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51
2000 Annual Report ■Barnes & Noble, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
9. INCOME TAXES
The Company files a consolidated federal return. Federal
and state income tax provisions (benefits) for fiscal 2000,
1999 and 1998 are as follows:
Fiscal Year 2000 1999 1998
Current:
Federal $ 59,055 64,454 39,286
State 13,086 15,306 10,146
72,141 79,760 49,432
Deferred:
Federal (44,390 ) 7,193 11,697
State (8,782 ) 2,684 3,064
(53,172 ) 9,877 14,761
Total $ 18,969 89,637 64,193
A reconciliation between the provision (benefit) for
income taxes and the expected provision for income
taxes at the federal statutory rate of 35 percent during
fiscal 2000, 1999 and 1998, is as follows:
Fiscal Year 2000 1999 1998
Expected provision (benefit)
for income taxes at
federal statutory rate $ ( 11,549 ) 76,522 54,799
Amortization of non-
deductible goodwill
and trade names and
write-down of goodwill 26,669 1,342 1,251
State income taxes,
net of federal income
tax benefit 2,798 11,694 8,596
Other, net 1,051 79 ( 453 )
Provision for income taxes $ 18,969 89,637 64,193
The tax effects of temporary differences that give rise to
significant components of the Company’s deferred tax
assets and liabilities as of February 3, 2001 and January
29, 2000 are as follows:
February 3, January 29,
2001 2000
Deferred tax liabilities:
Operating expenses $ (16,236 ) (15,437 )
Depreciation ( 20,886 ) (31,289 )
Investment in Barnes
& Noble.com (69,693 ) (110,439)
Total deferred tax liabilities (106,815 ) (157,165 )
Deferred tax assets:
Inventory 6,520 4,312
Lease transactions 20,705 18,664
Reversal of estimated accruals 7,733 4,246
Restructuring charge 13,530 14,537
Insurance liability 1,871 2,673
Deferred income 2,056 4,015
Unrealized holding losses on
available-for-sale securities 4,156 839
Other 8,409 7,278
Total deferred tax assets 64,980 56,564
Net deferred
tax liabilities $ ( 41,835 ) (100,601 )
10. ACQUISITIONS
On June 14, 2000, the Company acquired all of the
outstanding shares of Funco, a Minneapolis-based
electronic games retailer for approximately $159,200
(excluding acquisition related costs). The acquisition was
accounted for by 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
approximately $131,400, has been recorded as goodwill
and is being amortized using the straight-line method
over an estimated useful life of 30 years. The pro forma
effect assuming the acquisition of Funco at the beginning
of fiscal 1999 and fiscal 2000 is not material.