Barnes and Noble 1997 Annual Report Download - page 34

The tax effects of temporary differences that give rise to
significant components of the Company’s deferred tax assets and
liabilities as of January 31, 1998 and February 1, 1997 are
as follows:
JANUARY 31, FEBRUARY 1,
1998 1997
Deferred tax liabilities:
Operating expenses $(10,103) (6,910)
Depreciation (16,359) (7,979)
Total deferred tax liabilities (26,462) (14,889)
Deferred tax assets:
Inventory 6,604 4,828
Lease transactions 16,108 13,007
Reversal of estimated accruals 5,418 5,701
Restructuring charge 21,825 26,599
Insurance liability 2,265 2,769
Deferred income 7,058 4,296
Other 824 2,927
Total deferred tax assets 60,102 60,127
Net deferred tax assets $ 33,640 45,238
7. SHAREHOLDERS’ EQUITY
On September 22, 1997, the Company effected a two-for-one
stock split in the form of a stock dividend. One additional share
was issued for each share of common stock held by shareholders of
record as of September 2, 1997. Share and per share amounts for
all periods presented have been adjusted to reflect this split.
On October 2, 1995, the Company completed a public offer-
ing of 5,000,000 shares of common stock (restated for the
September 1997 two- for-one stock split) which generated
proceeds of $88,725 after deducting underwriting discounts and
commissions and expenses. The net proceeds were used for gen-
eral corporate purposes, including the financing of capital expen-
ditures and inventory purchases in connection with the
accelerated expansion of the Barnes & Noble store operations.
8. RESTRUCTURING CHARGE
From 1989 through 1995, the Company closed, on average,
between 50 and 60 mall bookstores per year primarily due to
increasing competition from superstores and declining mall traffic.
During the fourth quarter of fiscal 1995, the Company accelerated
its mall bookstore closing program with the aim of forming
a core of more profitable B. Dalton stores, and provided
for these closing costs and asset valuation adjustments through a
non-cash restructuring charge, and early adoption of Statement
of Financial Accounting Standards No.121,“Accounting for
Impairment of Long-Lived Assets and Assets to be Disposedof ”
(SFAS 121). In January 1996, the Company recorded a non-cash
charge to operating earnings of $123,768 ($87,303 after tax or
$1.32 per share) to reflect the aggregate impact of its restructuring
plan and change in accounting policy. The charge to earnings
included a $33,000 write-down of goodwill, and $45,862 related to
the write-down of fixed assets and other long-term assets.The
Company has substantially completed the store closing program.
The following table sets forth the restructuring liability activity:
BALANCE FISCAL BALANCE FISCAL BALANCE
AT JAN 27, 1996 AT FEB 1, 1997 AT JAN 31,
1996 ACTIVITY 1997 ACTIVITY 1998
Provision for
store closings $ 5,974 4,442 1,532 1,532 —
Lease termination
costs 32,833 2,371 30,462 9,026 21,436
Other 6,099 4,497 1,602 1,602 —
Total $44,906 11,310 33,596 12,160 21,436
The remaining liability, which primarily represents outstand-
ing lease liabilities, is expected to be paid out over the next
several years.
9. STOCK OPTION PLANS
The Company currently has two incentive plans under which
stock options have been or may be granted to officers, directors
and key employees of the Company—the 1991 Employee
Incentive Plan (the 1991 Plan) and the 1996 Incentive Plan (the
1996 Plan). The options to purchase common shares generally are
issued at fair market value on the date of the grant, begin vesting
after one year in 33 1/3% or 25% increments per year, expire ten
years from issuance and are conditioned upon continual
employment during the vesting period.
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Notes to Consolidated Financial Statements continued