Barnes and Noble 2007 Annual Report Download - page 30

The aggregate intrinsic value in the table above rep-
resents the total pretax intrinsic value (the diff erence
between the Company’s closing stock price on the last
trading day of the related fi scal year and the exercise
price, multiplied by the related in-the-money options)
that would have been received by the option holders had
they exercised their options at the end of the fi scal year.
This amount changes based on the market value of the
Company’s common stock. The amount as of February 3,
2007 has been reduced by $2,643 due to the increase in
price of certain options resulting from the stock option
review discussed below. Total intrinsic value of options
exercised for fi scal 2007, 2006 and 2005 (based on the
diff erence between the Company’s stock price on the
exercise date and the respective exercise price, multi-
plied by the number of options exercised) was $43,649,
$30,029 and $97,278, respectively.
As of February 2, 2008, there was $2,689 of total
unrecognized compensation expense related to unvested
stock options granted under the Company’s share-based
compensation plans. That expense is expected to be
recognized over a weighted average period of 0.8 years.
The following table presents a summary of the
Company’s restricted stock activity:
NUMBER OF
SHARES
(in thousands)
WEIGHTED
AVERAGE GRANT
DATE FAIR VALUE
Balance, January 29, 2005 50 $ 30.80
Granted 444 33.87
Vested (13) 30.94
Forfeited (29) 34.19
Balance, January 28, 2006 452 33.60
Granted 479 45.85
Vested (124) 33.52
Forfeited (40) 38.94
Balance, February 3, 2007 767 40.97
Granted 539 40.01
Vested (236) 39.83
Forfeited (44) 40.87
Balance, February 2, 2008 1,026 $ 40.74
Total fair value of shares of restricted stock that vested
during fi scal 2007 and 2006 was $9,108 and $5,666,
respectively. As of February 2, 2008, there was $30,974
of unrecognized stock-based compensation expense
related to nonvested restricted stock awards. That cost
is expected to be recognized over a weighted average
period of 2.6 years.
For fi scal 2007, 2006 and 2005, stock-based compensa-
tion expense of $17,168 (or $0.15 per diluted share),
$17,146 (or $0.15 per diluted share) and $3,566 (or
$0.03 per diluted share), respectively, is included in
selling and administrative expenses.
Stock Option Review
In July 2006, the Company created a Special Committee
of the Board of Directors, consisting of Patricia Higgins,
to review all of the stock option grants by the Company
and the Company’s wholly-owned subsidiary, Barnes
& Noble.com, during the period from 1996 through
2006 and engaged independent outside counsel and an
independent forensic auditor to assist in this matter. On
April 2, 2007, the Special Committee presented its fi nd-
ings and recommendations to the Company’s Board of
Directors, as reported in the Company’s Form 8-K fi led
April 4, 2007. The Special Committee indicated that the
Committee and its advisors received the Company’s full
cooperation throughout its investigation.
Among other fi ndings, the Special Committee deter-
mined that there were numerous instances of stock
option grants for which there was an improper mea-
surement of compensation expense under APB 25.
Although the Special Committee determined that there
were instances of stock options having been dated using
favorable dates that were selected with the benefi t of
hindsight and that serious mistakes were made, the
Special Committee did not fi nd any intent to defraud
or fraudulent misconduct by any individual or group
of individuals. The Special Committee found that the
Company’s dating and pricing practice for stock options
was applied uniformly by Company personnel to stock
options granted and was not used selectively to ben-
efi t any one group or individual within the Company.
The Company has evaluated these fi ndings and agrees
with the Special Committee. The Company has con-
cluded, however, that the charges are not material to
the fi nancial statements in any of the periods to which
such charges relate and therefore will not restate its
historic fi nancial statements. The Company recorded an
adjustment of $411 ($246 after tax) to increase non-cash
compensation expense in the fourth quarter of fi scal
2006 to correctly present compensation expense for
The aggregate intrinsic value in the table above rep-
resents the total pretax intrinsic value (the difference
between the Company’s closing stock price on the last
trading day of the related fiscal year and the exercise
price, multiplied by the related in-the-money options)
that would have been received by the option holders had
they exercised their options at the end of the fiscal year.
This amount changes based on the market value of the
Company’s common stock. The amount as of February 3,
2007 has been reduced by $2,643 due to the increase in
price of certain options resulting from the stock option
review discussed below. Total intrinsic value of options
exercised for fiscal 2007, 2006 and 2005 (based on the
difference between the Company’s stock price on the
exercise date and the respective exercise price, multi-
plied by the number of options exercised) was $43,649,
$30,029 and $97,278, respectively.
As of February 2, 2008, there was $2,689 of total
unrecognized compensation expense related to unvested
stock options granted under the Company’s share-based
compensation plans. That expense is expected to be
recognized over a weighted average period of 0.8 years.
The following table presents a summary of the
Company’s restricted stock activity:
NUMBER OF
SHARES
(in thousands)
WEIGHTED
AVERAGE GRANT
DATE FAIR VALUE
Balance, January 29, 2005 50 $ 30.80
Granted 444 33.87
Vested (13) 30.94
Forfeited (29) 34.19
Balance, January 28, 2006 452 33.60
Granted 479 45.85
Vested (124) 33.52
Forfeited (40) 38.94
Balance, February 3, 2007 767 40.97
Granted 539 40.01
Vested (236) 39.83
Forfeited (44) 40.87
Balance, February 2, 2008 1,026 $ 40.74
Total fair value of shares of restricted stock that vested
during fiscal 2007 and 2006 was $9,108 and $5,666,
respectively. As of February 2, 2008, there was $30,974
of unrecognized stock-based compensation expense
related to nonvested restricted stock awards. That cost
is expected to be recognized over a weighted average
period of 2.6 years.
For fiscal 2007, 2006 and 2005, stock-based compensa-
tion expense of $17,168 (or $0.15 per diluted share),
$17,146 (or $0.15 per diluted share) and $3,566 (or
$0.03 per diluted share), respectively, is included in
selling and administrative expenses.
Stock Option Review
In July 2006, the Company created a Special Committee
of the Board of Directors, consisting of Patricia Higgins,
to review all of the stock option grants by the Company
and the Company’s wholly-owned subsidiary, Barnes
& Noble.com, during the period from 1996 through
2006 and engaged independent outside counsel and an
independent forensic auditor to assist in this matter. On
April 2, 2007, the Special Committee presented its find-
ings and recommendations to the Company’s Board of
Directors, as reported in the Company’s Form 8-K filed
April 4, 2007. The Special Committee indicated that the
Committee and its advisors received the Company’s full
cooperation throughout its investigation.
Among other findings, the Special Committee deter-
mined that there were numerous instances of stock
option grants for which there was an improper mea-
surement of compensation expense under APB 25.
Although the Special Committee determined that there
were instances of stock options having been dated using
favorable dates that were selected with the benefit of
hindsight and that serious mistakes were made, the
Special Committee did not find any intent to defraud
or fraudulent misconduct by any individual or group
of individuals. The Special Committee found that the
Company’s dating and pricing practice for stock options
was applied uniformly by Company personnel to stock
options granted and was not used selectively to ben-
efit any one group or individual within the Company.
The Company has evaluated these findings and agrees
with the Special Committee. The Company has con-
cluded, however, that the charges are not material to
the financial statements in any of the periods to which
such charges relate and therefore will not restate its
historic financial statements. The Company recorded an
adjustment of $411 ($246 after tax) to increase non-cash
compensation expense in the fourth quarter of fiscal
2006 to correctly present compensation expense for
28 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
28 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued