Barnes and Noble 2007 Annual Report Download - page 27

and expected term. The Company estimates expected
volatility based on traded option volatility of the
Company’s stock over a term equal to the expected term
of the option granted. The expected term of stock option
awards granted is derived from historical exercise
experience under the Company’s stock option plans and
represents the period of time that stock option awards
granted are expected to be outstanding. The assump-
tions used in calculating the fair value of share-based
payment awards represent management’s best esti-
mates, but these estimates involve inherent uncertain-
ties and the application of management’s judgment. As a
result, if factors change and the Company uses diff erent
assumptions, stock-based compensation expense could
be materially diff erent in the future. In addition, the
Company is required to estimate the expected forfei-
ture rate, and only recognize expense for those shares
expected to vest. If the Company’s actual forfeiture rate
is materially diff erent from its estimate, the stock-
based compensation expense could be signifi cantly
diff erent from what the Company has recorded in the
current period. See Note 3 to the Consolidated Financial
Statements for a further discussion on stock-based
compensation.
Gift Cards
Revenue associated with gift cards is deferred until
redemption of the gift card. The Company estimates the
portion of the gift card liability for which the likelihood
of redemption is remote and records this amount in
income on a straight-line basis over a 12-month period
beginning in the 13th month after the month the gift
card was originally sold based upon the Company’s
historical redemption patterns. If actual redemption
patterns vary from the Company’s estimates, actual gift
card breakage may diff er from the amounts recorded.
Reclassifi cations
Certain prior-period amounts have been reclassifi ed for
comparative purposes to conform with the fi scal 2007
presentation.
Reporting Period
The Company’s fi scal year is comprised of 52 or 53
weeks, ending on the Saturday closest to the last day of
January. The reporting periods ended February 2, 2008,
February 3, 2007 and January 28, 2006 contained 52
weeks, 53 weeks and 52 weeks, respectively.
GAIN FROM INSURANCE SETTLEMENTS2.
In August 2005, the Company sustained signifi cant
damage to two of its stores, Gulfport, Mississippi and
Metairie, Louisiana, and minor damage to four others
as a result of Hurricane Katrina. The Company received
insurance proceeds of $13,754 over a fi scal three-year
period related to the settlement of the Hurricane Katrina
open claims, which resulted in a gain of $6,454 being
recorded in the fourth quarter of fi scal 2007 when the
fi nal proceeds were determined and received. The
gain is attributable to settlement of property claims at
replacement costs, which were in excess of net book
values of property and equipment, as well as business
interruption recoveries. The portion of the proceeds
attributable to the property claim is included in invest-
ing activities within the Consolidated Statement of
Cash Flows, while the business interruption recoveries
are classifi ed as operating cash fl ows. The Company
invested the insurance settlement in the redevelopment
of the stores that were aff ected.
STOCK-BASED COMPENSATION3.
Eff ective January 29, 2006, the Company adopted the
provisions of SFAS 123R using the modifi ed prospec-
tive transition method. Under this transition method,
stock-based compensation expense recognized for
share-based awards during the 52 weeks ended February
2, 2008 and the 53 weeks ended February 3, 2007
includes (a) compensation expense for all stock-based
compensation awards granted prior to, but not yet vested
as of, January 29, 2006, based on the grant date fair value
estimated in accordance with the original provisions of
SFAS 123, revised to estimate forfeitures, and (b) com-
pensation expense for all stock-based compensation
awards granted subsequent to January 29, 2006, based
on the grant date fair value estimated in accordance
with the provisions of SFAS 123R. In accordance with
the modifi ed prospective transition method, results for
fi scal 2005 have not been restated. Prior to the adoption
of SFAS 123R, the Company recognized stock-based
compensation expense in accordance with Accounting
Principles Board (APB) Opinion No. 25, “Accounting
for Stock Issued to Employees” (APB 25) and related
Interpretations, as permitted by SFAS 123.
At February 2, 2008, the Company had stock-based
compensation plans as more particularly described
200 Annual7 Report 25