Barnes and Noble 2003 Annual Report Download - page 48

[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
47 2003 Annual Report Barnes & Noble, Inc.
The weighted-average fair value of the options granted
during bn.com’s fiscal years ended December 31, 2003,
2002 and 2001 were estimated at $1.03, $1.06 and
$1.06, respectively, using the Black-Scholes option
pricing model with the following assumptions:
Fiscal Year Ended December 31, 2003 2002 2001
Volatility 102% 140% 113%
Risk-free interest rate 3.65% 4.00% 5.25%
Expected life 4 years 5 years 5 years
19. COMMITMENTS AND CONTINGENCIES
The Company leases retail stores, warehouse facilities,
office space and equipment. Substantially all of the
retail stores are leased under noncancelable agreements
which expire at various dates through 2036 with
various renewal options for additional periods. The
agreements, which have been classified as operating
leases, generally provide for both minimum and
percentage rentals and require the Company to pay all
insurance, taxes and other maintenance costs.
Percentage rentals are based on sales performance in
excess of specified minimums at various stores.
Rental expense under operating leases are as follows:
Fiscal Year 2003 2002 2001
Minimum rentals $ 391,676 370,746 358,522
Percentage rentals 12,600 15,404 14,274
$404,276 386,150 372,796
Future minimum annual rentals, excluding percentage
rentals, required under leases that had initial,
noncancelable lease terms greater than one year, as of
January 31, 2004 are:
Fiscal Year
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 383,889
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366,072
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,826
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321,760
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296,666
After 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,227,150
$2,936,363
The Company provides for minimum rent expense over
the lease terms on a straight-line basis. The excess of
such rent expense over actual lease payments is reflected
primarily in other long-term liabilities in the
accompanying balance sheets.
The Company leases one of its distribution facilities
located in South Brunswick, New Jersey from the New
Jersey Economic Development Authority (NJEDA)
under the terms of an operating lease expiring in June
2011. Under the terms of this lease, the Company
provides a residual value guarantee to the NJEDA, in an
amount not to exceed $5,000, relating to the fair
market value of this distribution facility calculated at
the conclusion of the lease term. The Company believes
that the possibility that any such payment would be
required under this guarantee is remote.
20. LEGAL PROCEEDINGS
There have been no material developments with respect
to previously reported legal proceedings, except as
follows:
In August 1998, The Intimate Bookshop, Inc. and its
owner, Wallace Kuralt, filed a lawsuit in the United
States District Court for the Southern District of New
York against the Company, Borders Group, Inc. and
others, alleging violation of the Robinson-Patman Act
and other federal law, New York statutes governing
trade practices and common law. In March 2000, a
Second Amended Complaint was served on the
Company and other defendants alleging a single cause
of action for violations of the Robinson-Patman Act.
The Second Amended Complaint claims that The
Intimate Bookshop, Inc. has suffered damages of
$11,250 or more and requests treble damages, costs,
attorneys’ fees and interest, as well as declaratory and
injunctive relief prohibiting the defendants from
violating the Robinson-Patman Act. The Company
served an Answer in April 2000 denying the material
allegations of the Second Amended Complaint and
asserting various affirmative defenses. On January 11,
2002, the Company and the other defendants filed a
motion for summary judgment. A hearing on that
motion was held on March 22, 2002. On September 30,
2003, the court granted defendants’ motion and
dismissed all of plaintiff’s claims. Plaintiff filed a notice
of appeal of that decision, which was withdrawn on
February 10, 2004.
On March 14, 2003, a Company employee filed a class
action lawsuit in the Superior Court of California,