Barnes and Noble 2007 Annual Report Download - page 17

Contractual Obligations
The following table sets forth the Company’s contractual obligations as of February 2, 2008 (in millions):
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD
Total
Less Than
1 Year 1-3 Years 3-5 Years
More Than
5 Years
Long-term debt $ — $ — $ — $ — $ —
Capital lease obligations —————
Operating leases 2,092.6 360.8 641.7 456.9 633.2
Purchase obligations 60.1 36.0 20.7 3.4 —
Other long-term liabilities refl ected on the
registrant’s balance sheet under GAAPa—————
Total $ 2,152.7 $ 396.8 $ 662.4 $ 460.3 $ 633.2
a Excludes $18.9 million of unrecognized tax benefi ts for which the Company cannot make a reasonably reliable estimate of the amount and period of
payment. See Note 9 to the Notes to Consolidated Financial Statements.
See also Note 8 to the Notes to Consolidated Financial Statements for information concerning the Company’s Pension and Postretirement Plans.
Off-Balance Sheet Arrangements
As of February 2, 2008, the Company had no off -balance
sheet arrangements as defi ned in Item 303 of Regulation
S-K.
Impact of Infl ation
The Company does not believe that infl ation has had a
material eff ect on its net sales or results of operations.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
See Note 16 to the Notes to Consolidated Financial
Statements.
CRITICAL ACCOUNTING POLICIES
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” discusses the
Company’s consolidated fi nancial statements, which
have been prepared in accordance with accounting
principles generally accepted in the United States. The
preparation of these fi nancial statements requires
management to make estimates and assumptions in
certain circumstances that aff ect amounts reported in
the accompanying consolidated fi nancial statements
and related footnotes. In preparing these fi nancial state-
ments, management has made its best estimates and
judgments of certain amounts included in the fi nancial
statements, giving due consideration to materiality. The
Company does not believe there is a great likelihood that
materially diff erent amounts would be reported related
to the accounting policies described below. However,
application of these accounting policies involves the
exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could diff er
from these estimates.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost
or market. Cost is determined primarily by the retail
inventory method on the fi rst-in, fi rst-out (FIFO)
basis for 99% and 96% of the Company’s merchandise
inventories as of February 2, 2008 and February 3, 2007,
respectively. The remaining merchandise inventories
are recorded based on the average cost method.
Market is determined based on the estimated net realiz-
able value, which is generally the selling price. Reserves
for non-returnable inventory are based on the Company’s
history of liquidating non-returnable inventory.
The Company also estimates and accrues shortage for
the period between the last physical count of inventory
and the balance sheet date. Shortage rates are estimated
and accrued based on historical rates and can be aff ected
by changes in merchandise mix and changes in actual
shortage trends.
2007 Annual Report 15