UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 1, 2009 (September 29, 2009)
BARNES & NOBLE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 1-12302 | 06-1196501 | |
| (Commission File Number) | (IRS Employer Identification No.) | |
| 122 Fifth Avenue, New York, NY | 10011 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(212) 633-3300
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
On October 1, 2009, Barnes & Noble, Inc. (the “Company”) filed a Current Report on Form 8-K (“Original Form 8-K”) to report the completion of the acquisition of Barnes & Noble College Booksellers, Inc. (“B&N College”) from Leonard Riggio and Louise Riggio (the “Sellers”) pursuant a Stock Purchase Agreement dated as of August 7, 2009 among the Company and the Sellers. Mr. Riggio is the Chairman of the Company’s Board of Directors.
This amendment to the Original Form 8-K is being filed to provide financial statements and pro forma financial statements required by Item 9.01 of Form 8-K.
| Item 9.01 | Financial Statements and Exhibits. |
(a) Financial Statements of Business Acquired
The required audited consolidated financial statements of B&N College for the 52 weeks ended May 2, 2009 and the unaudited interim condensed consolidated financial statements of Barnes & Noble College Booksellers, Inc. and Subsidiaries for the 13 weeks ended August 1, 2009 and August 2, 2008 are filed as Exhibit 99.1.
(b) Pro Forma Financial Information
The required unaudited pro forma condensed consolidated balance sheet as of August 1, 2009, unaudited pro forma condensed consolidated statements of operations for the 13 weeks ended May 2, 2009, unaudited pro forma condensed consolidated statements of operations for the 13 and 26 weeks ended August 1, 2009 and the unaudited pro forma condensed consolidated statements of operations for the 52 weeks ended January 31, 2009 are filed as Exhibit 99.2.
(d) Exhibits
| 23.1 | Consent of BDO Seidman, LLP, independent auditors. | |
| 99.1 | Barnes & Noble College Booksellers, Inc. and Subsidiaries audited consolidated financial statements for the 52 weeks ended May 2, 2009 and the unaudited interim condensed consolidated financial statements of Barnes & Noble College Booksellers, Inc. and Subsidiaries for the 13 weeks ended August 1, 2009 and August 2, 2008, and the notes related thereto. | |
| 99.2 | Barnes & Noble, Inc. and Subsidiaries Unaudited Pro Forma Condensed Consolidated Balance Sheet as of August 1, 2009, Unaudited Pro Forma Condensed Consolidated Statements of Operations for the 13 weeks ended May 2, 2009, Unaudited Pro Forma Condensed Consolidated Statements of Operations for the 13 and 26 weeks ended August 1, 2009 and the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the 52 weeks ended January 31, 2009, and the notes related thereto. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
BARNES & NOBLE, INC. (Registrant) |
||
| By: | /s/ J OSEPH J. L OMBARDI | |
| Joseph J. Lombardi | ||
| Chief Financial Officer | ||
Date: December 9, 2009
Barnes & Noble, Inc.
EXHIBIT INDEX
|
Exhibit
|
Description |
|
|
23.1 |
Consent of BDO Seidman, LLP, independent auditors. | |
|
99.1 |
Barnes & Noble College Booksellers, Inc. and Subsidiaries audited consolidated financial statements for the 52 weeks ended May 2, 2009 and the unaudited interim condensed consolidated financial statements of Barnes & Noble College Booksellers, Inc. and Subsidiaries for the 13 weeks ended August 1, 2009 and August 2, 2008, and the notes related thereto. | |
|
99.2 |
Barnes & Noble, Inc. and Subsidiaries Unaudited Pro Forma Condensed Consolidated Balance Sheet as of August 1, 2009, Unaudited Pro Forma Condensed Consolidated Statements of Operations for the 13 weeks ended May 2, 2009, Unaudited Pro Forma Condensed Consolidated Statements of Operations for the 13 and 26 weeks ended August 1, 2009 and the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the 52 weeks ended January 31, 2009, and the notes related thereto. | |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
Barnes & Noble, Inc.
New York, New York
We hereby consent to the incorporation by reference in the following Registration Statements on Form S-3 (No. 333-23855, No. 333-69731, No. 333-62210, No. 33-84826 and No. 33-89258) and Form S-8 (No. 333-27033, No. 33-89260, No. 333-90538, No. 333-116382, No. 333-59111 and No. 333-160560) of Barnes & Noble, Inc. of our report dated December 9, 2009, relating to the consolidated financial statements of Barnes & Noble College Booksellers, Inc. which appears in this Current Report on Form 8-K/A.
| /s/ BDO Seidman, LLP |
| BDO Seidman, LLP |
New York, NY
December 9, 2009
Exhibit 99.1
Barnes & Noble
College Booksellers, Inc.
and Subsidiaries
Consolidated Financial Statements
Year Ended May 2, 2009 and Three Months Ended
August 1, 2009 and August 2, 2008
Barnes & Noble
College Booksellers, Inc.
and Subsidiaries
Consolidated Financial Statements
Year Ended May 2, 2009 and Three Months Ended
August 1, 2009 and August 2, 2008
1
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Contents
|
Independent auditors’ report |
3 | |
|
Consolidated financial statements: |
||
|
Balance sheets |
4 | |
|
Statements of operations |
5 | |
|
Statements of stockholders’ equity and comprehensive income |
6 | |
|
Statements of cash flows |
7 | |
|
Notes to consolidated financial statements |
8-22 | |
2
Independent Auditors’ Report
Board of Directors
Barnes & Noble, Inc.
New York, New York
We have audited the accompanying consolidated balance sheet of Barnes & Noble College Booksellers, Inc. and Subsidiaries as of May 2, 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for the fiscal year then ended on the basis of accounting described in Note 2. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Barnes & Noble College Booksellers, Inc. and Subsidiaries as of May 2, 2009, and the results of their operations and their cash flows for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America.
| /s/ BDO Seidman, LLP | ||
| BDO Seidman, LLP | ||
|
New York, NY December 9, 2009 |
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3
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Consolidated Balance Sheets
(Thousands of dollars)
|
August 1,
2009 |
May 2,
2009 |
|||||
| (unaudited) | ||||||
|
Assets |
||||||
|
Current: |
||||||
|
Cash |
$ | 19,729 | $ | 59,980 | ||
|
Receivables, net |
30,293 | 29,281 | ||||
|
Merchandise inventories (Note 2) |
587,349 | 199,739 | ||||
|
Prepaid expenses and other current assets |
3,174 | 3,505 | ||||
|
Total current assets |
640,545 | 292,505 | ||||
|
Property and equipment, net (Note 3) |
||||||
|
Buildings and leasehold improvements |
86,515 | 84,993 | ||||
|
Fixtures and equipment |
202,276 | 200,241 | ||||
| 288,791 | 285,234 | |||||
|
Less: Accumulated depreciation and amortization |
212,741 | 206,945 | ||||
|
Net property and equipment |
76,050 | 78,289 | ||||
|
Other noncurrent assets, net (Note 5) |
19,503 | 22,726 | ||||
|
Goodwill |
1,193 | 1,193 | ||||
|
Total assets |
$ | 737,291 | $ | 394,713 | ||
|
Liabilities and Stockholders’ Equity |
||||||
|
Current liabilities: |
||||||
|
Short-term borrowings (Note 4) |
$ | 180,000 | $ | 123,500 | ||
|
Accounts payable – trade |
371,555 | 78,444 | ||||
|
Accounts payable – affiliates (Note 7) |
107,729 | 30,481 | ||||
|
Accrued employee compensation |
15,074 | 24,897 | ||||
|
Accrued liabilities |
35,032 | 55,992 | ||||
|
Total current liabilities |
709,390 | 313,314 | ||||
|
Long-term liabilities (Note 4) |
1,758 | 1,874 | ||||
|
Total liabilities |
711,148 | 315,188 | ||||
|
Commitments and contingency (Notes 5 and 6) |
||||||
|
Stockholders’ equity: |
||||||
|
Common stock – no par value: |
||||||
|
Class A, voting; authorized 200 shares; issued 196.67 shares (including 89.34 shares in treasury for both years) |
281 | 281 | ||||
|
Class B, nonvoting; authorized 200 shares; issued 16.13 shares (including 16.13 shares in treasury for both years) |
153 | 153 | ||||
|
Additional paid-in capital |
16,880 | 16,880 | ||||
|
Retained earnings |
69,171 | 122,553 | ||||
| 86,485 | 139,867 | |||||
|
Less: Cost of shares in treasury |
60,342 | 60,342 | ||||
|
Total stockholders’ equity |
26,143 | 79,525 | ||||
| $ | 737,291 | $ | 394,713 | |||
See accompanying notes to consolidated financial statements.
4
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Consolidated Statements of Operations
(Thousands of dollars)
| Three months ended |
Year ended May 2, |
||||||||||
| August 1, 2009 | August 2, 2008 | 2009 | |||||||||
| (unaudited) | |||||||||||
|
Sales |
$ | 215,125 | $ | 219,974 | $ | 1,782,884 | |||||
|
Cost of sales and occupancy (Note 7) |
168,272 | 174,744 | 1,405,701 | ||||||||
|
Gross profit |
46,853 | 45,230 | 377,183 | ||||||||
|
Selling and administrative expenses |
65,011 | 61,708 | 273,548 | ||||||||
|
Depreciation and amortization |
6,422 | 6,279 | 27,381 | ||||||||
|
Pre-opening expenses |
52 | 51 | 295 | ||||||||
|
Operating (loss) profit |
(24,632 | ) | (22,808 | ) | 75,959 | ||||||
|
Interest expense, net |
663 | 1,852 | 4,447 | ||||||||
|
(Loss) income before income tax (benefit) expense |
(25,295 | ) | (24,660 | ) | 71,512 | ||||||
|
Income tax (benefit) expense (Note 2) |
(498 | ) | (505 | ) | 5,151 | ||||||
|
Net (loss) income from operations |
$ | (24,797 | ) | $ | (24,155 | ) | $ | 66,361 | |||
See accompanying notes to consolidated financial statements.
5
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Consolidated Statements of Stockholders ’ Equity and Comprehensive Income
(Thousands of dollars)
Year ended May 2, 2009 and the three months ended August 1, 2009
| Common stock |
Additional paid-
in capital |
Retained
earnings |
Common stock
in treasury |
||||||||||||||||||
| Class A | Class B | ||||||||||||||||||||
|
Balance, May 3, 2008 |
$ | 281 | $ | 153 | $ | 16,880 | $ | 94,515 | $ | (60,342 | ) | $ | 51,487 | ||||||||
|
Comprehensive income: |
|||||||||||||||||||||
|
Net income |
— | — | — | 66,361 | — | 66,361 | |||||||||||||||
|
Net effect of excluded assets and liabilities (Note 2) |
— | — | — | 2,583 | — | 2,583 | |||||||||||||||
|
Total comprehensive income |
68,944 | ||||||||||||||||||||
|
Dividend distributions |
— | — | — | (40,906 | ) | — | (40,906 | ) | |||||||||||||
|
Balance, May 2, 2009 |
281 | 153 | 16,880 | 122,553 | (60,342 | ) | 79,525 | ||||||||||||||
|
Comprehensive loss: |
|||||||||||||||||||||
|
Net loss |
— | — | — | (24,797 | ) | — | (24,797 | ) | |||||||||||||
|
Net effect of excluded assets and liabilities (Note 2) |
— | — | — | 703 | — | 703 | |||||||||||||||
|
Total comprehensive loss |
(24,094 | ) | |||||||||||||||||||
|
Dividend distributions |
— | — | — | (29,288 | ) | — | (29,288 | ) | |||||||||||||
|
Balance, August 1, 2009 |
$ | 281 | $ | 153 | $ | 16,880 | $ | 69,171 | $ | (60,342 | ) | $ | 26,143 | ||||||||
See accompanying notes to consolidated financial statements.
6
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Thousands of dollars)
| Three months ended | Year ended | |||||||||||
| August 1, 2009 | August 2, 2008 | May 2, 2009 | ||||||||||
| (unaudited) | ||||||||||||
|
Cash flows from operating activities: |
||||||||||||
|
Net (loss) income from operations |
$ | (24,797 | ) | $ | (24,155 | ) | $ | 66,361 | ||||
|
Adjustments to reconcile net (loss) income from operations to net cash (used in) provided by operating activities: |
||||||||||||
|
Depreciation and amortization |
6,422 | 6,279 | 27,381 | |||||||||
|
Impairment charge |
4,619 | — | 4,999 | |||||||||
|
Loss (gain) on sale of fixed assets |
(38 | ) | (24 | ) | 229 | |||||||
|
Deferred tax provision (recovery) |
(399 | ) | (573 | ) | 3,645 | |||||||
|
Changes in operating assets and liabilities: |
||||||||||||
|
Decrease (increase) in: |
||||||||||||
|
Trade receivables |
(1,012 | ) | (384 | ) | 6,951 | |||||||
|
Merchandise inventories |
(387,610 | ) | (395,153 | ) | 28,417 | |||||||
|
Prepaid expenses and other current assets |
331 | 2,041 | (1,085 | ) | ||||||||
|
Other noncurrent assets |
(268 | ) | (471 | ) | (1,323 | ) | ||||||
|
Increase (decrease) in: |
||||||||||||
|
Accounts payable – trade |
293,111 | 306,072 | (6,396 | ) | ||||||||
|
Accounts payable – affiliate |
77,248 | 64,348 | (16,607 | ) | ||||||||
|
Accrued expenses |
(30,385 | ) | (30,694 | ) | 2,137 | |||||||
|
Net cash (used in) provided by operating activities |
(62,778 | ) | (72,714 | ) | 114,709 | |||||||
|
Cash flows from investing activities: |
||||||||||||
|
Capital expenditures |
(5,469 | ) | (5,143 | ) | (23,431 | ) | ||||||
|
Proceeds from the sale of assets |
173 | 30 | 101 | |||||||||
|
Net cash used in investing activities |
(5,296 | ) | (5,113 | ) | (23,330 | ) | ||||||
|
Cash flows from financing activities: |
||||||||||||
|
Dividend distributions |
(29,288 | ) | (25,462 | ) | (40,906 | ) | ||||||
|
Short-term borrowings (repayments) |
56,500 | 62,801 | (26,400 | ) | ||||||||
|
Payments on long-term liabilities |
(116 | ) | (43 | ) | (20,421 | ) | ||||||
|
Net cash provided by (used in) financing activities |
27,096 | 37,296 | (87,727 | ) | ||||||||
|
Effect on cash of excluded assets and liabilities (Note 2) |
727 | 502 | 5,166 | |||||||||
|
Net (decrease) increase in cash and cash equivalents |
(40,251 | ) | (40,029 | ) | 8,818 | |||||||
|
Cash and cash equivalents: |
||||||||||||
|
Beginning of period |
59,980 | 51,162 | 51,162 | |||||||||
|
End of period |
$ | 19,729 | $ | 11,133 | $ | 59,980 | ||||||
|
Supplemental disclosures of cash flow information: |
||||||||||||
|
Cash paid during the period for: |
||||||||||||
|
Interest |
$ | 593 | $ | 2,215 | $ | 5,315 | ||||||
|
Income taxes |
152 | 3 | 1,848 | |||||||||
See accompanying notes to consolidated financial statements.
7
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
1. Description of Business |
The business of Barnes & Noble College Booksellers, Inc. and Subsidiaries (the “Company”) principally includes the operation of retail bookstores on college campuses throughout the United States. The Company operated 624 and 620 college bookstores as of August 1, 2009 and May 2, 2009 (the end of fiscal 2009), respectively. | |
| The Company’s business is seasonal with the major portion of sales and operating profit realized during the second and third quarters, which includes sales from the beginning of the school semesters. Due to the seasonal nature of the business, the results of operations for the three months ended August 1, 2009 are not indicative of the results to be expected for the year ended May 1, 2010. | ||
| The Company has determined that it has one operating segment. The evaluation was made in accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information”. The Company’s evaluation included the identification of operating segments by considering the way the business is managed (focusing on the financial information distributed) and the manner in which the chief operating decision maker interacts with the other members of management. The operating segment has as its principal business, the sale of textbooks, trade books, school supplies, school spirit clothing and accessories. These product sales collectively account for substantially all of the Company’s sales. | ||
|
2. Summary of Significant Accounting Policies |
Principles of Consolidation and Basis of Presentation
The accompanying financial statements are presented on a consolidated basis which includes the accounts of the Company and its wholly-owned subsidiaries, BNCB Management Corporation and BNCB Management Holding Corporation. All intercompany balances and transactions have been eliminated in consolidation. |
|
8
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
The accompanying consolidated financial statements have been prepared to present the assets acquired and liabilities assumed by Barnes & Noble, Inc. (“BKS”) in a transaction that closed on September 30, 2009 (see Note 9). Accordingly, such financial statements have been adjusted to exclude the assets and liabilities of the Company that were not acquired or assumed by BKS. The excluded assets consisted primarily of an airplane owned by the Company, as well as the Company’s investments in BKS and GameStop Corp. The primary liability not assumed was the debt related to the airplane. The net book value of the excluded assets and liabilities, which amounted to approximately $117 million as of May 3, 2008, has been reflected as a reduction of retained earnings as of that date. The changes in the net book value of such excluded assets and liabilities have been presented in the accompanying consolidated statement of stockholders’ equity. Such amounts are presented as an increase in retained earnings to be consistent with the initial exclusion of assets and liabilities recorded on May 3, 2008 as a reduction of retained earnings.
In the opinion of management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position as of August 1, 2009 and the results of its operations and its cash flows for the three months ended August 1, 2009 and August 2, 2008.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid securities with original maturities of three months or less to be cash equivalents. |
9
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
Concentrations of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand. |
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|
Inventories
Merchandise inventories, consisting entirely of finished goods, are stated at the lower of cost, determined under both the first-in, first-out (FIFO) method and the last-in, first-out (LIFO) method, or market. As of August 1, 2009 and May 2, 2009, 87.3% and 71.8%, respectively, of the Company’s inventory was valued using the LIFO method. The Company’s LIFO reserve was not material to the recorded amount of inventory or the results of operations. |
||
|
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed as incurred. Construction-in-progress consists primarily of build-out of new stores and renovation of existing stores. |
||
|
Goodwill
The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance sheets.
The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, and, as a result, the Company does not amortize goodwill. The Company performs an annual impairment review of its goodwill and determined that no impairment charges have been necessary through August 1, 2009. |
||
10
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
| Fair Value of Financial Instruments | ||
| The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported for short-term and long-term debt approximates fair value because, in general, the interest on the underlying instruments approximates market rates. | ||
| Long-Lived Assets | ||
| The Company follows the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets”, which requires impairment losses to be recorded on long-lived assets used in operations when indications of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. The Company evaluates long-lived assets for impairment starting at the university contract combined store level, at which individual cash flows can be identified. Impairment losses included in selling, general and administrative expenses totaled $5.0 million for the fiscal year ended May 2, 2009 and $4.6 million for the three months ended August 1, 2009. There was no impairment for the three months ended August 2, 2008. | ||
| Income Taxes | ||
| The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”, which presents income taxes on the liability method. Under the liability method, deferred income taxes are provided on the differences in bases of assets and liabilities between financial reporting and tax returns using enacted tax rates. Effective May 1, 1998, the Company elected, with the consent of its stockholders, to be taxed as an S corporation under the provisions of the Internal Revenue Code and in certain other state and local jurisdictions, where allowable. The stockholders are required to report the Company’s taxable income or loss in their personal income tax returns; accordingly, | ||
11
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
| such income taxes are not reflected in the financial statements. The financial statements include a provision for income taxes in certain states and local jurisdictions that do not recognize S corporation status. | ||
| For the year ended May 2, 2009, the Company recognized current state and local income tax expense of $1.6 million. In addition, a deferred state and local tax provision was recognized in 2009 of $3.6 million, which relates primarily to an adjustment of deferred taxes on prior year LIFO reserves. | ||
| Fiscal Year | ||
| The Company operates on a 52-53 week fiscal year ending on the Saturday closest to the end of April. The quarters ended August 1, 2009 and August 2, 2008 consisted of thirteen weeks and the year ended May 2, 2009 consisted of 52 weeks. | ||
| Pre-opening Costs | ||
| Advertising, payroll and other costs associated with the opening of new stores are expensed as incurred. | ||
| Revenue Recognition | ||
| Revenue from sales of the Company’s products is recognized at the time of sale. Sales returns (which are not significant) are recognized at the time returns are made. | ||
| Use of Estimates | ||
| The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Amounts reported based on these assumptions include but are not limited to allowance for doubtful accounts, vendor allowances and inventory allowances. | ||
12
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
| Reclassifications | ||
| Certain reclassifications have been made to prior year information to conform with the current year’s presentation. | ||
| Recent Accounting Pronouncements | ||
| In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”), which requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest of an acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application is prohibited. The adoption of SFAS No. 141(R) did not have a material impact on the Company’s results of operations or its financial position. | ||
| In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”, which requires (1) ownership interests in subsidiaries held by parties other than the parent to be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the parent’s equity; (2) the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations; and (3) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently as equity transactions. SFAS No. 160 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application is prohibited. The adoption of SFAS No. 160 did not have a material impact on the Company’s results of operations or its financial position. | ||
13
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
| In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133”, which changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS No. 161 did not have a material impact on the Company’s results of operations or its financial position. | ||
| In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”, which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the consolidated financial statements. This Staff Position is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of this Staff Position did not have a material effect on the Company’s operations. | ||
| In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”. SFAS No. 165 establishes principles and requirements for subsequent events, which are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, SFAS No. 165 sets forth (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity shall recognize events or transactions occurring after the | ||
14
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
| balance sheet date in its financial statements; and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009 and is to be applied prospectively. The adoption of SFAS No. 165 did not have a material impact on the Company’s results of operations or its financial position and its requirements are reflected herein. | ||
|
3. Property and Equipment |
Property and equipment consists of the following: | |
|
Estimated useful
life |
August 1, 2009 | May 2, 2009 | ||||||
| ($ in thousands) | ||||||||
|
Buildings and leasehold improvements |
Life of asset or
lease, whichever is less |
$ | 86,515 | $ | 84,993 | |||
|
Fixtures and equipment |
5 | 164,173 | 163,217 | |||||
|
Computer software |
3 | 36,033 | 35,838 | |||||
|
Construction-in-progress |
2,070 | 1,186 | ||||||
| 288,791 | 285,234 | |||||||
|
Less: Allowance for depreciation and amortization |
212,741 | 206,945 | ||||||
| $ | 76,050 | $ | 78,289 | |||||
| Depreciation and amortization expense was $27.4 million, $6.4 million and $6.3 million, for the year ended May 2, 2009 and the three months ended August 1, 2009 and August 2, 2008, respectively. | ||
15
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
4. Debt Obligations |
Debt obligations, including revolving credit facilities, consist of the following: |
|
August 1,
2009 |
May 2,
2009 |
|||||
| ($ in thousands) | ||||||
|
Revolving credit facilities (a) |
$ | 180,000 | $ | 123,500 | ||
|
Other long-term liabilities (b) |
2,211 | 2,294 | ||||
| 182,211 | 125,794 | |||||
|
Less: Current maturities of debt obligations and revolving credit facilities |
180,453 | 123,920 | ||||
| $ | 1,758 | $ | 1,874 | |||
|
(a) On November 13, 2006, the Company entered into a new credit facility. The new agreement provides for a $400 million five-year revolving credit facility (“Credit Facility”). The Credit Facility permits borrowings at various interest rates based on the prime rate or London Interbank Offered Rate (“LIBOR”). In addition, the agreement requires the Company to pay a commitment fee for the unused portion. The Credit Facility contains covenants, limitations and events of default typical of credit facilities of this size and nature, including financial covenants which require the Company to meet, among other things, debt service coverage and leverage ratios and dividend distributions. The Company is required to pay the outstanding balance down to zero during each fiscal year. As a result of this requirement, the Credit Facility is classified as short-term debt. |
16
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
Selected information related to the Company’s Credit Facility is as follows: |
||
|
Year ended May 2, 2009 |
|||
| ($ in thousands) | |||
|
Balance at end of period |
$ | 123,500 | |
|
Average balance outstanding during the period |
109,226 | ||
|
Maximum borrowings outstanding during the period |
288,800 | ||
|
Fees expensed with respect to the unused portion of the Company’s Credit Facility were $0.3 million during the fiscal year ended May 2, 2009. |
||
|
(b) Other long-term liabilities consist of an obligation under a capital lease with a related party of $1.5 million and a capital lease for computer hardware acquired through a third party of $0.8 million as of May 2, 2009 (see Note 5). The current portion of the capital lease obligation is included in accrued liabilities in the consolidated balance sheets. |
||
|
As of May 2, 2009, annual maturities of debt obligations are as follows: |
||
|
Fiscal year |
Amount | ||
| ($ in thousands) | |||
|
2010 |
$ | 123,920 | |
|
2011 |
469 | ||
|
2012 |
524 | ||
|
2013 |
302 | ||
|
2014 |
327 | ||
|
Thereafter |
252 | ||
|
Total |
$ | 125,794 | |
17
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
5. Leases |
The Company has operating lease agreements for retail stores, office space and equipment, which expire on various dates through 2026. The agreements, which have been classified as operating leases, generally provide for both minimum and percentage payments. Certain operating lease agreements require advance payments at the inception of the lease. These upfront payments, which amount to $21.7 million and $18.5 million at May 2, 2009 and August 1, 2009, respectively, are amortized over the life of the lease and are included in other noncurrent assets in the consolidated balance sheets. | |
| Included in capital leases is a lease with a related party (see Note 7(a)(ii)) which has been classified as a capital lease in accordance with Financial Accounting Standards Board (“FASB”) No. 13 and is included in contractual rights at a capitalized amount of $2.4 million. Accumulated amortization of $1.9 million and $2.0 million as of May 2, 2009 and August 1, 2009, respectively, has been included in the allowance for depreciation and amortization. | ||
| At May 2, 2009, minimum annual contractual commitments under the Company’s leases, net of estimated sublease income (see Note 7(a)(i)), were as follows: | ||
| Capital lease |
Operating
leases |
||||||
| ($ in thousands) | |||||||
|
2010 |
$ | 702 | $ | 102,600 | |||
|
2011 |
702 | 89,840 | |||||
|
2012 |
702 | 76,235 | |||||
|
2013 |
426 | 65,709 | |||||
|
2014 |
401 | 57,480 | |||||
|
Thereafter |
263 | 166,385 | |||||
|
Total guaranteed contract payments |
3,196 | $ | 558,249 | ||||
|
Amounts representing interest |
(902 | ) | |||||
|
Less: Current portion |
(420 | ) | |||||
| $ | 1,874 | ||||||
18
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
| Contract expense for all operating leases was $198.4 million for the year ended May 2, 2009. | ||
|
6. Profit Sharing Plan |
The Company established a defined contribution profit sharing plan covering employees who have one credited year of service and who have reached age 21. A credited year is defined as a 12 consecutive month period during which an employee is credited with at least 1,000 hours of service. Effective February 1, 2008, employees who have reached age 18 and have been credited with at least 1,000 hours of service can join the plan. | |
| The Company’s matching contribution is equal to 100% of the employee’s contribution up to a maximum amount of 4% of each employee’s salary, but in no event could the employee’s total contribution for any calendar tax year exceed the limit prescribed by the Internal Revenue Code. | ||
| The employee is 100% vested in Company matching contributions made on and after January 1, 2002. For Company matching contributions made prior to January 1, 2002, the employee begins vesting 20% at the 3 rd year of credited service and 20% per year thereafter, until reaching 100% vesting at the 7 th credited year of service. | ||
| Total Company contributions amounted to approximately $3.0 million for the year ended May 2, 2009. | ||
19
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
7. Related Party Transactions |
Unless otherwise stated, the principal stockholder of the Company is also a stockholder of the entities referred to below. The accounts payable to affiliate relates substantially to the transactions described in paragraph (b) below: | |
|
(a) The operating leases and capital lease described in Note 5 include commitments for certain premises leased by the Company from related parties, as follows: |
||
|
(i) The Company’s previous administrative offices located in New York City are subleased from an affiliated company, BKS, through March 2020. The sublease agreement provides for annual rentals ranging from $555,000 to $595,000 for the first 12 years, adjusting to fair market value in the last 13 years based upon a calculation stipulated in the lease. During fiscal 2004, the Company vacated the premises covered by this lease and relocated its corporate offices from New York City, NY to Basking Ridge, NJ. The Company has entered into a sublease of this space with a new unrelated third party tenant through March 2020. This sublease agreement provides for annual rental payments of approximately equivalent amounts to the sublease with BKS. Sublease income is recorded as a reduction of rent expense. |
||
|
(ii) The Company leases a store from a partnership in which the principal stockholder of the Company has a majority interest, for a 30-year term ending in 2014. The lease provides for annual rentals of $401,000 but also provides for periodic increases in annual rentals based upon the determination of fair market rent, as defined in the lease. The lease has been accounted for as a capital lease based on the minimum lease payment requirements at the inception of the lease. Increases in the minimum rentals are expensed as incurred. |
||
20
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
(b) During the three months ended August 1, 2009 and August 2, 2008 and the year ended May 2, 2009, the Company had net purchases of college textbooks from MBS Textbook Exchange, Inc. (“MBS”), an affiliate, approximating $68.7 million, $74.6 million and $90.6 million, respectively. In addition, the Company earned commissions from MBS’s buy-back program of used college textbooks and distance learning approximating $6.8 million and $4.7 million during the three months ended August 1, 2009 and August 2, 2008, respectively, and $14.7 million for the year ended May 2, 2009. |
||
|
(c) The Company allocates certain administrative expenses to BKS incurred on its behalf. Allocated expenses were approximately $0.1 million for the three months ended August 1, 2009 and August 2, 2008, and $0.4 million for fiscal 2009. |
||
|
(d) The Company purchased $13.9 million, $16.6 million and $48.4 million, (at cost) of trade books from BKS during the three months ended August 1, 2009 and August 2, 2008 and the fiscal year ended May 2, 2009, respectively. The books were sold at retail in certain of the Company’s college bookstores. In addition, the Company was allocated expenses from BKS approximating $1.1 million, $0.9 million and $4.3 million for the three months ended August 1, 2009, August 2, 2008 and the fiscal year ended May 2, 2009, respectively, for occupancy, insurance and other related costs. |
||
|
(e) The Company is provided with national freight distribution, including trucking services, by Argix Direct Inc. (“Argix”) (formerly the LTA Group, Inc.), a company in which the brother of the principal stockholder owns a minority interest. The Company paid Argix approximately $0.4 million and $0.5 million during the three months ended August 1, 2009 and August 2, 2008, respectively, and $1.6 million during the fiscal year ended May 2, 2009. The Company believes these costs compare favorably with other third-party freight carriers. |
||
21
Barnes & Noble College Booksellers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information for Periods Ended August 1, 2009 and
August 2, 2008 is Unaudited
|
8. Fair Value |
SFAS No. 157, “Fair Value Measurements”, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework, creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements, and details the disclosures that are required for items measured at fair value. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis. Under SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, entities are permitted to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value measurement option under SFAS No. 159 for any of its financial assets or liabilities. | |
|
9. Subsequent Events |
SFAS No. 165 requires that companies evaluate subsequent events through the date that the financial statements are issued. Management has evaluated subsequent events through the time of the filing of these financial statements on December 9, 2009.
On September 30, 2009, BKS completed their acquisition of the Company through a stock purchase agreement previously entered into on August 7, 2009, with the shareholders, pursuant to which BKS acquired all of the issued and outstanding capital stock of the Company. Assets and liabilities excluded from the sale were removed from the Company prior to closing including common stock of BKS (see Note 2). In connection with the distribution of the excluded assets, 667,058 shares of the common stock of BKS previously held by the Company were transferred to members of its management team and employees. The previously announced purchase price of $596 million was reduced to reflect $82 million in cash bonuses paid by the Company to members of its management team and employees immediately prior to closing. In conjunction with the transaction, the revolving credit facility described in Note 4 was repaid in full. |
|
22
Exhibit 99.2
BARNES & NOBLE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Financial Statements
(Thousands of dollars, except per share data)
The accompanying unaudited pro forma condensed consolidated financial statements have been prepared by Barnes & Noble, Inc. (the Company) to reflect its completed acquisition of Barnes & Noble College Booksellers, Inc. (B&N College) on September 30, 2009, as described in Item 2.01 of the Current Report on Form 8-K filed on October 1, 2009.
On September 29, 2009, the Board of Directors of the Company authorized a change in the Company’s fiscal year end from the Saturday closest to the last day of January to the Saturday closest to the last day of April. The change in fiscal year, which became effective on September 30, 2009 upon the closing of the acquisition of B&N College by the Company, gives the Company and B&N College the same fiscal year. The change was intended to better align the Company’s fiscal year with the business cycles of both the Company and B&N College.
The unaudited pro forma condensed consolidated balance sheet is based on the assumptions and adjustments which give effect to events that are directly attributable to the acquisition and factually supportable regardless of whether they have continuing impact or are nonrecurring. The unaudited pro forma condensed consolidated balance sheet as of August 1, 2009 is based on the Company’s historical balance sheet as of that date, and gives effect to the acquisition transaction as if it had occurred on August 1, 2009.
The unaudited pro forma condensed consolidated statements of operations are based on the assumptions and adjustments which give effect to events that are: (i) directly attributable to the acquisition transaction; (ii) expected to have a continuing impact; and (iii) factually supportable, as described in the accompanying notes. The unaudited pro forma condensed consolidated statements of operations for the 13 and 26 weeks ended August 1, 2009 and the 13 weeks ended May 2, 2009 are based on the historical condensed consolidated statements of operations of the Company and B&N College and give effect to the acquisition transaction as if it had occurred on February 3, 2008, the first day of the Company’s prior fiscal year. The unaudited pro forma condensed consolidated statements of operations for the 52 weeks ended January 31, 2009 combine the Company’s historical condensed consolidated statements of operations for the 52 weeks ended January 31, 2009 and the B&N College historical condensed consolidated statements of operations for the 52 weeks ended May 2, 2009 and give effect to the acquisition transaction as if it had occurred on February 3, 2008, the first day of the Company’s prior fiscal year. The results of operations of B&N College for the 13 weeks ended May 2, 2009 have been included in the pro forma condensed consolidated statements of operations for the 26 weeks ended August 1, 2009 and the 52 weeks ended January 31, 2009. Management believes that the assumptions used and the adjustments made are reasonable given the information available.
The allocation of the purchase price of the acquisition used in these unaudited pro forma condensed consolidated financial statements is based upon the Company’s estimates and assumptions at the date of preparation, which have been made for the purpose of developing such pro forma condensed consolidated financial statements.
1
BARNES & NOBLE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Financial Statements
(Thousands of dollars, except per share data)
The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the acquisition been consummated as of the date indicated or of the results that may be obtained in the future. The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 1, 2009, Quarterly Reports on Form 10-Q filed with the SEC on June 4, 2009 and September 10, 2009, the Transition Report on Form 10-Q filed with the SEC on November 9, 2009, recent Current Reports on Form 8-K filed with the SEC and the historical financial statements and accompanying notes of B&N College contained in Exhibit 99.1 of this Current Report on Form 8-K/A.
2
BARNES & NOBLE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of August 1, 2009
(In thousands, except per share data)
3
BARNES & NOBLE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statements of Operations
13 weeks ended May 2, 2009
(In thousands, except per share data)
|
Historical Barnes
& Noble Inc. |
Historical
Barnes & Noble College Booksellers |
Pro Forma
Adjustments |
Pro Forma
Consolidated |
|||||||||||||
|
Sales |
$ | 1,105,152 | $ | 196,484 | $ | 1,133 | (N) | $ | 1,302,769 | |||||||
|
Cost of sales and occupancy |
773,491 | 154,617 | — | 928,108 | ||||||||||||
|
Gross profit |
331,661 | 41,867 | 1,133 | 374,661 | ||||||||||||
|
Selling and administrative expenses |
286,554 | 65,207 | (3,049 | )(O) | 348,712 | |||||||||||
|
Depreciation and amortization |
45,879 | 6,776 | 3,715 | (P) | 56,370 | |||||||||||
|
Pre-opening expenses |
2,472 | 22 | — | 2,494 | ||||||||||||
|
Operating profit (loss) |
(3,244 | ) | (30,138 | ) | 467 | (32,915 | ) | |||||||||
|
Interest expense, net |
(199 | ) | (341 | ) | (12,735 | )(Q) | (13,275 | ) | ||||||||
|
Loss from continuing operations before taxes |
(3,443 | ) | (30,479 | ) | (12,268 | ) | (46,190 | ) | ||||||||
|
Income taxes |
(1,374 | ) | 2,381 | (19,437 | )(R) | (18,430 | ) | |||||||||
|
Loss from continuing operations (net of income tax) |
(2,069 | ) | (32,860 | ) | 7,169 | (27,760 | ) | |||||||||
|
Loss from discontinued operations (net of income tax) |
(654 | ) | — | — | (654 | ) | ||||||||||
|
Net loss |
(2,723 | ) | (32,860 | ) | 7,169 | (28,414 | ) | |||||||||
|
Net loss attributable to noncontrolling interests |
30 | — | — | 30 | ||||||||||||
|
Net loss attributable to Barnes & Noble, Inc. |
$ | (2,693 | ) | $ | (32,860 | ) | $ | 7,169 | $ | (28,384 | ) | |||||
|
Loss attributable to Barnes & Noble, Inc. |
||||||||||||||||
|
Loss from continuing operations |
$ | (2,069 | ) | $ | (27,760 | ) | ||||||||||
|
Less loss attributable to noncontrolling interests |
30 | 30 | ||||||||||||||
|
Loss from continuing operations attributable to Barnes & Noble, Inc. |
$ | (2,039 | ) | $ | (27,730 | ) | ||||||||||
|
Basic earnings per common share |
||||||||||||||||
|
Loss from continuing operations attributable to Barnes & Noble, Inc. |
$ | (0.04 | ) | $ | (0.51 | ) | ||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
(0.01 | ) | (0.01 | ) | ||||||||||||
|
Net loss attributable to Barnes & Noble, Inc. |
$ | (0.05 | ) | $ | (0.52 | ) | ||||||||||
|
Diluted earnings per common share |
||||||||||||||||
|
Loss from continuing operations attributable to Barnes & Noble, Inc. |
$ | (0.04 | ) | $ | (0.51 | ) | ||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
(0.01 | ) | (0.01 | ) | ||||||||||||
|
Net loss attributable to Barnes & Noble, Inc. |
$ | (0.05 | ) | $ | (0.52 | ) | ||||||||||
|
Weighted average common shares outstanding |
||||||||||||||||
|
Basic |
54,759 | 54,759 | ||||||||||||||
|
Diluted |
54,759 | 54,759 | ||||||||||||||
4
BARNES & NOBLE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statements of Operations
13 weeks ended August 1, 2009
(In thousands, except per share data)
|
Historical Barnes
& Noble Inc. |
Historical
Barnes & Noble College Booksellers |
Pro Forma
Adjustments |
Pro Forma
Consolidated |
|||||||||||||
|
Sales |
$ | 1,155,681 | $ | 215,125 | $ | 200 | (S) | $ | 1,371,006 | |||||||
|
Cost of sales and occupancy |
799,826 | 168,272 | — | 968,098 | ||||||||||||
|
Gross profit |
355,855 | 46,853 | 200 | 402,908 | ||||||||||||
|
Selling and administrative expenses |
288,651 | 65,011 | (2,909 | )(T) | 350,753 | |||||||||||
|
Depreciation and amortization |
44,854 | 6,422 | 3,715 | (U) | 54,991 | |||||||||||
|
Pre-opening expenses |
1,698 | 52 | — | 1,750 | ||||||||||||
|
Operating profit (loss) |
20,652 | (24,632 | ) | (606 | ) | (4,586 | ) | |||||||||
|
Interest expense, net |
(304 | ) | (663 | ) | (15,254 | )(V) | (16,221 | ) | ||||||||
|
Income from continuing operations before taxes |
20,348 | (25,295 | ) | (15,860 | ) | (20,807 | ) | |||||||||
|
Income taxes |
8,110 | (498 | ) | (15,898 | )(W) | (8,286 | ) | |||||||||
|
Income from continuing operations (net of income tax) |
12,238 | (24,797 | ) | 38 | (12,521 | ) | ||||||||||
|
Loss from discontinued operations (net of income tax) |
— | — | — | — | ||||||||||||
|
Net income |
12,238 | (24,797 | ) | 38 | (12,521 | ) | ||||||||||
|
Net loss attributable to noncontrolling interests |
29 | — | — | 29 | ||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 12,267 | $ | (24,797 | ) | $ | 38 | $ | (12,492 | ) | ||||||
|
Income attributable to Barnes & Noble, Inc. |
||||||||||||||||
|
Income from continuing operations |
$ | 12,238 | $ | (12,521 | ) | |||||||||||
|
Less loss attributable to noncontrolling interests |
29 | 29 | ||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 12,267 | $ | (12,492 | ) | |||||||||||
|
Basic earnings per common share |
||||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 0.22 | $ | (0.23 | ) | |||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
— | — | ||||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 0.22 | $ | (0.23 | ) | |||||||||||
|
Diluted earnings per common share |
||||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 0.21 | $ | (0.23 | ) | |||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
— | — | ||||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 0.21 | $ | (0.23 | ) | |||||||||||
|
Weighted average common shares outstanding |
||||||||||||||||
|
Basic |
55,186 | 55,186 | ||||||||||||||
|
Diluted |
56,221 | 56,221 | ||||||||||||||
5
BARNES & NOBLE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statements of Operations
26 weeks ended August 1, 2009
(In thousands, except per share data)
|
Historical Barnes
& Noble Inc. |
Historical
Barnes & Noble College Booksellers |
Pro Forma
Adjustments |
Pro Forma
Consolidated |
|||||||||||||
|
Sales |
$ | 2,260,833 | $ | 411,609 | $ | 1,333 | (S) | $ | 2,673,775 | |||||||
|
Cost of sales and occupancy |
1,573,317 | 322,889 | — | 1,896,206 | ||||||||||||
|
Gross profit |
687,516 | 88,720 | 1,333 | 777,569 | ||||||||||||
|
Selling and administrative expenses |
575,205 | 130,218 | (5,958 | )(T) | 699,465 | |||||||||||
|
Depreciation and amortization |
90,733 | 13,198 | 7,430 | (U) | 111,361 | |||||||||||
|
Pre-opening expenses |
4,170 | 74 | — | 4,244 | ||||||||||||
|
Operating profit |
17,408 | (54,770 | ) | (139 | ) | (37,501 | ) | |||||||||
|
Interest expense, net |
(503 | ) | (1,004 | ) | (27,989 | )(V) | (29,496 | ) | ||||||||
|
Income from continuing operations before taxes |
16,905 | (55,774 | ) | (28,128 | ) | (66,997 | ) | |||||||||
|
Income taxes |
6,736 | 1,883 | (35,335 | )(W) | (26,716 | ) | ||||||||||
|
Income from continuing operations (net of income tax) |
10,169 | (57,657 | ) | 7,207 | (40,281 | ) | ||||||||||
|
Loss from discontinued operations (net of income tax) |
(654 | ) | — | — | (654 | ) | ||||||||||
|
Net income |
9,515 | (57,657 | ) | 7,207 | (40,935 | ) | ||||||||||
|
Net loss attributable to noncontrolling interests |
59 | — | — | 59 | ||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 9,574 | $ | (57,657 | ) | $ | 7,207 | $ | (40,876 | ) | ||||||
|
Income attributable to Barnes & Noble, Inc. |
||||||||||||||||
|
Income from continuing operations |
$ | 10,169 | $ | (40,281 | ) | |||||||||||
|
Less loss attributable to noncontrolling interests |
59 | 59 | ||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 10,228 | $ | (40,222 | ) | |||||||||||
|
Basic earnings per common share |
||||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 0.18 | $ | (0.73 | ) | |||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
(0.01 | ) | (0.01 | ) | ||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 0.17 | $ | (0.74 | ) | |||||||||||
|
Diluted earnings per common share |
||||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 0.18 | $ | (0.73 | ) | |||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
(0.01 | ) | (0.01 | ) | ||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 0.17 | $ | (0.74 | ) | |||||||||||
|
Weighted average common shares outstanding |
||||||||||||||||
|
Basic |
54,973 | 54,973 | ||||||||||||||
|
Diluted |
55,894 | 55,894 | ||||||||||||||
6
BARNES & NOBLE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statements of Operations
52 weeks ended January 31, 2009
(In thousands, except per share data)
|
Historical Barnes
& Noble Inc. January 31, 2009 |
Historical
Barnes & Noble College Booksellers May 2, 2009 |
Pro Forma
Adjustments |
Pro Forma
Consolidated |
|||||||||||||
|
Sales |
$ | 5,121,804 | $ | 1,782,884 | $ | 2,491 | (X) | $ | 6,907,179 | |||||||
|
Cost of sales and occupancy |
3,540,596 | 1,405,701 | — | 4,946,297 | ||||||||||||
|
Gross profit |
1,581,208 | 377,183 | 2,491 | 1,960,882 | ||||||||||||
|
Selling and administrative expenses |
1,251,524 | 273,548 | (13,403 | )(Y) | 1,511,669 | |||||||||||
|
Depreciation and amortization |
173,557 | 27,381 | 14,860 | (Z) | 215,798 | |||||||||||
|
Pre-opening expenses |
12,796 | 295 | — | 13,091 | ||||||||||||
|
Operating profit |
143,331 | 75,959 | 1,034 | 220,324 | ||||||||||||
|
Interest (expense) income, net |
(2,344 | ) | (4,447 | ) | (54,174 | )(AA) | (60,965 | ) | ||||||||
|
Income from continuing operations before taxes |
140,987 | 71,512 | (53,140 | ) | 159,359 | |||||||||||
|
Income taxes |
55,591 | 5,151 | 2,093 | (AB) | 62,835 | |||||||||||
|
Income from continuing operations (net of income tax) |
85,396 | 66,361 | (55,233 | ) | 96,524 | |||||||||||
|
Loss from discontinued operations (net of income tax) |
(9,506 | ) | — | — | (9,506 | ) | ||||||||||
|
Net income |
75,890 | 66,361 | (55,233 | ) | 87,018 | |||||||||||
|
Net loss attributable to noncontrolling interests |
30 | — | — | 30 | ||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 75,920 | $ | 66,361 | $ | (55,233 | ) | $ | 87,048 | |||||||
|
Income attributable to Barnes & Noble, Inc. |
||||||||||||||||
|
Income from continuing operations |
$ | 85,396 | $ | 96,524 | ||||||||||||
|
Less loss attributable to noncontrolling interests |
30 | 30 | ||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 85,426 | $ | 96,554 | ||||||||||||
|
Basic earnings per common share |
||||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 1.55 | $ | 1.69 | ||||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
(0.17 | ) | (0.17 | ) | ||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 1.38 | $ | 1.52 | ||||||||||||
|
Diluted earnings per common share |
||||||||||||||||
|
Income from continuing operations attributable to Barnes & Noble, Inc. |
$ | 1.49 | $ | 1.65 | ||||||||||||
|
Loss from discontinued operations attributable to Barnes & Noble, Inc. |
(0.17 | ) | (0.17 | ) | ||||||||||||
|
Net income attributable to Barnes & Noble, Inc. |
$ | 1.32 | $ | 1.48 | ||||||||||||
|
Weighted average common shares outstanding |
||||||||||||||||
|
Basic |
55,207 | 55,207 | ||||||||||||||
|
Diluted |
57,327 | 57,327 | ||||||||||||||
7
BARNES & NOBLE, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
(Thousands of dollars, except per share data)
| (1) | Basis of Pro Forma Presentation |
The unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of Barnes & Noble, Inc. (the Company) and Barnes & Noble College Booksellers, Inc. (B&N College) after giving effect to the cash paid, seller financing and a new credit facility used to consummate the acquisition of B&N College, as well as certain pro forma adjustments.
On September 29, 2009, the Board of Directors of the Company authorized a change in the Company’s fiscal year end from the Saturday closest to the last day of January to the Saturday closest to the last day of April. The change in fiscal year, which became effective on September 30, 2009 upon the closing of the acquisition of B&N College by the Company, gives the Company and B&N College the same fiscal year. The change was intended to better align the Company’s fiscal year with the business cycles of both the Company and B&N College.
The unaudited pro forma condensed consolidated balance sheet as of August 1, 2009 is based on the Company’s historical balance sheet as of that date, and gives effect to the acquisition transaction as if it had occurred on August 1, 2009. The pro forma adjustments give effect to events that are directly attributable to the acquisition and are factually supportable regardless of whether they have continuing impact or are nonrecurring.
The unaudited pro forma condensed consolidated statements of operations for the 13 and 26 weeks ended August 1, 2009 and the 13 weeks ended May 2, 2009 are based on the historical condensed consolidated statements of operations of the Company and B&N College and give effect to the acquisition transaction as if it had occurred on February 3, 2008, the first day of the Company’s prior fiscal year. The unaudited pro forma condensed consolidated statements of operations for the 52 weeks ended January 31, 2009 combine the Company’s historical condensed consolidated statements of operations for the 52 weeks ended January 31, 2009 and the B&N College historical condensed consolidated statements of operations for the 52 weeks ended May 2, 2009 and give effect to the acquisition transaction as if it had occurred on February 3, 2008, the first day of the Company’s prior fiscal year. The pro forma condensed consolidated statements of operations combine the historical results of the Company and B&N College, including pro forma adjustments.
The allocation of the purchase price of the acquisition used in these unaudited pro forma condensed consolidated financial statements is based upon the Company’s estimates and assumptions at the date of preparation, which have been made for the purpose of developing such pro forma condensed consolidated financial statements.
8
BARNES & NOBLE, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements – (Continued)
(Thousands of dollars, except per share data)
The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the historical financial statements and accompanying notes of B&N College (contained elsewhere in this Form 8-K/A) and the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 1, 2009, Quarterly Reports on Form 10-Q filed with the SEC on June 4, 2009 and September 10, 2009, the Transition Report on Form 10-Q filed with the SEC on November 9, 2009, recent Current Reports on Form 8-K filed with the SEC and the historical financial statements and accompanying notes of B&N College contained in Exhibit 99.1 of this Current Report on Form 8-K/A. The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the acquisition been consummated as of the date indicated or of the results that may be obtained in the future.
| (2) | Purchase Price and Purchase Price Allocation |
On September 30, 2009, the Company completed the acquisition (the Acquisition) of B&N College from Leonard Riggio and Louise Riggio (the Sellers) pursuant to a Stock Purchase Agreement dated as of August 7, 2009 among the Company and the Sellers (the Purchase Agreement).
The purchase price paid to the Sellers under the Purchase Agreement was $596,000, consisting of $346,000 in cash and $250,000 in aggregate principal amount of the Seller Notes described below. However, pursuant to the terms of the Purchase Agreement, the cash paid to the Sellers was reduced by $82,352 in cash bonuses paid by B&N College to 192 members of its management team and employees, not including Leonard Riggio.
On September 30, 2009, in connection with the closing of the Acquisition described above, the Company issued to the Sellers (i) a senior subordinated note in the principal amount of $100,000, payable in full on December 15, 2010, with interest of 8% per annum payable on the unpaid principal amount (the Senior Seller Note), and (ii) a junior subordinated note in the principal amount of $150,000, payable in full on the fifth anniversary of the closing of the Acquisition, with interest of 10% per annum payable on the unpaid principal amount (the Junior Seller Note; and together with the Senior Seller Note, the Seller Notes).
9
BARNES & NOBLE, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements – (Continued)
(Thousands of dollars, except per share data)
Credit Facility
On September 30, 2009, the Company entered into a credit agreement with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and other lenders, under which the lenders committed to provide up to $1,000,000 in commitments under a four-year asset-backed revolving credit facility (the Credit Facility). Banc of America Securities LLC, J.P. Morgan Securities Inc. and Wells Fargo Retail Finance, LLC are the joint lead arrangers for the Credit Facility.
The purchase price was allocated to tangible and identifiable intangible assets acquired and liabilities assumed, based on the Company’s estimates of fair value as of the acquisition date of September 30, 2009. The excess of the purchase price over the net tangible and identifiable intangible assets is recorded as goodwill. Based upon a valuation and assuming the acquisition transaction had occurred on August 1, 2009, the purchase price for these transactions would be allocated as set forth in the following table:
|
Cash Paid |
$ | 263,648 | ||
|
Seller Notes |
250,000 | |||
|
Fair value of total consideration |
$ | 513,648 | ||
|
Allocation of purchase price: |
||||
|
Current assets |
$ | 637,643 | ||
|
Non-current assets |
118,291 | |||
|
Trade Name |
245,000 | |||
|
Customer Relationships |
255,000 | |||
|
Goodwill |
278,898 | |||
|
Total assets acquired |
1,534,832 | |||
|
Deferred tax liability |
(227,685 | ) | ||
|
Liabilities assumed |
(793,499 | ) | ||
| $ | 513,648 | |||
Trade Name
The Company previously licensed the “Barnes & Noble” trade name from B&N College under certain agreements. The acquisition of B&N College gave the Company exclusive ownership of the Barnes & Noble trade name. The $245,000 ascribed to the trade name represents solely the estimated incremental value acquired as part of the acquisition, which is not representative of the value of the Barnes & Noble trade name taken as a whole. The trade name has been classified as an indefinite life intangible asset.
Customer Relationships
The estimated fair value of customer relationships of B&N College is $255,000. Customers are comprised of existing college and university contractual relationships at the date of acquisition.
Amortization of Fair Value Ascribed to Customer Relationships
Historical customer attrition rates imply a life of 50 years, however the useful life was shortened to 25 years since the majority of the value of discounted cash flows are captured in this period. The $255,000 will be amortized evenly over the 25 year period.
10
BARNES & NOBLE, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements – (Continued)
(Thousands of dollars, except per share data)
| (3) | Pro Forma Adjustments |
The following adjustments have been reflected in the unaudited pro forma condensed consolidated balance sheet as of August 1, 2009:
| (A) | Represents the on hand cash consideration offset by loan proceeds paid by the Company in connection with the acquisition of B&N College. |
| (B) | The majority of B&N College’s inventories are valued at the last-in, first-out (LIFO) method. In establishing the fair inventory value at lower of cost or market, the LIFO reserve at the date of acquisition was eliminated and reset to zero. A new base year layer has been established at the acquisition date. |
| (C) | To record the current portion of the deferred financing fees related to the Credit Facility. |
| (D) | To adjust buildings and leasehold improvements to the estimate of its fair value. |
| (E) | To adjust fixtures and equipment to the estimate of its fair value. |
| (F) | To record the valuation of goodwill. |
| (G) | To record the allocation of identifiable intangible assets: |
|
Trade Name |
$ | 245,000 | |
|
Customer Relationships |
255,000 | ||
| $ | 500,000 | ||
| (H) | To record deferred financing fees related to the Credit Facility. |
| (I) | To record the following pro forma adjustments to accrued liabilities: |
|
Payment of B&N College short-term borrowings |
$ | (180,000 | ) | |
|
Record B&N College short-term deferred taxes to the Company’s rate |
24,534 | |||
|
Acquisition related fees, net of tax |
6,640 | |||
| $ | (148,826 | ) | ||
| (J) | The following table represents cash borrowed under the Credit Facility: |
|
Payment of B&N College short-term borrowings |
$ | 180,000 | |
|
Cash borrowed to acquire B&N College |
113,648 | ||
|
Cash Paid for financing fees |
37,069 | ||
|
Cash bonus paid to B&N College employees |
82,352 | ||
| $ | 413,069 | ||
| (K) | To record a deferred tax liability representing the difference between the estimated book and tax basis of the net assets acquired. |
11
BARNES & NOBLE, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements – (Continued)
(Thousands of dollars, except per share data)
| (L) | To record Seller Notes issued in connection with the acquisition of B&N College. |
| (M) | To record the elimination of the historical stockholders’ equity of B&N College and the impact of the pro forma adjustment to reflect acquisition related fees, net of tax (See Note I). |
The following adjustments have been reflected in the unaudited pro forma condensed consolidated statement of operations for the 13 weeks ended May 2, 2009:
| (N) | To record marketing income for certain third party marketing agreements of Textbooks.com, Inc. (Textbooks.com) that were assigned to B&N College. |
| (O) | To record the following effects on selling and administrative expenses related to the termination and changes in certain compensation arrangements, textbook royalty and non-operating expenses not acquired in the transaction and not to be replaced after the transaction: |
|
Compensation arrangements |
$ | 1,729 | |
|
Textbook royalty(1) |
972 | ||
|
Non-operating expenses not acquired |
348 | ||
| $ | 3,049 | ||
| (1) | Under a previous agreement between Barnes & Noble.com, B&N College and Textbooks.com, Barnes & Noble.com was granted the right to sell college textbooks over the Internet using the “Barnes & Noble” name. Barnes & Noble.com paid Textbooks.com a royalty on revenues from the sale of books designated as textbooks. This agreement was terminated with the acquisition of B&N College, saving Barnes & Noble.com royalty expenses, which has been reflected as a pro forma adjustment. |
| (P) | To record depreciation on the step-up in property and equipment to its estimated fair value and record amortization related to the customer relationships. |
| (Q) | To record the interest related to the Credit Facility and the Seller Notes, lost interest income on cash used to finance the acquisition as well as the amortization of the deferred financing fees related to the Credit Facility, offset by interest on the short-term borrowings at B&N College and the replacement of the Company’s prior credit facility. |
| (R) | To record the effect of the Company’s tax rate on B&N College’s earnings as B&N College was previously taxed as an S corporation and the effect of pro forma adjustments. |
The following adjustments have been reflected in the unaudited pro forma condensed consolidated statement of operations for the 13 and 26 weeks ended August 1, 2009:
| (S) | To record marketing income for certain third party marketing agreements of Textbooks.com that were assigned to B&N College. |
12
BARNES & NOBLE, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements – (Continued)
(Thousands of dollars, except per share data)
| (T) | To record the following effects on selling and administrative expenses related to the termination and changes in certain compensation arrangements, textbook royalty and non-operating expenses not acquired in the transaction and not to be replaced after the transaction: |
| August 1, 2009 | ||||||
| 13 Weeks Ended | 26 Weeks Ended | |||||
|
Compensation arrangements |
$ | 1,733 | $ | 3,462 | ||
|
Textbook royalty (1) |
936 | 1,908 | ||||
|
Non-operating expenses not acquired |
240 | 588 | ||||
| $ | 2,909 | $ | 5,958 | |||
| (1) | Under a previous agreement between Barnes & Noble.com, B&N College and Textbooks.com, Barnes & Noble.com was granted the right to sell college textbooks over the Internet using the “Barnes & Noble” name. Barnes & Noble.com paid Textbooks.com a royalty on revenues from the sale of books designated as textbooks. This agreement was terminated with the acquisition of B&N College, saving Barnes & Noble.com royalty expenses, which has been reflected as a pro forma adjustment. |
| (U) | To record depreciation on the step-up in property and equipment to its estimated fair value and record amortization related to the customer relationships. |
| (V) | To record the interest related to the Credit Facility and the Seller Notes, lost interest income on cash used to finance the acquisition as well as the amortization of the deferred financing fees related to the Credit Facility, offset by interest on the short-term borrowings at B&N College and the replacement of the Company’s prior credit facility. |
| (W) | To record the effect of the Company’s tax rate on B&N College’s earnings as B&N College was previously taxed as an S corporation and the effect of the pro forma adjustments. |
The following adjustments have been reflected in the unaudited pro forma condensed consolidated statement of operations for the 52 weeks ended January 31, 2009:
| (X) | To record marketing income for certain third party marketing agreements of Textbooks.com that were assigned to B&N College. |
| (Y) | To record the following effects on selling and administrative expenses related to the termination and changes in certain compensation arrangements, text book royalty and non-operating expenses not acquired in the transaction and not to be replaced after the transaction: |
|
Compensation arrangements |
$ | 6,914 | |
|
Textbook royalty (1) |
5,528 | ||
|
Non-operating expenses not acquired |
961 | ||
| $ | 13,403 | ||
| (1) | Under a previous agreement between Barnes & Noble.com, B&N College and Textbooks.com, Barnes & Noble.com was granted the right to sell college textbooks over the Internet using the “Barnes & Noble” name. Barnes & Noble.com paid Textbooks.com a royalty on revenues from the sale of books designated as textbooks. This agreement was terminated with the acquisition of B&N College, saving Barnes & Noble.com royalty expenses, which has been reflected as a pro forma adjustment. |
13
BARNES & NOBLE, INC. AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements – (Continued)
(Thousands of dollars, except per share data)
| (Z) | To record depreciation on the step-up in property and equipment to its estimated fair value and record amortization related to the customer relationships. |
| (AA) | To record the interest related to the Credit Facility and the Seller Notes, lost interest income on cash used to finance the acquisition as well as the amortization of the deferred financing fees related to the Credit Facility, offset by interest on the short-term borrowings at B&N College and the replacement of the Company’s prior credit facility. |
| (BB) | To record the effect of the Company’s tax rate on B&N College’s earnings and the effect of the pro forma adjustments as B&N College was previously taxed as an S corporation and the effect of the pro forma adjustments. |
14