Barnes and Noble 1999 Annual Report Download - page 50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued 49
10. Acquisition of Babbage’s Etc.
On October 28, 1999, the Company acquired Babbage’s Etc.,
one of the nation’s largest operators of video game and
entertainment software stores, for $208,670 (including
assumed liabilities). If financial performance targets are met
over the next two fiscal years, the Company will make
additional payments of approximately $10,000 in 2001 and
approximately $10,000 in 2002. The acquisition was accounted
for under the purchase method of accounting and, accordingly,
the results of operations for the period subsequent to the
acquisition are included in the consolidated financial statements.
The excess of purchase price over the net assets acquired, in
the amount of $202,386, has been recorded as goodwill and
is being amortized using the straight-line method over an
estimated useful life of 30 years.
The following table summarizes pro forma results as if the
Company had entered into the agreement on the first day of
fiscal year 1998:
Fiscal Year 1999 1998
Sales $3,815,435 3,470,774
Earnings before cumulative
effect of a change in
accounting principle $ 125,011 93,298
Net earnings $ 120,511 93,298
Net earnings per
common share:
Basic $ 1.75 1.36
Diluted $ 1.69 1.30
The pro forma results of operations include adjustments to
give effect to amortization of goodwill and interest expense on
debt related to the acquisition, together with related income tax
effects. The information has been prepared for comparative
purposes only and does not purport to be indicative of the
results of operations which actually would have resulted had
the acquisition occurred on the date indicated, or which may
result in the future.
11. Segment Information
Historically, the Company operated as a single segment. As
a result of the acquisition of Babbage’s Etc. in 1999, the
Company is currently operating under two segments and
accordingly, is required to disclose information in accordance
with Statement of Financial Accounting Standards No. 131,
“Disclosures about Segments of an Enterprise and Related
Information” (SFAS 131). The Company’s reportable segments
are strategic groups that offer different products. These groups
have been aggregated into two segments: bookstores and video
game and entertainment software stores.
Bookstores
This segment includes 542 book “super” stores under the Barnes
& Noble Booksellers, Bookstop and Bookstar names which
generally offer a comprehensive title base, a café, a children’s
section, a music department, a magazine section and a calendar
of ongoing events, including author appearances and children’s
activities. Additionally, this segment includes 400 small format
mall-based stores under the B. Dalton Bookseller, Doubleday
Book Shops and Scribner’s Bookstore trade names.
Video Game and Entertainment
Software Stores
This segment includes 526 video game and entertainment
software stores under the Babbage’s, Software Etc. and
GameStop names, and a Web site, gamestop.com. The
principal products of these stores are comprised of video
game hardware and software and PC entertainment software.
The Company’s consolidated financial statements reflect the
results of Babbage’s Etc. for the fourth quarter of 1999 only.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
Segment operating profit includes corporate expenses in each
operating segment. Barnes & Noble evaluates the performance
of its segments and allocates resources to them based on
operating profit.