Bed, Bath and Beyond 2005 Annual Report Download - page 18

BED BATH& BEYOND ANNUAL REPORT 2005
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Q. Treasury Stock
The Company’s Board of Directors has authorized repurchases of shares of its common stock for $200 million in January 2006,
for $400 million in October 2005 and for $350 million in December 2004. The Company was authorized to make repurchases
from time to time in the open market pursuant to existing rules and regulations and other parameters approved by the Board
of Directors. During fiscal 2005, the Company repurchased approximately 16.4 million shares of its common stock at a total cost
of approximately $598 million excluding brokerage fees. During fiscal 2004, the Company repurchased approximately 8.8 million
shares of its common stock at a total cost of approximately $350 million excluding brokerage fees.
R. Revenue Recognition
Sales are recognized upon purchase by customers at our retail stores or when shipped for products purchased from our websites.
The value of point of sale coupons and point of sale rebates that result in a reduction of the price paid by the customer are
recorded as a reduction of sales. Shipping and handling fees that are billed to a customer in a sale transaction are recorded in
sales. Revenues from gift cards, gift certificates and merchandise credits are recognized when redeemed.
Sales returns are provided for in the period that the related sales are recorded based on historical experience. Although the
estimate for sales returns has not varied materially from historical provisions, actual experience could vary from historical experi-
ence in the futureif the level of sales return activity changes materially. In the future, if the Company concludes that an adjustment
to the sales returns accrual is required due to material changes in the returns activity, the reserve will be adjusted accordingly.
S. Cost of Sales
Cost of sales includes the cost of merchandise, buying costs and costs of our distribution network including inbound freight
charges, distribution facility costs, receiving costs and internal transfer costs.
T. Vendor Allowances
The Company receives allowances from vendors in the normal course of business for various reasons including direct cooperative
advertising, purchase volume and reimbursement for other expenses. Annual terms for each allowance include the basis for
earning the allowance and payment terms which varyby agreement. All vendor allowances are recorded as a reduction of inven-
tory cost, except for direct cooperative advertising allowances which are specific, incremental and identifiable. The Company
recognizes purchase volume allowances as a reduction of the cost of inventory in the quarter in which milestones are achieved.
Advertising costs were reduced by direct cooperative allowances of $9.4 million, $8.7 million and $9.5 million for fiscal 2005, 2004
and 2003, respectively.
U. Store Opening, Expansion, Relocation and Closing Costs
Store opening, expansion, relocation and closing costs, including markdowns, asset residual values and projected occupancy costs,
are charged to earnings as incurred.
V. Advertising Costs
Expenses associated with storeadvertising arecharged to earnings as incurred. Net advertising costs amounted to $158.2 million,
$134.5 million and $93.7 million for fiscal 2005, 2004 and 2003, respectively.
W.Stock-Based Compensation
The FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”) which requires companies to measure
all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial
statements. In addition, the adoption of SFAS No. 123R requires additional accounting and disclosure related to income tax and
cash flow effects resulting from stock-based compensation. The Company adopted SFAS No. 123R on August 28, 2005 (the “date
of adoption”), the beginning of its third quarter of fiscal 2005, the year ended February 25, 2006. While SFAS No. 123R is not
required to be effective until the first annual reporting period that begins after June 15, 2005, early adoption was encouraged
and the Company elected to adopt before the required effective date.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)