Barnes and Noble 2013 Annual Report Download - page 13

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NOOK
This segment includes the Company’s digital business,
which includes the Company’s eBookstore, digital news-
stand and sales of NOOK® devices and accessories through
B&N Retail, B&N College and third party distribution
partners.
The underlying strategy of the NOOK business is to offer
customers any digital book, newspaper or magazine any
time on any device. The Company remains committed to
delivering to customers the best digital bookstore experi-
ence, while reducing its existing cost structure. As part
of this commitment, the Company intends to continue to
offer the best black-and-white and color eReaders on the
market, backed by quality customer service and technol-
ogy support for those devices. The Company will continue
to sell its existing device inventory through reduced and
promotional pricing. At the same time, it will leverage all
Barnes & Noble retail, digital and partnership assets, as
well as existing NOOK customer relationships.
The Company sells digital content in the U.K. directly
through its NOOK devices and its nook.co.uk website.
The Company plans to continue to expand into additional
international markets and believes that its partnership
with Microsoft will help foster that expansion. Under its
partnership agreements with Microsoft, the Company pre-
viously disclosed that it expected to be in 10 international
markets by June 30, 2013. While substantial progress has
been made towards meeting the target expansion require-
ment, the Company now expects expansion into these 10
markets to be accomplished by the end of 2013.
The digital products group has knowledgeable product
development and operational management teams in the
areas of reading software, digital content retailing and
mobile device development. NOOK’s development office
in Palo Alto employs experienced engineers in its digital
product area. The NOOK digital products management
team is currently focused on next generation digital read-
ing products to enhance the reading experience and help
consumers discover content in new and interesting ways.
The Digital Services team, which includes the Cloud and
Commerce groups, is responsible for maintaining and
developing the NOOK digital bookstore service.
RESTATEMENT OF PRIOR PERIOD FINANCIAL
STATEMENTS
The Company has restated its previously reported consoli-
dated financial statements for the years ended April 28,
2012 and April 30, 2011, including the opening stockhold-
ers’ equity balance, in order to correct certain previously
reported amounts. In fiscal 2013, management determined
that the Company had incorrectly overstated certain
accruals for the periods prior to April 27, 2013, as a result
of inadequate controls over its Distribution Center accrual
reconciliation process. In accordance with ASC 250-10-
S99-2, Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial
Statements (ASC 250), the Company recorded an adjust-
ment to decrease cost of sales by $6.7 million ($4.0
million after tax) and $8.5 million ($5.1 million after tax)
to correctly present the statement of operations for fiscal
2012 and 2011, respectively. The Company also decreased
accounts payable by $81.0 million, $89.5 million and $96.2
million at May 1, 2010, April 30, 2011 and April 28, 2012,
respectively and increased retained earnings by $69.5
million, $74.6 million and $78.6 million, net of tax at May
1, 2010, April 30, 2011 and April 28, 2012, respectively, to
correct the consolidated balance sheet.
2013 Annual Report 11