Barnes and Noble 2012 Annual Report Download - page 49

Aggregate Amortization Expense:
For the 52 weeks ended April 28, 2012 $ 18,415
For the 52 weeks ended April 30, 2011 $ 14,512
For the 52 weeks ended May 1, 2010 $ 11,350
Estimated Amortization Expense:
(12 months ending on or about April 30)
2013 $ 19,464
2014 $ 17,213
2015 $ 13,277
2016 $ 11,241
2017 $ 10,875
The changes in the carrying amount of goodwill by segment
for fi scal  are as follows:
B&N
Retail
Segment
B&N
College
Segment
B&N.com
Segment
NOOK
Segment
Total
Company
Balance as of
May 1, 2010 $ 254,471 274,070 — —$ 528,541
Benefi t of excess
tax amortizationa— — (4,428) — (4,428)
Re-allocation of
Goodwillb(29,135) — 29,135 — —
Balance as of
April 30, 2011 $ 225,336 274,070 24,707 —$ 524,113
Benefi t of excess
tax amortizationa— — (4,428) — (4,428)
Re-allocation of
Goodwillc — — (20,279) 20,279 —
Balance as of
April 28, 2012 $ 225,336 274,070 — 20,279 $ 519,685
a The tax basis of goodwill arising from an acquisition during the 52
weeks ended January 29, 2005 exceeded the related basis for fi nancial
reporting purposes by approximately $96,576. In accordance with ASC
740-10-30, Accounting for Income Taxes, the Company is recognizing
the tax benefi ts of amortizing such excess as a reduction of goodwill as
it is realized on the Company’s income tax return.
b Due to the increased focus on the internet and digital businesses, the
Company performed an evaluation on the effect of its impact on the
identifi cation of operating segments. The assessment considered the
way the business is managed (focusing on the fi nancial information
distributed) and the manner in which the chief operating decision
maker interacts with other members of management. As a result of
this assessment, the Company determined that it has three operating
segments: B&N Retail, B&N College and B&N.com. As a result of this
evaluation, $29,135 of goodwill was re-allocated between B&N Retail
and B&N.com segments.
c Prior to April 28, 2012, the Company reported an operating segment
titled B&N.com, which included both its NOOK digital business and
eCommerce operations. Due to the increased focus on the digital
business and the Company’s recently developed ability to review the
digital business separate from its eCommerce business, the Company
performed an evaluation on the effect of its impact on the identifi cation
of operating segments. The assessment considered the way the busi-
ness is managed (focusing on the fi nancial information distributed) and
the manner in which the chief operating decision maker interacts with
other members of management. As a result of this assessment, during
the fourth quarter of fi scal 2012, the Company created a new segment
titled NOOK to report upon its digital business, moving the eCommerce
business into the B&N Retail segment. The Company’s three operating
segments are: B&N Retail, B&N College and NOOK. As a result of this
evaluation, $20,279 of goodwill was re-allocated between B&N.com
and NOOK segments.
On October , , the Company fi nalized the purchase
of certain intellectual property assets from the Borders
Group, Inc. Chapter  Bankruptcy for , includ-
ing acquisition related fees. These intellectual property
assets include a customer list, trade names and URLs.
The Company accounted for the transaction as an asset
purchase, and these assets are included on its consolidated
balance sheet as Intangible Assets. The intangible assets
are being amortized on an accelerated basis over a three
year period, commencing October , . Amortization
expense related to the acquisition of these assets for fi scal
 was ,.
11. MICROSOFT INVESTMENT
On April , , the Company entered into an investment
agreement among the Company, Morrison Investment
Holdings, Inc. (Morrison), and Microsoft Corporation
(Microsoft) pursuant to which the Company will form a
Delaware limited liability company (NewCo), and transfer
to NewCo the Company’s digital device, digital content
and college bookstore businesses and NewCo will sell to
Morrison, and Morrison will purchase, , convert-
ible preferred membership interests in NewCo (Series A
Preferred) for an aggregate purchase price of ,.
Concurrently with its entry into this agreement, the
Company has also entered into a commercial agreement
with Microsoft, pursuant to which, among other things,
NewCo will develop and distribute a Windows  application
for e-reading and digital content purchases, and an intel-
lectual property license and settlement agreement with
Microsoft and Microsoft Licensing GP.
The closing conditions are set forth in the defi nitive docu-
ments between the parties. While there can be no assur-
ance that the transaction will close or close by a particular
date certain, the Company is actively pursuing work in con-
2012 Annual Report 47