Barnes and Noble 2003 Annual Report Download - page 27

capitalized. Leasehold improvements are capitalized
and amortized over the shorter of their estimated useful
lives or the terms of the respective leases. Capitalized
lease acquisition costs are being amortized over the
lease terms of the underlying leases. Costs incurred in
purchasing management information systems are
capitalized and included in property and equipment.
These costs are amortized over their estimated useful
lives from the date the systems become operational.
Internally developed software is expensed as incurred.
Other Long-Lived Assets
The Company’s other long-lived assets include property
and equipment and amortizable intangibles. At January
31, 2004, the Company had $686,649 of property and
equipment, net of accumulated depreciation, and
$20,156 of amortizable intangible assets, net of
amortization, accounting for approximately 20.2% of
the Company’s total assets. The Company reviews its
long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying
amount of an asset may not be recoverable in
accordance with Statement of Financial Accounting
Standards (SFAS) No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”.
Recoverability of assets held and used are measured by
a comparison of the carrying amount of an asset to
undiscounted pre-tax future net cash flows. Future
events could cause the Company to conclude that
impairment indicators exist and that long-lived assets
may be impaired. Any resulting impairment loss could
have a material adverse impact on the Company’s
financial condition and results of operations.
Goodwill and Unamortizable Intangible Assets
The costs in excess of net assets of businesses acquired
are carried as goodwill in the accompanying
consolidated balance sheets.
At January 31, 2004, the Company had $509,244 of
goodwill and $74,418 of unamortizable intangible
assets (i.e. those with an indefinite life), accounting for
approximately 16.6% of the Company’s total assets.
SFAS No. 142, “Goodwill and Other Intangible Assets”,
requires that goodwill and other unamortizable
intangible assets no longer be amortized, but instead be
tested for impairment at least annually or earlier if there
are impairment indicators. The Company performs a
two-step process for impairment testing of goodwill as
required by SFAS No. 142. The first step of this test,
used to identify potential impairment, compares the fair
value of a reporting unit with its carrying amount. The
second step (if necessary) measures the amount of the
impairment. The Company completed its annual
impairment test on the goodwill in November 2003 and
deemed that no impairment charge was necessary. The
Company has noted no subsequent indicators of
impairment. The Company tests unamortizable intangible
assets by comparing the fair value and the carrying value
of such assets. Changes in market conditions, among other
factors, could have a material impact on these estimates.
The effect of adoption of SFAS No. 142 on the reported
net income (loss) is as follows:
Fiscal Year 2003 2002 2001
Reported net income $ 151,853 99,948 63,967
Add back: Amortization of
goodwill, net of tax -- -- 7,419
Net income, as adjusted $ 151,853 99,948 71,386
Basic earnings per share:
Reported net income $ 2.30 1.51 0.96
Add back: Amortization of
goodwill, net of tax -- -- 0.11
Net income, as adjusted $ 2.30 1.51 1.07
Diluted earnings per share:
Reported net income $ 2.07 1.39 0.94
Add back: Amortization of
goodwill, net of tax -- -- 0.10
Net income, as adjusted $ 2.07 1.39 1.04
Deferred Charges
Costs incurred to obtain long-term financing are
amortized over the terms of the respective debt
agreements using the straight-line method, which
approximates the interest method. Unamortized costs
included in other noncurrent assets as of January 31,
2004 and February 1, 2003 were $9,732 and $11,130,
respectively. Amortization expense included in interest
and amortization of deferred financing fees were
[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
26 2003 Annual ReportBarnes & Noble, Inc.