Bed, Bath and Beyond 2007 Annual Report Download - page 22

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BED BATH& BEYOND ANNUAL REPORT 2007
20
V. Litigation
The Company records an estimated liability related to various claims and legal actions arising in the ordinary course of business
which is based on available information and advice from outside counsel, where appropriate. As additional information becomes
available, the Company reassesses the potential liability related to its pending litigation and revises its estimates, as appropriate.
The ultimate resolution of these ongoing matters as a result of future developments could have a material impact on the
Company’s earnings. The Company cannot predict the nature and validity of claims which could be asserted in the future, and
future claims could have a material impact on its earnings.
W. Earnings per Share
The Company presents earnings per share on a basic and diluted basis. Basic earnings per share has been computed by dividing
net earnings by the weighted average number of shares outstanding. Diluted earnings per share has been computed by dividing
net earnings by the weighted average number of shares outstanding including the dilutive effect of stock-based awards as
calculated under the treasury stock method.
Stock-based awards of approximately 10.9 million, 8.6 million and 4.9 million shares were excluded from the computation of
diluted earnings per share as the effect would be anti-dilutive for fiscal 2007, 2006 and 2005, respectively.
X. Segments
The Company accounts for its operations as one operating segment.
Y. Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes
a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value
measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements
and accordingly, does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. The FASB has issued a one-year deferral of SFAS No. 157’s fair value measurement requirements for non-
financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis. Although
SFAS No. 157 will require additional disclosures about fair value measurements, the Company does not expect the adoption of
SFAS No. 157 to have a material impact on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including
an amendment of FASB Statement No. 115.” SFAS No. 159 permits companies to choose to measure certain financial assets and
liabilities at fair value (the “fair value option”). If the fair value option is elected, any upfront costs and fees related to the item
must be recognized in earnings and cannot be deferred, e.g. debt issue costs. The fair value election is irrevocable and may
generally be made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to fair value.
At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a
cumulative adjustment to beginning retained earnings. SFAS No. 159 is effective for fiscal years beginning after November 15,
2007. The Company does not believe SFAS No. 159 will have a material impact on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” SFAS No. 141R establishes principles and
requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS
No. 141R determines what information to disclose to enable users of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not
permitted.
2. ACQUISITION
On March 22, 2007, the Company completed and announced the acquisition of buybuy BABY, a retailer of infant and toddler
merchandise, for approximately $67 million (net of cash acquired) and repayment of debt of approximately $19 million. Based in
Garden City, New York, buybuy BABY operated a total of 8 stores at the time of acquisition, in Maryland, New Jersey, New York
and Virginia. The stores range in size from approximately 28,000 to 60,000 square feet and offer a broad assortment of premier
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)