Barnes and Noble 1998 Annual Report Download - page 51

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6. Employees’ Retirement and Defined Contribution Plans
The Company maintains a noncontributory defined benefit pension plan (the Pension Plan) and a defined contribution plan
(the Savings Plan) for the benefit of substantially all employees. In addition, the Company provides certain health care and life
insurance benefits (the Po s t r e t i r ement Plan) to re t i red employees, limited to those receiving benefits or re t i red as of April 1, 1993 .
A summary of the components of net periodic pension cost for the Pension Plan and other postretirement benefit cost for the
Postretirement Plan follows:
Pension Plan Postretirement Plan
Fiscal Year 1998 1997 1996 1998 1997 1996
Service cost $ 4,157 3,294 2,542 — — —
Interest cost 2,039 1,666 1,354 149 315 326
Expected return on plan assets (2,208) (1,803) (1,500) — — —
Net amortization and deferral 36 36 36 (135) — —
Net periodic cost $ 4,024 3,193 2,432 14 315 326
Total Company contributions charged to employee benefit expenses for the Savings plan were $3,090, $2,545 and $2,115
during fiscal 1998, 1997 and 1996, respectively.
Weighted-average actuarial assumptions used in determining the net periodic pension and other post retirement benefit costs
and the funded status of the Pension Plan and the Postretirement Plan are as follows:
Pension Plan Postretirement Plan
Fiscal Year 1998 1997 1996 1998 1997 1996
Discount rate 7.3% 7.3% 7.5% 7.3% 7.3% 7.5%
Expected return on plan assets 9.5% 9.5% 9.5% — — —
Assumed rate of compensation increase 4.3% 4.3% 4.0% — — —
As a result of the formation of barnesandnoble.com llc, as more fully described in Note 5, assets of the Pension Plan and an
equivalent benefit obligation, were transferred to barnesandnoble.com’s defined benefit pension plan as of the date of the formation.
5. Formation of barnesandnoble.com llc
On Nove m ber 12, 1998, the Company and Bertelsmann
AG (Bertelsmann) completed the formation of a limited liability
c o m p a n y to operate the online retail bookselling operations of
the Company’s wholly owned subsidiary, barn e s a n d n o b l e . c o m
inc. The new entity is structured as a limited liability company
under the name barnesandnoble.com llc. Under the terms of the
relevant agreements, effective as of October 31, 1998, the
C o m p a ny and Bertelsmann each have a 50% membership inter-
est in barnesandnoble.com. The Company contributed substan-
tially all of the assets and liabilities of its online operations to the
joint ve n t u re and Bertelsmann paid $75 , 000 to the Company
and made a $150 , 000 cash contribution to the joint ve n t u re .
Bertelsmann also agreed to contribute an additional $50 , 000 to
the joint ve n t u re for future working capital re q u i rements. In
addition, if in an initial public offering (see be l ow) of
b a rnesandnoble.com prior to December 31, 2001, the value of
Bertelsmann’s interest exceeds the value of Bertelsmann’s inve s t-
ment, Bertelsmann will pay the Company such excess amount,
up to $25 , 0 00. As a consequence of the above transactions the
C o m p a ny has recognized a pre-tax gain during fiscal 1998 in the
amount of $126 , 435, of which $63 , 759 has been recognized in
e a rnings based on the $75 , 000 re c e i ved directly fro m
Bertelsmann and $62 , 676 ($36 , 351 after taxes) has been
reflected in additional paid-in capital based on the Company ’ s
s h a r e of the incremental equity of the joint ve n t u re re s u l t i n g
f rom the $150 , 000 Bertelsmann contribution.
Summarized financial information for barn e s a n d n o b l e . c o m
f o l l ow s :
Fiscal Year 1998 1997(1)
Net sales $ 70,249 14,601
Gross profit $ 16,169 2,849
Loss before taxes $(85,590) (15,395)
Current assets $102,114 12,197
Noncurrent asset $ 89,324 24,879
Current liabilities $ 26,824 12,268
Net assets $164,614 24,808
Barnes & Noble’s equity in loss
before taxes $(71,334) (15,395)
Barnes & Noble’s equity in net assets $ 82,307 24,808
(1) Fiscal 1997 represents amounts as consolidated in the accompanying
consolidated financial statements.