Barnes and Noble 2001 Annual Report Download - page 11

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S O F
F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S c o n t i n u e d
2 0 0 1 A n n u a l R e p o r t ■B a r n e s & N o b l e , I n c .
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and related footnotes. In preparing these financial
statements, management has made its best estimates and
judgments of certain amounts included in the financial
statements, giving due consideration to materiality. The
Company does not believe there is a great likelihood that
materially diff e rent amounts would be re p o rted re l a t e d
to the accounting policies described below. However,
application of these accounting policies involves the
e x e rcise of judgment and use of assumptions as to future
u n c e rtainties and, as a result, actual results could diff e r
f rom these estimates.
Impairment of Long-Lived Asset s
The Company’s long-lived assets include pro p e rty and
equipment and intangibles (primarily goodwill). At
F e b ru a r y 2, 2002, the Company had $595.8 million of
p ro p e r ty and equipment, net of accumulated depre c i a t i o n
and $352.9 million of goodwill, net of amort i z a t i o n ,
accounting for approximately 36.2% of the Company’s
total assets. The Company periodically reviews its long-
lived assets for impairment whenever events or changes in
c i r cumstances indicate that their carrying amounts may
not be recoverable or their depreciation or amort i z a t i o n
periods should be accelerated. The Company assesses
recoverability based on several factors, including
m a n a g e m e n t ’s intention with respect to its stores and
those stores’ projected undiscounted cash flows. An
i m p a i rment loss is recognized for the amount by which
the carrying amount of the assets exceeds the pre s e n t
value of their projected cash flows. For a further discussion,
see Newly Issued Accounting Pro n o u n c e m e n t s .
During fiscal 2000, the Company recorded a non-cash
c h a rge to operating earnings of $106.8 million. This
c h a rge included approximately $69.9 million of
goodwill and $32.4 million of pro p e rt y, plant and
equipment related to the book business, primarily
goodwill associated with the purchase of B. Dalton and
other mall-bookstore assets.
M a r ketable Equity Securities
All marketable equity securities are classified as
a v a i l a b l e - f o r-sale. The Company carries these investments
at fair value, based on quoted market prices, with
u n realized gains and losses (net of taxes) included in
accumulated other comprehensive earnings, which is
reflected as a separate component of share h o l d e r s ’
equity. Realized gains and losses are recognized in the
Company’s consolidated statement of operations when
the securities are sold or impairment is considered other
than temporary. The Company reviews its equity
holdings on a regular basis to evaluate whether or not
each security has experienced an other-than-temporary
decline in fair value. The Company has reviewed each of
the companies’ financial position, results of operations,
stock price performance and various analyst research
reports and believes that the declines in fair value of its
equity holdings are temporary.
Closed Sto re Expenses
Upon a formal decision to close or relocate a store, the
Company charges unrecoverable costs to expense. Such
costs include the net book value of abandoned fixtures
and leasehold improvements and a provision for future
lease obligations, net of expected sublease re c o v e r i e s .
Costs associated with store closings of $9.8 million,
$5.0 million and $5.4 million during fiscal 2001, fiscal
2000 and fiscal 1999, re s p e c t i v e l y, are included in
selling and administrative expenses in the accompanying
consolidated statements of operations.