such person.
 
12.16       Successors .   The provisions of this Plan shall bind and inure to the benefit of the Company and other Employers and their respective successors and assigns, and to the Participants and their Beneficiaries.
 
12.17       Spouse’s Interest .   The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.
 
12.18       Insurance .   The Company, on its own behalf or on behalf of other Employers, in its discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the trustees may choose.  The Company or the trustees of the
 
23 

 
Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance.  The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Company shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for insurance.
 
12.19       Legal Fees To Enforce Rights After Change in Control .   The Company is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participant’s Employer (which might then be composed of new members) or a shareholder of the Company or the Participant’s Employer, or of any successor corporation might then cause or attempt to cause the Company, the Participant’s Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or the Participant’s Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan.  In these circumstances, the purpose of the Plan could be frustrated.  Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, the Participant’s Employer or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, such Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company irrevocably authorizes such Participant to retain counsel of his or her choice at the expense of the Company to represent such Participant in connection with the initiation or defense of any litigation or other related legal action, whether by or against the Company, the Participant’s Employer or any director, officer, shareholder or other person affiliated with the Company, the Participant’s Employer or any successor thereto in any jurisdiction.
 
ARTICLE 13
Transitional Rules
 
13.1         Introduction .  This Plan document is effective on January 1, 2009 (i.e., the “effective date”) and, except as otherwise provided herein, shall apply only to those persons who are Participants or Beneficiaries on or after the effective date.  The provisions of the Plan document as in effect prior to the effective date, taking into account changes made in operations to satisfy Code Section 409A, Treasury Regulations thereunder and other guidance with respect to such Code Section issued by the Internal Revenue Service, even if not reflected in the formal Plan document previously in effect, shall continue to govern the rights and entitlements of persons not described in the immediately preceding sentence except to the extent (i) the application of this Plan document to such persons or the payment of benefits to such persons does not materially diminish or enlarge such rights and entitlements, or (ii) such application is necessary to satisfy such law and regulations.
 
13.2         Amounts Deferred Under Prior Plan .
 
(a)            General .  Account Balances (including earnings and losses on such balances regardless of when incurred) attributable to deferrals and contributions for periods
 
24 

 
after 2004 shall be accounted for separately from such balances attributable to deferrals and contributions (other than those described in subsection (b) immediately following) for periods before 2005 (such pre-2005 balances are referred to as the “Grandfathered Account Balances”).
 
(b)            Non-Vested .  The Grandfathered Account Balances shall not include any portion thereof which was not vested as of December 31, 2004, with such vesting determined without regard to any amendment or other material action, or other than the continued performance of services, made or taken after October 3, 2004, which caused an increase in such vesting.  Such non-vested portions of such balances shall be paid at the time and form elected by the Participant concerned on or before December 31, 2004 and, in the absence of any such election, shall be paid in a lump sum during the first sixty (60) days of the Plan Year which immediately follows the Plan Year in which the Participant incurs a Termination of Employment, Retires, or dies.
 
13.3         Suspension of Deferrals for Penalty Withdrawals .  The exercise of the 10% penalty withdrawal feature under Section 4.4 of the 2004 Plan shall cause a cancellation of any further Annual Deferral Amount as described therein and no Annual Deferral Amount may be elected by the Participant concerned with respect to any period before the second Plan Year which begins after the date of such payment.
 
13.4         Treatment of Grandfathered Account Balances .  Except as otherwise provided herein, the time and form of payment of Grandfathered Account Balances, including any right to further accelerate or further defer any such payment, whether as of right or petition by the Participant or Beneficiary concerned or in the discretion of the Committee or other third party, shall not be materially enlarged or subtracted from by this Plan restatement.
 
IN WITNESS WHEREOF , the Company has signed this Fifth Amended and Restated Deferred Compensation Plan document effective as of January 1, 2009.

 	Best Buy Co., Inc., a Minnesota corporation	

Dated:	 	 	By:	 	
 	 	Title:	 	
 
25 

 
TABLE OF CONTENTS

 	 	Page	
 	 	 	
ARTICLE 1.	Definitions	1	
 	 	 	
ARTICLE 2.	Selection, Enrollment, Commencement of Participation	6	
2.1	Selection by Committee	6	
2.2	Enrollment Requirements	6	
2.3	Amount of Participant’s Annual Deferral Amount	7	
2.4	Company Contribution Amount	8	
2.5	Crediting and Debiting of Account Balances	8	
2.6	Vesting	10	
2.7	Payment of Withholdings to Trustees or Custodian	10	
 	 	 	
ARTICLE 3	In-Service Distribution; Unforeseeable Financial Emergencies	10	
3.1	In-Service Distribution	10	
3.2	Other Benefits Take Precedence Over In-Service Distribution	11	
3.3	Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies	11	
 	 	 	
ARTICLE 4	Retirement Benefit	11	
4.1	Retirement Benefit	11	
4.2	Payment of Retirement Benefit	11	
4.3	Death Prior to Completion of Retirement Benefit	11	
4.4	Specified Employees	12	
 	 	 	
ARTICLE 5	Termination Benefit	12	
5.1	Termination Benefit	12	
5.2	Payment of Termination Benefit	12	
5.3	Death Prior to Completion of Termination Benefit	12	
5.4	Specified Employees	12	
 	 	 	
ARTICLE 6	Pre-Retirement Survivor Benefit	13	
6.1	Pre-Retirement Survivor Benefit	13	
6.2	Payment of Pre-Retirement Survivor Benefit	13	
 	 	 	
ARTICLE 7	Beneficiary Designation	13	
7.1	Beneficiary	13	
7.2	Beneficiary Designation; Change; Spousal Consent	13	
7.3	Acknowledgment	14	
7.4	No Beneficiary Designation	14	
7.5	Doubt as to Beneficiary	14	
7.6	Crediting and Debiting Account Balances	14	
 
i 

 

ARTICLE 8	Claims Procedures	14	
8.1	Presentation of Claim	14	
8.2	Notification of Decision	14	
8.3	Review of a Denied Claim	15	
8.4	Decision on Review	15	
8.5	Subsequent Action; Mandatory Arbitration	15	
 	 	 	
ARTICLE 9	Establishment of The Trust	16	
9.1	Establishment and Funding of the Trust	16	
9.2	Interrelationship of the Plan and the Trust	16	
9.3	Distributions From the Trust	16	
 	 	 	
ARTICLE 10	Administration	17	
10.1	Committee Duties	18	
10.2	Administration Upon Change In Control	18	
10.3	Agents	18	
10.4	Binding Effect of Decisions	18	
10.5	Indemnity	19	
10.6	Employer Information	19	
 	 	 	
ARTICLE 11.	Termination, Amendment or Modification	19	
11.1	Termination	19	
11.2	Amendment	19	
 	 	 	
ARTICLE 12	Miscellaneous	20	
12.1	Non-Guarantee of Employment	20	
12.2	Rights to Trust Asset	20	
12.3	Suspension of Rules	20	
12.4	Requirement of Proof	21	
12.5	Non-Alienation and Taxes	21	
12.6	Savings Clause	21	
12.7	Facility of Payment	22	
12.8	Requirement of Releases	22	
12.9	Board Action	22	
12.10	Computational Errors	22	
12.11	Communications	23	
12.12	Terms	23	
12.13	Captions	23	
12.14	Governing Law	23	
12.15	Notice	23	
12.16	Successors	23	
12.17	Spouse’s Interest	23	
12.18	Insurance	23	
 
ii 

 

12.19	Legal Fees To Enforce Rights After Change in Control	24	
 	 	 	
ARTICLE 13	Transitional Rules	24	
13.1	Introduction	24	
13.2	Amounts Deferred Under Prior Plan	24	
13.3	Suspension of Deferrals for Penalty Withdrawals	25	
13.4	Treatment of Grandfathered Account Balances	25	
 
iii 

 
FIRST AMENDMENT
OF
BEST BUY
FIFTH AMENDED AND RESTATED
DEFERRED COMPENSATION PLAN
 
WHEREAS, Best Buy Co., Inc. (the “Company”) has heretofore established and maintains a nonqualified deferred compensation plan which is currently embodied in a document effective January 1, 2009 and entitled “BEST BUY FIFTH AMENDED AND RESTATED DEFERRED COMPENSATION PLAN” (collectively, the “Plan document”);
 
WHEREAS, the Company has reserved to itself the power to make further amendments of the Plan document.
 
NOW, THEREFORE, the Plan document is hereby amended as follows:
 
1.              POSTPONING SCHEDULED DISTRIBUTIONS.  Effective November 1, 2010, Section 3.1 of the Plan document shall be amended to read as follows:
 
3.1.           In-Service Distribution .
 
(a)            Electing a Scheduled Distribution .  In connection with and at the time of each Annual Deferral Amount election, a Participant may irrevocably elect to receive a future In-Service Distribution from the Plan with respect to all or a portion of such Deferral Account.  The In-Service Distribution shall be a lump sum payment in an amount that is equal to the portion of the Deferral Account for which the Participant has elected to receive such distribution, adjusted as provided for in Section 2.5 to the time of such distribution.  The In-Service Distribution shall be paid within the first sixty (60) days of the Plan Year that begins two Plan Years after the end of the Plan Year to which the Annual Deferral Amount relates or such later Plan Year as is timely elected by the Participant.  By way of example, if the minimum two year In-Service Distribution is elected for Annual Deferral Amounts that are deferred in the Plan Year commencing January 1, 2009, a minimum two year In-Service Distribution would be payable during the sixty (60) day period commencing January 1, 2012.
 
(b)            Postponing Scheduled Distributions .  Subject to Section 3.2, a Participant may make an election to postpone any In-Service Distribution described in Section 3.1(a) above, and have such amount paid out in a lump sum payment during a sixty (60) day period commencing immediately after an allowable alternative distribution payable date designated by the Participant in accordance with this Section 3.1(b).  In order to make this election, the Participant must submit a new In-Service Distribution election form to the Committee in accordance with the following criteria:
 
(i)             Such election form must be submitted to and accepted by the Committee at least twelve (12) months prior to the Participant’s previously designated In-Service Distribution payable date;
 
1 

 
(ii)            The new In-Service Distribution payable date selected by the Participant must be a January 1 at least five years after the previously designated In-Service Distribution payable date; and
 
(iii)           The election of the new In-Service Distribution payable date will not be effective until twelve (12) months after the date on which the election is made.
 
2.              FUNDING OF THE TRUST.  Effective November 1, 2010, Sections 9.1 and 9.2 of the Plan document shall be amended to read as follows:
 
9.1.           Establishment and Funding of Trust .   The Company may establish a Trust with an independent corporate trustee in order to provide assets from which the obligations of the Employer(s) to the Participants and their Beneficiaries under the Plan may be fulfilled.  The Trust must be a grantor trust that conforms substantially with the model trust described in Revenue Procedure 92-64.  The Employers may from time to time transfer to the Trust cash, marketable securities or other property, including securities issued by the Company, acceptable to the Trustee in accordance with the terms of the Trust.
 
9.2.        Interrelationship of the Plan and the Trust .   The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan.  The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust.  Each Employer shall at all times remain liable to carry out its obligations under the Plan.  Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of the Plan, with the Participant’s or other person’s only interest under the Plan being the right to receive the benefits set forth herein.  The Trust is established only for the convenience of the Employers and the Participants, and no Participant has any interest in the assets of the Trust prior to distribution of such assets pursuant to the Plan.  To the extent the Participant or any other person acquires a right to receive benefits under the Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Employer.
 
3.              SAVINGS CLAUSE.  Save and except as herein expressly amended, the Plan Statement shall continue in full force and effect.

 	BEST BUY CO., INC., a Minnesota corporation	

Dated:	 	 	By:	 	
 	 	 	
 	 	Chief Human Resources Officer	

2 

Exhibit No. 12.1
 
Statements re: Computation of Ratios
$ in millions

 	 	Feb. 26,
2011	 	Feb. 27,
2010	 	Feb. 28,
2009	 	Mar. 1,
2008	 	Mar. 3,
2007	 	
Ratio of Earnings to Fixed Charges:	 	 	 	 	 	 	 	 	 	 	 	
Earnings:	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income taxes, noncontrolling interests and equity in income (loss) of affiliates	 	$	2,078	 	$	2,195	 	$	1,700	 	$	2,228	 	$	2,130	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Fixed Charges:	 	 	 	 	 	 	 	 	 	 	 	
Interest portion of rental expense	 	348	 	338	 	282	 	222	 	198	 	
Interest expense	 	87	 	94	 	94	 	62	 	31	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed charges	 	435	 	432	 	376	 	284	 	229	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings available for fixed charges	 	$	2,513	 	$	2,627	 	$	2,076	 	$	2,512	 	$	2,359	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges	 	5.78	 	6.08	 	5.52	 	8.85	 	10.30	 	

Exhibit No. 21.1
 
BEST BUY CO., INC.
SUBSIDIARIES OF THE REGISTRANT AT FEBRUARY 26, 2011*

 	 	State or Other Jurisdiction of
Incorporation or Organization	
BBC Insurance Agency Inc.	 	Minnesota	
BBC Investment Co.	 	Nevada	
BBY Networks, Inc.	 	Minnesota	
BBC Property Co.	 	Minnesota	
Best Buy Stores, L.P. (1)	 	Virginia	
BBY Services, Inc.	 	Delaware	
BestBuy.com, LLC	 	Virginia	
Best Buy Connect, LLC	 	Delaware	
Best Buy Gov, LLC (2)	 	Delaware	
Best Buy Stores Puerto Rico, LLC	 	Puerto Rico	
Best Buy Warehousing Logistics, Inc.	 	Delaware	
Nichols Distribution, LLC	 	Minnesota	
BBY Holdings International, Inc.	 	Minnesota	
Best Buy China Holdings, Ltd.	 	Mauritius	
Best Buy Shanghai, Ltd.	 	China	
Best Buy Enterprise Services, Inc.	 	Minnesota	
BBY Canada Finance, LLC	 	Delaware	
BBCAN Financial Services, L.P.	 	Alberta	
BBCAN UK, LLP	 	United Kingdom	
Best Buy, LLP	 	United Kingdom	
Best Buy Distributions Limited	 	United Kingdom	
Best Buy Europe Distributions Limited ¥ (3)	 	United Kingdom	
Best Buy UK Distributions Limited ¥	 	United Kingdom	
Best Buy UK CP Limited ¥	 	United Kingdom	
Best Buy Europe Limited ¥	 	United Kingdom	
CPW Mobile Limited ¥	 	United Kingdom	
CPWCO 16 Limited ¥	 	United Kingdom	
BBY Mobile Consulting, LLC ¥	 	Delaware	
CPW Europe Limited ¥	 	United Kingdom	
The Carphone Warehouse Limited ¥	 	Ireland	
The Phone House Netherlands BV ¥	 	Netherlands	
Compro-Telematics BV ¥	 	Netherlands	
F.M. Investments BV ¥	 	Netherlands	
F.M. Development BV ¥	 	Netherlands	
F.M. Wholesale BV ¥	 	Netherlands	
Typhone E-Concepts BV ¥	 	Netherlands	
Provitel Groothandel BV ¥	 	Netherlands	
The Phone House Netherlands Business Centers BV ¥	 	Netherlands	
The Phone House Netherlands Franchise BV ¥	 	Netherlands	
The Phone House Netherlands Retail BV ¥	 	Netherlands	
F.M. Corporate Communications BV ¥	 	Netherlands	
The Phone House Netherlands Retail Regio Midden BV ¥	 	Netherlands	
The Phone House Netherlands Retail Regio Noord BV ¥	 	Netherlands	
The Phone House Netherlands Retail Regio Zuid BV ¥	 	Netherlands	
CPW Insurance Limited ¥	 	United Kingdom	

 

Evergreen Services (2) Limited ¥	 	United Kingdom	
Geek Squad UK Limited ¥	 	United Kingdom	
Geek Squad Iberia SL ¥	 	Spain	
Mobiles.co.uk Limited ¥	 	United Kingdom	
New Technology Insurance ¥	 	Ireland	
SpinVox Limited ¥	 	United Kingdom	
Talk Mobile Limited ¥	 	United Kingdom	
The Carphone Warehouse Ltd. ¥	 	United Kingdom	
CPWCO 18 Limited ¥	 	United Kingdom	
ISE-NET Solutions Limited ¥	 	United Kingdom	
The Carphone Warehouse UK Limited ¥	 	United Kingdom	
The Phone House SAS ¥	 	France	
The Phone House Holdings (UK) Limited ¥	 	United Kingdom	
Best Buy Limited ¥	 	United Kingdom	
MTIS Limited ¥	 	Ireland	
The Phone House BV ¥	 	Netherlands	
Fresh Telecom Limited ¥	 	United Kingdom	
The Phone House Holdings (UK) Spanish Branch ¥	 	Spain	
The Phone House Canarias S.L.U. ¥	 	Spain	
The Phone House Direct S.L. ¥	 	Spain	
The Phone House LTDA ¥	 	Portugal	
The Phone House Mobil S.L.U. ¥	 	Spain	
The Phone House Spain S.L.U. ¥	 	Spain	
Telechoice Espana ¥	 	Spain	
Sociedad Gestora de Participacoes Sociais SQ ¥	 	Portugal	
OSFONE-Comercio de Aparelhos de Telecommunicaciones Lda ¥	 	Portugal	
OSFONE NEGOCIOS- Comercio de Aparelhos de Telecommunicaciones
Lda ¥	 	Portugal	
Tecnologias Integrales de Telecommunicaciones S.A. ¥	 	Spain	
Xtra Telecom SL ¥	 	Spain	
Phone House International AB ¥	 	Sweden	
GEAB The Phone House AB ¥	 	Sweden	
MSG The Phone House AB ¥	 	Sweden	
TalkTalk Telecom GmbH ¥	 	Switzerland	
The Phone House Deutschland GmbH ¥	 	Germany	
The Phone House Services GmbH ¥	 	Germany	
The Phone House ShopManagement GmbH ¥	 	Germany	
The Phone House Telecom GmbH ¥	 	Germany	
BBY Business to Business, ULC	 	Nova Scotia	
BBY Solutions, Inc.	 	Minnesota	
Best Buy Asia Pacific Regional Holdings Limited	 	Hong Kong	
Best Buy Hangzhou Limited	 	China	
Best Buy Nanjing Limited	 	China	
Best Buy Canada Ltd. (4)	 	Canada +	
6349021 Canada Ltd.	 	Canada +	
FutureGard Reinsurance Ltd.	 	Turks and Caicos	
Howell & Associates, Inc.	 	Ontario	
Best Buy Holdings B.V.	 	Netherlands	
Best Buy China Ltd.	 	Bermuda	
Best Buy Purchasing LLC (5)	 	Minnesota	
Best Buy Finance, Inc.	 	Minnesota	
BBY (Mauritius I) Ltd.	 	Mauritius	
BBY (Mauritius II) Ltd.	 	Mauritius	

 

Best Buy China %	 	China	
BBY (Mauritius III) Ltd.	 	Mauritius	
Best Buy (AsiaPacific) Limited	 	China	
Best Buy China UK, LLP	 	United Kingdom	
Best Buy International Finance, S.a.r.l.	 	Luxembourg	
Best Buy Enterprises, S. de R.L. de C.V.	 	Mexico, Federal District	
Best Buy Imports, S. de R.L. de C.V.	 	Mexico, Federal District	
Best Buy Stores, S. de R.L. de C.V.	 	Mexico, Federal District	
Best Buy Istanbul Magazacilik Limited Sirketi	 	Turkey	
Dovinic Limited	 	Hong Kong	
ExB Marketing Japan G.K.	 	Japan	
Five Star Trust %	 	China	
Best Buy Jiangsu Ltd.	 	Mauritius	
Jiangsu Five Star Appliance Co., Ltd.	 	China	
Anhui Five Star Appliance Co., Ltd	 	China	
Anhui Five Star Appliance Repair & Maintenance Service Co., Ltd	 	China	
Changzhou Five Star Appliance Co., Ltd #	 	China	
Chengdu Xingpu Five Star Electrical Appliance Co.	 	China	
Henan Five Star Appliance Co., Ltd	 	China	
Jiangsu Five Star Appliance Repair & Maintenance Co.,Ltd	 	China	
Jiangsu Five Star Appliance Service Co.,Ltd	 	China	
Jiangsu Five Star Central Air-conditioning Co., Ltd	 	China	
Jiangsu Five Star Purchase Co., Ltd	 	China	
Jiangsu Friendship Appliance Co., Ltd	 	China	
Jiangsu Hengxin Gree Air-conditioner Sales Co., Ltd @	 	China	
Jiangsu Taide Commercial & Trade Co., Ltd	 	China	
Jiangsu Xingpu Science & Technology Trading Co., Ltd	 	China	
Nanjing Appliance Central Air-conditioning Engineering Co., Ltd	 	China	
Ningbo Xingpu Five Star Appliance Co., Ltd	 	China	
Qingdao Five Star Appliance Service Co., Ltd	 	China	
Shandong Five Star Appliance Co., Ltd	 	China	
Sichuan Xingpu Five Star Appliance Co., Ltd	 	China	
Xuzhou Five Star Appliance Co., Ltd	 	China	
Xuzhou Five Star Appliance Service Co., Ltd	 	China	
Wuxi Five Star Appliance Co., Ltd	 	China	
Yancheng Asia Shopping Mall Co., Ltd	 	China	
Yunnan Five Star Appliance Co.,Ltd	 	China	
Zhejiang Xingpu Five Star Appliance Co., Ltd	 	China	
Zhejiang Xingpu Five Star Appliance Service Co., Ltd	 	China	
Best Buy - Fuse Capital Digital Media Fund, LLC	 	Delaware	
Best Buy UK Investments 1, LLC	 	Delaware	
Best Buy UK Investments 2, LLC	 	Delaware	
CCL Insurance Company	 	Vermont	
CP Gal Ritchfield, LLC	 	Delaware	
Jiangsu Five Star Capital Ltd.	 	Mauritius	
Jiangsu Five Star Investment Ltd.	 	Mauritius	
Magnolia Hi-Fi, Inc. (6)	 	Washington	
Napster, Inc.	 	Delaware	
Napster Card Company LLC	 	Virginia	
Napster, LLC (7)	 	Delaware	
Napster Deutschland GmbH	 	Germany	
Napster Luxembourg S. á r. l.	 	Luxembourg	

 

Napster UK Ltd.	 	United Kingdom	
Pacific Sales Kitchen and Bath Centers, Inc.	 	California	
Redline Entertainment, Inc. (8)	 	Minnesota	
Talkback, Inc.	 	Washington	
vpr Matrix, Inc.	 	Minnesota	

*              Indirect subsidiaries are indicated by indentation.
#              We own 60% of this entity
@            We own 40% of this entity
¥              Jointly held — owned 50%
+              Federally chartered
%            China Business Trust
 
Also doing business as:
 
(1)           Geek Squad, Audiovisions, Xtreme Value Electronics,  2nd Turn,  Magnolia Home Theater, FutureShop, Best Buy Mobile, HD Gamer Store, GameDaemons, Best Buy Express, DealTree,  TechLiquidators, Napster, Cowboom.
(2)           Best Buy Blue, BBC Gov
(3)           The Phone House, Geek Squad   
(4)           FutureShop, Best Buy Mobile, Geeksquad
(5)           Insignia Products, Cowboom
(6)           Magnolia Home Theater, Magnolia Audio Video.
(7)           Duet GP, Pressplay
(8)           Redline Films

Exhibit No. 23.1
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
We consent to the incorporation by reference in Registration Statement Nos. 333-83562 and 333-172662 on Form S-3, Nos. 333-54871, 333-39531, 333-39533, 333-49371, 333-61897, 333-80967, 333-46228, 333-56146, 333-108033, 333-119472, 333-137483, 333-144957, 333-153801, and 333-160247 on Form S-8, and No. 333-154796 on Form S-4, of our reports dated April 25, 2011, relating to the consolidated financial statements and financial statement schedule of Best Buy Co., Inc., and subsidiaries (“the Company”), (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s change in its method of accounting for noncontrolling interests with the adoption of Financial Accounting Standards Board Accounting Standards Codification 810, Consolidation ) and the effectiveness of the Company’s internal control over financial reporting, appearing in the Annual Report on Form 10-K of the Company for the year ended February 26, 2011.

 
Minneapolis, Minnesota
April 25, 2011

Exhibit No. 31.1
 
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Brian J. Dunn, certify that:
 
1.                I have reviewed this Annual Report on Form 10-K of Best Buy Co., Inc.;
 
2.                Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.                Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.                The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)               Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)              Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)               Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)              Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.                The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
 
a)               All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)              Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 25, 2011	/s/ Brian J. Dunn	
 	Brian J. Dunn	
 	Chief Executive Officer	

Exhibit No. 31.2
 
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, James L. Muehlbauer, certify that:
 
1.                I have reviewed this Annual Report on Form 10-K of Best Buy Co., Inc.;
 
2.                Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.                Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.                The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)               Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)              Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)               Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)              Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.                The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
 
a)               All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)              Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 25, 2011	/s/ James L. Muehlbauer	
 	James L. Muehlbauer	
 	Executive Vice President — Finance and Chief Financial Officer	

Exhibit No. 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
Pursuant to 18 U.S.C. §1350 (adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Chief Executive Officer of Best Buy Co., Inc. (the “Company”), hereby certify that the Annual Report on Form 10-K of the Company for the fiscal year ended February 26, 2011 (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: April 25, 2011	/s/ Brian J. Dunn	
 	Brian J. Dunn	
 	Chief Executive Officer	

Exhibit No. 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
Pursuant to 18 U.S.C. §1350 (adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Executive Vice President — Finance and Chief Financial Officer of Best Buy Co., Inc. (the “Company”), hereby certify that the Annual Report on Form 10-K of the Company for the fiscal year ended February 26, 2011 (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: April 25, 2011	/s/ James L. Muehlbauer	
 	James L. Muehlbauer	
 	Executive Vice President — Finance and Chief Financial Officer