Bed, Bath and Beyond 2013 Annual Report Download - page 26

T. Stock-Based Compensation
The Company measures all employee stock-based compensation awards using a fair value method and records such expense in
its consolidated financial statements. The Company adopted the accounting guidance related to stock compensation on
August 28, 2005 (the ‘‘date of adoption’’) under the modified prospective application. Under this application, the Company
records stock-based compensation expense for all awards granted on or after the date of adoption and for the portion of
previously granted awards that remained unvested at the date of adoption. Currently, the Company’s stock-based
compensation relates to restricted stock awards and stock options. The Company’s restricted stock awards are considered
nonvested share awards.
U. Income Taxes
The Company files a consolidated Federal income tax return. Income tax returns are also filed with each taxable jurisdiction in
which the Company conducts business.
The Company accounts for its income taxes using the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in earnings in the period that includes the enactment date.
The Company intends to reinvest the unremitted earnings of its Canadian subsidiary. Accordingly, no provision has been made
for U.S. or additional non-U.S. taxes with respect to these earnings. In the event of repatriation to the U.S., in most cases such
earnings would be subject to U.S. income taxes.
The Company recognizes the tax benefit from an uncertain tax position only if it is at least more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon settlement with the taxing authorities.
Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. In
the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain.
Additionally, the Company’s tax returns are subject to audit by various tax authorities. Although the Company believes that its
estimates are reasonable, actual results could differ from these estimates.
V. 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 1.2 million, 1.2 million and 0.9 million shares were excluded from the computation of
diluted earnings per share as the effect would be anti-dilutive for fiscal 2013, 2012 and 2011, respectively.
2. ACQUISITIONS
On June 1, 2012, the Company acquired Linen Holdings, LLC (‘‘Linen Holdings’’), a provider of a variety of textile products,
amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other
industries, for an aggregate purchase price of approximately $108.1 million. The purchase price includes approximately
$24.0 million for tradenames and approximately $40.2 million for goodwill. Linen Holdings is included within the Institutional
Sales operating segment. In the first quarter of fiscal 2013, the Company finalized the valuation of assets acquired and
liabilities assumed.
Since the date of acquisition, the results of Linen Holdings’ operations, which are not material, have been included in the
Company’s results of operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
BED BATH & BEYOND 2013 ANNUAL REPORT
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