Thank you for standing by. Welcome to the Best Buy's conference call for the third quarter of fiscal 2012. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available by 12:00 p.m. Eastern Time today. [Operator Instructions] I would now like to turn the conference over to Bill Seymour, Vice President of Investor Relations. Please go ahead.

Thank you, Alicia. Good morning, everyone. Thank you for joining us on our fiscal third quarter 2012 conference call. We have 2 speakers today, Brian Dunn, our CEO; and Jim Muehlbauer, our CFO. And after our prepared remarks, we should have plenty of time for your questions. Before I hand the call over to Brian, I'd like to take care of a few housekeeping items. [Operator Instructions] Let me remind you that comments made by me or by others representing Best Buy may contain forward-looking statements which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. You will also note that our reported results this morning include non-GAAP financial measures excluding the gain on sale of investments as well as the impact of restructuring charges, which are largely related to the restructuring activities we announced on November 7. These results should not be confused with the GAAP numbers we reported this morning in our earnings release and in the GAAP numbers we report in our 10-Q. In addition, the 2012 fiscal year adjusted guidance we'll be discussing today excludes the gain on sale of investments and the impact from restructuring charges, estimated impairment charges and the purchase of CPW share of the Mobile profit share agreement. For a GAAP to non-GAAP reconciliation of our reported to adjusted results and guidance, please refer to the supplemental schedules in this morning's news release. Also, we refer to free cash flow in today's results in our discussion today. Our definition of free cash flow is operating cash flow minus CapEx. With those housekeeping items aside, I would like to turn the call over to Brian Dunn.

Good morning, everyone, and happy holidays and thank you for joining us on our third quarter earnings conference call. My comments this morning will focus on our third quarter performance and what we have seen at this early stage in this holiday season. First, I want to take this opportunity to thank our employees for their world-class execution this quarter. I am especially proud of their extraordinary efforts in serving our customers during Black Friday weekend. For me, the key takeaways of the quarter were: we took decisive actions to drive our business, specifically in revenue and market share, both in-store and aggressively online. These actions, while negatively impacting gross margin, significantly resonated with customers and resulted in improved traffic and comp sales, including a significant increase in our online growth. We still have most of the holiday season in front of us, and we are on track to deliver both our revenue and earnings guidance for the year as adjusted. We remain committed to utilizing our strong cash flow to both invest in the profitable segments of our business and improve returns via share repurchases. I'd also like to highlight the strategic announcements we made on November 7. These structural changes are critical elements in driving our strategy in the future and improving returns for our shareholders. All of these actions are expected to be accretive to adjusted operating income and EPS next year and beyond. On balance, we continue to execute well on, and benefit from, the 3 foundational elements of our strategy: one, our unique multichannel approach that allows us to connect with customers wherever and whenever they want to shop; two, optimizing our scale to drive growth to new categories, new store formats and to gain share in key categories; and three, leveraging our financial strength…

Thanks, Brian, and good morning, everyone. Today I plan on covering the financial highlights of our third quarter results, along with some additional context on our outlook for the rest of the fiscal year. Before we get into the details of the quarter, for the benefit of our listeners who might be newer to the Best Buy story, it's worth mentioning that the Q3 results we are discussing today really reflect 2 different periods of consumer purchase behavior. First is a non-holiday period, including activity in September and October; and second is the beginnings of the important holiday selling season in November, especially the big Black Friday kickoff weekend. Looking back on the past several years, we have learned that it is important to assess the performance for the full November and December period to get a more complete view of customer behavior and performance for the holidays. For Best Buy, this is especially relevant considering the significant weighting of earnings derived from the month of December. This was also part of the rationale to change our fiscal year, which will result in the month of November, December and January being reported together in our new Q4 next year. Given that as important context, as we look at our Q3 results and current expectations for the fourth quarter, we believe that we remain on track to deliver both the revenue and adjusted earnings performance for the year, consistent with the guidance ranges that we discussed on last quarter's call. Moving into the highlights from the third quarter. Our Domestic business delivered both positive store traffic and comparable store sales growth. This was the first period that we've seen positive Domestic comps since the first quarter of fiscal 2011. In-store traffic is growing for the first time since Q3 of FY…

[Operator Instructions] And our first question comes from the line of Mike Baker with Deutsche Bank.

If I'm going to ask one question, I guess it's going to be how you longer term view the balance between driving traffic and gross profit rate including not in longer term, but in the fourth quarter. At some point, I think we need to see sales and margins get better, gross profit margin, that is. How do you drive that combination?

Mike, that is the age-old question in retail and what our focus really is, our focus is to grow our business, our top line, grow our customer base and to grow up income as we do so. You've heard us talk about how important services are to us and it's our intent to grow that business. You also -- on November 7, we talked about our transaction with our partners, Carphone Warehouse. That is entirely designed to take what we've learned in smartphones and spread those connections across fast-growing categories like tablets to bring that connection capability to places where the customer is interested. And SG&A is a critical component as well. We believe that there continues to be room for us to improve our efficiency and you will see us aggressively pursue those things. And the bottom line here is we are absolutely confident we can grow our top line and our operating income and do so in a capital-efficient manner.

If I were to ask a follow-up it would be, operating profits down 25% year-to-date. So when do we think that starts to get better? That's Domestic operating profit.

Yes, Mike, it's Jim. It is. And just recall that we had planned for operating profit to be down year-to-date through Q3. And certainly given the weighting of our earnings in Q4, we had planned operating profit to be up in Q4. We still expect it to be up in Q4. But I think the core point of your first question is where do we see the opportunities in the business to grow both the top line and to grow the gross margin dollars in the business. And consistent with Brian's response, Michael, we are investing into higher margins basis around connections and services. And actually, we saw some comparable store sales growth in Q3. The key for us is to make sure that our relevance stays high with consumers and we get the opportunity to grow those businesses given the footsteps we will have both in-store and online. So we've got to bring that mix to the right level of top line growth and margin growth. But one thing is for certain, we're not going to be able to execute our strategies in growing connections and services without the strong foot traffic and brand relevance that comes along with it. And secondly, in order to grow operating income, we've got to sell the more profitable mix of products and we're seeing progress in that space, to Brian's point, around what's happening in mobility and services. We also have significant opportunities to continue to work on our cost structure, which you've also seen great progress on this year. So it's going to take a combination of all those factors, but we're certainly encouraged by where we're starting to see some of our biggest business display. As we mentioned upfront, we had very conservative assumptions for what the notebook category was going to do this year and the television category and year-to-date, we're exceeding our expectations on both of those 2 very big businesses. So in light of the macro headwinds and what we see in the CE industry, we're using this time to make sure that we may remain relevant with customers from a traffic standpoint, while focusing on the profitable growth opportunities that will actually grow op income going forward. Probably a way longer answer than you're looking for, Mike, but I appreciate the question around about finding that balance and making sure we drive op income going forward.

Our next question comes from the line of Dan Binder with Jefferies & Company. Daniel T. Binder - Jefferies & Company, Inc., Research Division: My question was just tied to some of the sourcing issues computer makers might have with the hard drives and the Thailand issues, if that's going to or you're expecting to have an impact on you in the fourth quarter?

Thanks for the question. This is Mike Vitelli. We're going to have moderate impact with hard drives in the fourth quarter. The manufacturers are doing the best they can to get that into the best products for them and for us which means it will have less of an impact on the higher-end SKUs and probably more impact on some of their really entry-level value SKUs as they put the hard drives in the best return products that they offer for the industry. I would also add that that's been contemplated in everything we just told you this morning. Daniel T. Binder - Jefferies & Company, Inc., Research Division: So if you had to take your best guess in quantifying the comp impact either on computing or the overall comp, is it meaningful?

On the overall versus what we just told you, it's not meaningful. It's within what we've been looking at for the year with mobile computing and notebooks overall.

Our next question comes from the line of Chris Horvers with JPMorgan. Christopher Horvers - JP Morgan Chase & Co, Research Division: Last year, you seemed to be very focused on gross margin rates. And this year, really starting with the first quarter, you shifted to driving sales and a much greater willingness to use promotion. So just curious, at a very high level, what drove this shift? Was it a change in focus about what the competitive environment is? Was it the realization that perhaps the economy and the product cycle wasn't going to help you anytime soon? It seems very distinct and I was just curious what the, kind of, at the senior management level, what drove that distinct shift?

This is Brian. It is distinct, and we have been very purposeful in being, in our steady case it's always been that we need to be where the customers needs us to be. Value is critically important to consumers right now, and there's nothing more important to us than our customer franchise. So maintaining and growing that share in the places where there is growth is critically important to us because it sets up and has historically set up for us our strategies around connections and services and all the value-added things that we do better than anybody else.

Yes, Chris, just to build on Brian's point; in addition to that, if you look at the margin performance last year, specifically in our Domestic business, remember that a good portion of that was being simply driven by the mix impact of lower computer sales just based on the industry, where they were, in general. Now that notebooks have come back in -- and I'm sorry tablets have come back in and reignited that industry, last year we actually saw a benefit to the overall company rate by selling fewer computers. This year, selling more computers is actually a drag on our rate. We're happy with that because that means more dollars are coming into the till, and an opportunity for us to attach connections to those, but a big part of that change year-over-year is just driven by the mix of the computing industry in our business. Christopher Horvers - JP Morgan Chase & Co, Research Division: Also, I'll slide in a follow up and follow my peers. You talked about 3% to 4% SG&A growth for the year earlier this year and it was supposed to increase throughout the year and now you're talking about 2%, which includes the 53rd week. So I guess what allowed you, where did you find the money and what did you take off the table to try to manage what's happening on the gross margin line?

Yes, it's a great question, Chris, and similar to Brian's tee off [ph] earlier. We see significant opportunities to continue to lower our cost structure in the business. We have been moving labor around very effectively within the stores, focusing on where we can provide the most help and assistance for customers and support our business models and being aggressive in places where the labor isn't providing the returns that we need. Also if you look at our cost structure, we have been trimming back on discretionary expenses and really focusing on those expenses that would drive the business most. We're very happy with the fact that we've been able to increase support in advertising our brand during that period while at the same time lowering expenses. And quite candidly, as we get sharper on what we have to invest to drive traffic so we can sell those connections and services, we're purposely going to pull back on those investments to fund some of those gross margins and pricing and promotional investments that we made in the quarter. So more to come on opportunities in that space, but we are certainly not priced for perfection yet on the SG&A line of the business. We've got work to do and I think you'll continue to see progress in that space.

Our next question comes from the line of Scot Ciccarelli with RBC Capital Markets.

I guess my question is given the mid-quarter launch of the iPhone, would you have expected the mobile business to improve more than it did? And kind of related to that, is there anything else that might been a drag in that segment, especially given the very strong growth you highlight in tablets and eReaders, which I think is all part of that category?

The iPhone, as you said, happened in the middle of the quarter and continues to gain momentum for us as our inventory positions improve in that category. I would also say I think, again to Jim's point earlier about mixing in November and different periods, the Black Friday week, which is extraordinarily strong for us, is a -- even while we had record connections in that day, people coming in and doing mobile phone set up is more challenging in that environment than it is in probably of any other week of the year. So when you look at it in balance of where we're growing overall connections and where it will continue to grow in December, January and February, we're pleased with it. And the inventory positions continue to improve there as well.

Scott, was the back-end of your question about our tablets and eReaders part of how we report our mobile sales?

Yes. I mean I guess my thought was if iPhone launched, I would expect pretty strong demand for that. Again, I don't know the supply situation as well as you guys, but then also you highlight triple digit growth in tablets and eReaders, and I was assuming that was all part of the mobile segment.

No, let's be clear that mobile computing includes notebooks, netbooks, all the accessories related to that and tablets and eReaders. Mobile itself is just the mobile phone business.

All right. That's mobile phones only. All right, got it.

Our next question comes from the line of Michael Lasser with UBS.

So digging into Domestic connections a bit more, they improved from the second to the third quarter but not at the same pace as the increase in mobile phone sales. So did you see a deterioration in other areas of Domestic connections? And does that strategy become harder to execute during periods of high velocity sales and say something about the low longer-term outlook?

We were actually pleased with the growth of some of the other areas of Domestic connections we talked about with mobile broadband in the computing department, where we put in an effort over the last month or so to get more connection specials in that area and start to, as Brian said earlier, connect tablets and connect computers as well as we're connecting phones. That's very, very early in our stages of trying to get that done, but we were actually pleased. We saw strong double-digit growth that were mentioned earlier in both of those areas. So yes, I would say that week 4 of November is going to be a challenge for any high touch type of connection or set up or install, but that is what that week is; it's a very exciting and start to the holiday season. But December, we're looking forward to that momentum improving in our connection space.

So you've already seen an improvement in December? And does that speak broadly about the gross margin for the business in December as well?

We're just talking about what we saw in Q3 at this point.

Our next question comes from the line of Matthew Fassler with Goldman Sachs.

In the past, you had spoken about being somewhat selective in terms of the kind of offers you extended to customers. You were sensitive about customers who cherry-picked, and I guess this is the time of the year that's really susceptible to that. But it seems like that selectivity has abated a bit and your push for market share was much more pronounced. So is this a permanent change in your point of view? Is it something that we'll tend to see more often during seasonal peaks when you feel like that market share proposition is more critical? Any elaboration there would be great.

Our business, Matt, this is Brian, it is absolutely critical to us. There's nothing more important than our customer franchise. And you're going to see us be very focused on providing great values to our customers so that we can get them, keep them or grow them into the Best Buy fold so that we can do all the things that we can do better than anybody else, and that's connect with services, that's to help customers with connections, all in service of helping customers get the most out of this technology. At its core, that's what we do. It's what we do better than anybody else, so you will continue to see us be sharp in providing great value to bring customers to us so that we can help them complete with connections and services their full technology suite of needs.

If I can just follow up on that. Last year I guess, and it's always been your focus, last year you had more of a focus on margin this year, more of a focus on share, any chance the gross profit dollars were under pressure. So I know that Jim spoke earlier about some of the new opportunities you hope to pursue but if you think about the legacy business, is it just going to be tougher to grow gross profit dollars in that regard if you were to maintain shares, has the environment changed?

Matt, you followed this business for a long time. You know that that is largely dependent on product cycles in various categories. It's no secret that home theater has not been in a robust product cycle. You're going to see us remain focused on driving top line with our customers, share with our customers and growing our operating income. That's where we're going to focus our time and our energy.

Our next question comes from the line of Anthony Chukumba with BB&T Capital Markets. Anthony C. Chukumba - BB&T Capital Markets, Research Division: I had a question about the sequential improvement that you saw in the television business being sort of down low single digits. I mean that's quite an improvement from what we've seen the last few quarters. And I guess I was wondering what really drove that? Was it just simply increased promotional activity or were there some other things that were going on there as well, including a shift to larger screen sizes?

I would say it was -- this is Mike Vitelli again. I would say it was both. We were clearly more promotional in the third quarter than we were last year, which is why we know we've gained share in televisions in the month of October and why we don't have December, November results yet. We would imagine that would continue to be true. But to your point, one of the places we saw the biggest gain, Brian mentioned it in his opening comments, that we saw a greater than 50% growth in greater than 46-inch units. So that's where you certainly see revenue opportunity. Also, that's a great category for us to attach services and connections as we've seen both 3D and IPTV grow as a percentage as well.

Our next question comes from the line of Gary Balter with Crédit Suisse. Gary Balter - Crédit Suisse AG, Research Division: Following up from the questions, Brian, and just trying to bring it all together. Could you talk about, like you mentioned SG&A will be lower, but can you talk about your plans in terms of store closings into next year and as you see your Internet growth be at 20% and your store growth be potentially flattish or around flattish, does that change your thinking about how quickly we should be shrinking store size and closing stores? And as part of that, when you made the decision to go to more aggressive pricing, were you disappointed in the comps that you ended up generating from that?

Gary, no. Let me start by saying no, we weren't disappointed with the comps we saw coming from that. We're very pleased with how traffic grew across all our channels in the quarter. We're very pleased how they accelerated into the holiday season. That's traffic and that's top line. And we have done work on rationalizing some of our square footage. But again, I need to remind the audience, Gary, we believe that installed base of stores is a huge advantage with us. The way customers are leveraging our website, the way customers are gravitating to an in-store pickup type environment, the way the services business and the connections business is growing, and I'll just remind everybody on the call that connections business, about $150 billion of it is addressable by us a year, and we have about a 1% share of that. We see that as a massive growth opportunity. Those stores are a very important place for us to do that customer acquisition and make those connections with customers. We are doing a lot of work in getting our stores rightsized where we think that makes sense. So for me it's not about closing huge tranches of stores, it's about being where the customer needs us to be, online, in stores, on the phone and it's about us being priced competitively so that we can get into the world of connections and attachments and services that help customers put this technology and service of what it is they're trying to do. That really is our game plan and it's the hypothesis at a very simple level.

And Gary just to follow up, this is Jim. As Brian talked about, the key focus of us resetting the stores to perform stronger in a connected world also gives us the opportunity as we focus on the big improvements that, that will drive to the operating model. Brian mentioned the efficiencies that we also see in continuing to rightsize the stores based on the business we see going forward, which incorporates the assumptions you made around what's going to happen in connections and services and what's going to happen online. We continue to be on track to deliver the square footage reduction that we've talked about over the 3- to 5-year window. Last quarter, I gave a little update on the progress we had made on the first tranches of stores. We're actually doing a few more stores this year than we had planned, and we remain on track to see anywhere between 10% to 15% square footage reduction in those stores. But just back to Brian's broader point, that work is being done in service of making the operating model better, the efficiencies that we'll get out of the SG&A cost. That's a small portion of the story. The bigger portion of the story is the gains we'll see in growth and services and in connections while we increase those points of presence.

Gary, it's Brian. Let me just add on to the longest answer ever. We have every intention of being relentless around 3 things: about driving our customers to our brand across all the channels that we conserve them in and we're going to be purposely driving them across our channels; two, you're going to see us be relentlessly focused on providing connections and services better than anybody in the world for those customers when they come in; and third, you can and should expect us to be relentless again in driving efficiencies throughout our business wherever they exist. We'll look at every dollar so that we can provide the best of those 3 dimensions for our customers and our shareholders. Thanks for the question, Gary.

Our next question comes from the line of David Gober with Morgan Stanley.

We've touched on this a couple of times kind of tangentially. But I was just wondering if you could speak more specifically about attach and whether that's services or accessories maybe in computing. Could you just talk a little bit about what you saw in the quarter? It sounds like the big-ticket items in the stores sold very well, but the attach rates were less than you might normally expect. Can you talk at all about what you're seeing there? Is it just a function of the environment? Or are you seeing any kind of share gains or losses from other players in terms of maybe some of the smaller items that you would normally get a nice margin on even if they are smaller kind of dollar items?

Yes, David. It's Jim. Looking at that from a couple different perspective, one of the things we've continued to see in the quarter is that our relative attach rate of services across the board is primarily driven by the price points people are purchasing at or above computing items and television items. When we look at the attachment rate across those price points, they have actually held pretty stable and in some cases have actually grown year-over-year. My comments around the mix of what people are buying in lower dollar value in more promotional items, as they skew more into those, those generally come with a lower attach rate. So by ASPs by brand [ph] we've seen attach rates pretty consistent with previous years and actually growth in a number of the categories. But when our mix shifts to lower ASP items, we see a little less attach in that space. To the comment Mike Vitelli made earlier, also it's beginning to more promotional periods around November. Those are typically just lower attach months in general, just given the velocity with which we're moving traffic through the store during -- especially the Black Friday promotional weekend, weekend.

And I guess just a quick follow up, more specifically on tablets where you're seeing maybe a little bit of share shift away from the iPad, and maybe that's because there are some lower ASP SKUs there. But are you seeing anything changing there in terms of the value of the basket? I know you previously talked about tablet baskets being as good if not better than notebooks.

There's no change. That's still true, okay. Total tablet basket is better than a notebook basket.

And we continue, by the way, to be very pleased with the iPad sales in both online and in our stores.

Our next question comes from the line of Dan Wewer with Raymond James. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Change the topic to the balance sheet. There are some fairly significant changes year-over-year. Maybe, Jim, you could talk about the 8.4% drop in inventories, yet receivables are up 15% year-over-year. And then looking to payables, the inventory rate, it jumped from 98% to 109%. And were these big slings related to the dispositions of some of your businesses or is there some strategy, different strategy behind the exchanges?

Yes, Dan. Appreciate the question. There's a number of different things going on there. Let me unpack that for you a little bit. First and foremost, we're very pleased with the way that we've managed the balance sheet this year, especially the inventory levels within the business. If you recall last year in Q3, inventories grew pretty substantially based on a softer level of sales than we anticipated last year. So a lot of the improvement that you're seeing year-over-year in inventory is based on we had too high inventories at the end of last Q3. We've done a much more effective job and it had stronger sales this year that's one component of it. Another component of it is related to some of the timing differences we talked about at year end around our payables and receivable positions. We knew that we had benefits coming in Q1 and Q2 of this year, which we've been talking about all year long. That's lifting the cash, free cash flow from those items. The other item that you mentioned specifically is the growth in accounts receivable, principally driven by 2 things. As our mobile phone business continues to grow, the bounties that were due from the carriers are a higher percentage of our receivables overall. That's one part of the growth. The other anomaly that sits a little bit in Q3 is just given the strength of our Black Friday sales, a lot of the credit card receivables we generated over the Black Friday weekend don't get collected until the next week. So we get a little bit of just a timing issue at the year end, at the quarter end of Q3 around that piece. So those are the 2 biggest pieces that explain what's going on in the receivable balance.…

Yes, it's really about balancing it, Dan, right? So we need to reduce our cost structure in places so we can redeploy labor against high margin areas. We've been doing that all year. So as you'd expect looking at our SG&A this year being down a little bit, we're investing more labor in the mobile phone space, for instance, than we did last year. We're investing more labor in the services space than we did last year. So in spite of investing in those areas for growth, we're still bringing expenses down. Part of our goal, obviously, is to manage that portfolio and hold expenses flat to bring them down while still funding those profitable growth levers in the business. We do see significant opportunities to continue to do that in the portfolio. The square footage reduction is just one element in doing that. But across the P&L, we see opportunities to be more efficient in our labor model and other things in the business.

We have time for one final question. Our final question comes from the line of David Magee with SunTrust Robinson Humphrey.

I'm just curious just after being in the stores during Black Friday weekend seeing a lot of the product brand TVs featured, how did that subcategory do? And does that -- your approach to that category change at all as you go to next year given your pricing strategy?

David, this is Michael Vitelli. I'm not sure I understand the point of your question.

I'm curious how the private brand TVs performed as a subcategory. And as you become maybe a little more promotional driving traffic, does your approach towards that business change?

Yes, as we reported we were pleased with the momentum that we saw in television. There was a positive change sequentially in what we saw in the business. But if you were there on Black Friday and watching that, that is a unique period of time for promotionality. So whether that's going to be done by us or by manufacturers at different points of time, that changes every year. But fundamentally, television is a core part of our business. We're going to drive the millions of units there. It's another area where connections are important as Internet connected television, DIRECTV, cable companies, all of those are part of those connections that we need to accelerate. And we still continue to use our private label brands as a way to drive the television category as well.

Okay. And so you still feel confident regarding the product brand approach to the business?

Absolutely.

This is Brian. Exclusive brands are a very important part of our portfolio. We're very pleased with their performance and actually very pleased with their performance. Thank you for the question.

Thank you, Alicia, and thanks to our audience for participating in our third quarter earnings conference call. That concludes our call.

Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect.