Barnes and Noble 1998 Annual Report Download - page 55

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24
In accordance with the Statement of Financial Ac c o u n t i n g
S t a n d a rds No. 123, “Accounting for Stock-Based Compensation”
( SFAS 123), the Company discloses the pro forma impact of
re c o rding compensation expense utilizing the Black-Scholes
model. The Black-Scholes option valuation model was deve l o p e d
for use in estimating the fair value of traded options which have
no vesting restrictions and are fully transferable. In addition,
option valuation models re q u i r e the input of highly subjective
assumptions including the expected stock price vo l a t i l i t y. Because
the Company’s stock options have characteristics significantly
d i f f e rent from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair
value estimate, in management’s opinion, the Black-Scholes
model does not necessarily provide a reliable measure of the fair
value of its stock options.
Had compensation cost for the Company’s stock option
grants been determined based on the fair value at the stock
option grant dates consistent with the method of SFAS 123, the
Company’s net earnings and diluted earnings per share for
fiscal 1998, 1997 and 1996, would have been reduced by approx-
imately $6,188 or $0.09 per share, $3,863 or $0.06 per share,
and $5,305 or $0.08 per share, respectively.
Because the application of the pro forma disclosure
provisions of SFAS 123 are required only to be applied to grants
of options made by the Company during fiscal 1995 and after,
the above pro forma amounts may not be representative of the
effects of applying SFAS 123 to future years.
The weighted-average fair value of the options granted
during fiscal 1998, 1997 and 1996 were estimated at $12.96,
$8.05, and $4.66 respectively, using the Black-Scholes option-
pricing model with the following assumptions: volatility of 35%
for fiscal 1998 grants, 28% for fiscal 1997 and 1996 grants, risk-
free interest rate of 5.33% in fiscal 1998, 6.54% in fiscal 1997,
and 6.63% in fiscal 1996, and an expected life of 5.4 years for
fiscal 1998 and 6.0 years for fiscal 1997 and 1996.
A summary of the status of the Company’s stock options
is presented below:
Weighted-Average
(In thousands of shares) Shares Exercise Price
Balance, January 27, 1996 7,902 $ 9.95
Granted 1,856 14.63
Exercised (460) 4.95
Forfeited (156) 14.97
Balance, February 1, 1997 9,142 11.07
Granted 2,254 19.31
Exercised (1,546) 9.28
Forfeited (186) 16.25
Balance, January 31, 1998 9,664 13.17
Granted 1,841 31.12
Exercised (837) 11.11
Forfeited (390) 22.35
Balance, January 30, 1999 10,278 $ 19.69
Options exercisable as of January 30, 1999, January 31,
1998 and February 1, 1997 were 6,780,000, 6,558,000 and
7,070,000, respectively. Options available for grant under the
plans were 5,902,000, 2,354,000 and 4,422,000 at January 30,
1999, January 31, 1998 and February 1, 1997, respectively.