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7. NET EARNINGS PER SHARE
Following is a reconciliation of net earnings and weighted average common shares outstanding for purposes of
calculating basic and diluted earnings per share:
Fiscal Year 2003 2002
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic EPS
Net income $ 151,853 65,989 $ 2.30 $ 99,948 66,362 $ 1.51
Effect of dilutive securities
Options -- 1,889 -- 2,091
Convertible debt 10,151(a) 9,227 10,249(a) 9,227
162,004 110,197
Effect of GameStop dilutive EPS
GameStop net income
less minority interest 40,571 33,262
121,433 76,935
GameStop diluted EPS $ 1.06 $ 0.87
GameStop shares owned
by Barnes & Noble 36,009 38,240 36,009 31,328
$159,673 77,105 $2.07 $108,263 77,680 $ 1.39
(a) Represents interest on convertible subordinated notes, net of taxes.
[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
31
2003 Annual Report Barnes & Noble, Inc.
8. BARNES & NOBLE.COM ACQUISITION
On November 12, 1998, the Company and Bertelsmann
AG (Bertelsmann) completed the formation of
Barnes & Noble.com to operate the online retail
bookselling operations of the Company’s wholly owned
subsidiary, barnesandnoble.com inc. (bn.com). Under the
terms of the relevant agreements, effective as of October
31, 1998, the Company and Bertelsmann each retained
a 50 percent membership interest in Barnes &
Noble.com. The Company contributed substantially all
of the assets and liabilities of its online operations to the
joint venture and Bertelsmann paid $75,000 to the
Company and made a $150,000 cash contribution to
the joint venture. Bertelsmann also agreed to contribute
an additional $50,000 to the joint venture for future
working capital requirements. The Company recognized
a pre-tax gain during fiscal 1998 in the amount of
$126,435, of which $63,759 was recognized in earnings
based on the $75,000 received directly and $62,676
($36,351 after taxes) was reflected in additional paid-in
capital based on the Company’s share of the
incremental equity of the joint venture resulting from
the $150,000 Bertelsmann contribution.
On May 25, 1999, bn.com completed an IPO of 28.75
million shares of Class A Common Stock and used the
proceeds to purchase a 20 percent interest in Barnes &
Noble.com. As a result, the Company and Bertelsmann
each retained a 40 percent interest in Barnes &
Noble.com. The Company recorded an increase in
additional paid-in capital of $116,158 after taxes
representing the Company’s incremental share in the
equity of Barnes & Noble.com. Under the terms of the
November 12, 1998 joint venture agreement between
the Company and Bertelsmann, the Company received
a $25,000 payment from Bertelsmann in connection
with the IPO. The Company recognized the $25,000
pre-tax gain in fiscal 1999.
In November 2000, Barnes & Noble.com acquired
Fatbrain.com, Inc. (Fatbrain) through a merger with
bn.com. Bn.com issued shares of its common stock to
Fatbrain shareholders as partial consideration for the
merger. As a result of this acquisition, the Company and
Bertelsmann each retained an approximate 36 percent
interest in Barnes & Noble.com. In October 2002, the
Company announced its intent to purchase up to $10,000