Barnes and Noble 2014 Annual Report Download - page 22

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Income Taxes
52 weeks ended
Dollars in thousands
April 27,
2013
Effective
Rate
April 28,
2012
Effective
Rate
Income Taxes $ (97,543) 38.2% $ (25,067) 27.9%
Income tax benefit in fiscal  was (.) million com-
pared with income tax benefit of (.) million in fiscal
. The Company’s effective tax rate increased to .
in fiscal  compared with . in fiscal . The
higher effective tax rate in fiscal  was due primarily to
a significant increase in R&D tax credits and a significant
decrease in the impact of non-deductible compensation
partly offset by an increase in tax reserves and a reduction
in the state tax rate.
The Company evaluates the realizability of the deferred tax
assets on a quarterly basis. As part of this evaluation, the
Company reviews all evidence both positive and negative
to determine if a valuation allowance is needed. At the end
of the year, the Company was in a cumulative loss position.
However, this negative evidence was outweighed by the
positive evidence available and no valuation allowance,
other than those previously recorded against particular
deferred assets, is recorded. The Company’s review of posi-
tive evidence included the review of feasible tax planning
strategies that may be implemented and the reversal of
temporary items. The Company monitors the need for the
additional valuation allowance at each quarter in the future
and if the negative evidence outweighs the positive evi-
dence, an allowance will be recorded.
Net Earnings (Loss)
52 weeks ended
Dollars in thousands
April 27,
2013
Diluted
EPS
April 28,
2012
Diluted
EPS
Net Loss $ (157,806) $ (3.02) $ (64,840) $ (1.34)
As a result of the factors discussed above, the Company
reported a consolidated net loss of (.) million (or
. per diluted share) during fiscal , compared
with consolidated net loss of (.) million (or . per
diluted share) during fiscal .
SEASONALITY
The B&N Retail business, like that of many retailers, is sea-
sonal, with the major portion of sales and operating profit
realized during its third fiscal quarter, which includes the
holiday selling season.
The B&N College business is highly seasonal, with the
major portion of sales and operating profit realized during
the second and third fiscal quarters, when college students
generally purchase and rent textbooks for the upcoming
semesters. Revenues from textbook rentals, which primar-
ily occur at the beginning of the semester, are recognized
over the rental period.
The NOOK business, like that of many technology com-
panies, is impacted by the launch of new products and the
promotional efforts to support those new products, as well
as the traditional retail holiday selling seasonality.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of the Company’s cash are net cash
flows from operating activities, funds available under its
credit facility, cash received and committed to NOOK Media
and short-term vendor financing.
The Company’s cash and cash equivalents were .
million as of May , , compared with . million as
of April , . The increase in cash is primarily attribut-
able to cash flow from operating activities, including the
sell-through of existing NOOK inventory. On May , ,
the Company had no borrowings under its . billion
credit facility, compared to . million in the prior year.
Additional year-over-year balance sheet changes include
the following:
• Merchandise inventories decreased . million, or
., to . billion as of May , , compared with
. billion as of April , . NOOK inventories
decreased due to the sell through of existing on-hand
devices, while Retail declined on improved inventory
management on the lower sales volume. B&N College
inventories slightly increased on higher used textbooks
and general merchandise.
• Receivables, net decreased . million, or ., to
. million as of May , , compared to .
million as of April , . This decrease was primarily
due to lower channel partner business, partially offset by
the eBook settlement discussed below.
• Short-term deferred taxes decreased . million, or
., to . million as of May ,  compared to
. million as of April , . This decrease was
primarily due to decreases in inventory and accrued
liabilities.
20 Barnes & Noble, Inc. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued