Barnes and Noble 2001 Annual Report Download - page 39

14. SHAREHOLDERS’ EQ U I T Y
In fiscal 1999, the Board of Directors authorized a
common stock re p u rchase program for the purc h a s e
of up to $250,000 of the Company’s common share s .
As of Febru a ry 2, 2002, the Company has re p u rc h a s e d
5,504,700 shares at a cost of approximately $117,377
under this program. The re p u rchased shares are held
in tre a s u ry.
Each share of the Company’s Common Stock also entitles
the holder to the right (the Right) to purchase one four-
h u n d redth of a share of the Company’s Series H Pre f e rre d
Stock for $225. The Right is only exercisable if a person
or group acquires 15 percent or more of the Company’s
outstanding Common Stock or announces a tender off e r
or exchange off e r, the consummation of which would
result in such person or group owning 15 percent or
m o r e of the Company’s outstanding Common Stock.
15. IMPAIRMENT CHARGE
During fiscal 2000, the Company re c o rded a non-cash
c h a rge to operating earnings of $106,833. This charg e
included approximately $69,928 of goodwill and
$32,405 of pro p e rt y, plant and equipment related to the
book business, primarily goodwill associated with the
p u r chase of B. Dalton, other mall-bookstore assets and
$6,186 of warehouse equipment. The Company’s mall-
based bookstores have experienced significant declines
in sales and profitability as a result of increased competition
f rom book superstores and Internet book retailers. In
fiscal 2000, B. Dalton comparable s t o re sales declined
(1.7%) compared with an increase in comparable store
sales of 0.1% in fiscal 1999. As a result, the anticipated
f u t u re cash flows from certain stores were no longer
s u f ficient to recover the carrying value of the underlying
assets. Also, included in this charge were other charg e s
of $4,500 related to the write-off of certain investments
which had continuing adverse financial results. The
estimated fair value of the assets was based on
anticipated future cash flows discounted at a rate
commensurate with the risk involved.
16. STOCK OPTION PLANS
The Company currently has two incentive plans under
which stock options have been or may be granted to
officers, directors and key employees of the Company,
the 1991 Employee Incentive Plan (the 1991 Plan) and
the 1996 Incentive Plan (the 1996 Plan). The options
to purchase common shares generally are issued at
fair market value on the date of the grant, begin
vesting after one year in 33-1/3 percent or 25 perc e n t
increments per year, expire 10 years from issuance and
are conditioned upon continual employment during the
vesting period.
The 1996 Plan and the 1991 Plan allow the Company
to grant options to purchase up to 11,000,000 and
4,732,704 shares of common stock, respectively. No
more grants may be made under the 1991 Plan.
In addition to the two incentive plans, the Company
has granted stock options to certain key executives
and directors. The vesting terms and contractual lives of
these grants are similar to that of the incentive plans.
In accordance with the Statement of Financial
Accounting Standards No. 123, “Accounting for Stock-
Based Compensation” (SFAS 123), the Company
discloses the pro forma impact of re c o rd i n g
compensation expense utilizing the Black-Scholes
model. The Black-Scholes option valuation model was
developed 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 re the input of highly subjective assumptions
including the expected stock price volatility. Because
the Company’s stock options have characteristics
significantly different from those of traded options, and
because changes in the subjective input assumptions
can materially affect the fair value estimate, in
m a n a g e m e n t ’s opinion, the Black-Scholes model does
not necessarily provide a reliable measure of the fair
value of its stock options.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T 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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