Restatement of Prior Period Financial Statements

The Company has restated its previously reported consolidated financial statements for the years ended April 28, 2012 and April 30, 2011, including the opening stockholders’ 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 adjustment to decrease cost of sales by $6,700 ($4,027 after tax) and $8,460 ($5,084 after tax) to correctly present the statement of operations for fiscal 2012 and 2011, respectively. The Company also decreased accounts payable by $89,500 and $96,200 at April 30, 2011 and April 28, 2012, respectively; increased income taxes payable included in Accrued Liabilities in the consolidated Balance Sheets by $14,939 and $18,598 at April 30, 2011 and April 28, 2012, respectively; and increased retained earnings by $74,561 and $78,588, net of tax at April 30, 2011 and April 28, 2012, respectively.

In addition, in reviewing the Company’s components of deferred income tax assets and liabilities, management determined that deferred income tax liability in the amount of $26,026, net, was related to a transaction in which gain was reported for both accounting and tax purposes prior to 2010. Accordingly, management concluded that this deferred income tax liability should be reversed. In accordance with ASC 250, the Company recorded an adjustment to decrease deferred tax liability and increase retained earnings by $26,026 at May 1, 2010. The cumulative effect of these adjustments increased previously reported retained earnings by $95,503 at May 1, 2010.

In fiscal 2013, management determined that the Company had not accrued a tenant allowance related to one of its properties in fiscal 2012. The Company recorded an adjustment to increase receivable, net and other long-term liabilities by $9,450 in fiscal 2012.

The following tables set forth the correction to each of the individual affected line items in the consolidated balance sheets as of April 30, 2011 and April 28, 2012 and the consolidated statement of operations for fiscal 2011 and 2012. The restated amounts presented below reflect the impact of these corrections, as well as adjustments of $52,072 and $47,026 related to the current portion of deferred rent and tenant allowances on the April 30, 2011 and April 28, 2012 balance sheet, respectively. The Company did not present tables for the adjustments within the consolidated cash flow statement since all of the adjustments were within the operating section of the consolidated cash flow statement. The above corrections and adjustments did not effect total cash flows from operating activities, financing activities or investing activities for any period presented.

The financial information included in the accompanying financial statements and notes thereto reflect the affects of the corrections and other adjustments described in the preceding discussion and tables.


Balance Sheet Data:	As of April 30, 2011
(In thousands, except per share data)	As Previously Reported			Corrections			Other Adjustments			Restated
Assets
Current assets:
Cash and cash equivalents	$	59,429			—			—		$	59,429
Receivables, net		150,294			—			—			150,294
Merchandise inventories, net		1,375,362			—			—			1,375,362
Prepaid expenses and other current assets		161,936			—			—			161,936

Total current assets	$	1,747,021			—			—		$	1,747,021

Property and equipment:
Land and land improvements		8,617			—			—			8,617
Buildings and leasehold improvements		1,204,108			—			—			1,204,108
Fixtures and equipment		1,670,488			—			—			1,670,488

		2,883,213			—			—			2,883,213
Less accumulated depreciation and amortization		2,178,562			—			—			2,178,562

Net property and equipment		704,651			—			—			704,651

Goodwill		524,113			—			—			524,113
Intangible assets, net		566,578			—			—			566,578
Other noncurrent assets		54,103			—			—			54,103

Total assets	$	3,596,466			—			—		$	3,596,466

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	949,010			(89,500	)		—		$	859,510
Accrued liabilities		474,575			14,939			52,072			541,586
Gift card liabilities		311,092			—			—			311,092

Total current liabilities		1,734,677			(74,561	)		52,072			1,712,188

Long-term debt		313,100			—			—			313,100
Deferred taxes		280,132			(26,026	)		—			254,106
Other long-term liabilities		448,647			—			(52,072	)		396,575
Shareholders’ equity:
Common stock; $.001 par value; 300,000 shares authorized; 90,465 shares issued		90			—			—			90
Additional paid-in capital		1,323,263			—			—			1,323,263
Accumulated other comprehensive loss		(11,630	)		—			—			(11,630	)
Retained earnings		562,379			100,587			—			662,966
Treasury stock, at cost, 33,410 shares		(1,054,192	)		—			—			(1,054,192	)

Total Shareholders’ equity		819,910			100,587			—			920,497

Commitments and contingencies		—			—			—			—

Total liabilities and shareholders’ equity	$	3,596,466			—			—		$	3,596,466


Balance Sheet Data:	As of April 28, 2012
(In thousands, except per share data)	As Previously Reported			Corrections			Other Adjustments			Restated
Assets
Current assets:
Cash and cash equivalents	$	54,131			—			—		$	54,131
Receivables, net		160,497			9,450			—			169,947
Merchandise inventories, net		1,561,841			—			—			1,561,841
Prepaid expenses and other current assets		221,324			—			—			221,324

Total current assets	$	1,997,793			9,450			—		$	2,007,243

Property and equipment:
Land and land improvements		2,541			—			—			2,541
Buildings and leasehold improvements		1,196,764			—			—			1,196,764
Fixtures and equipment		1,784,492			—			—			1,784,492

		2,983,797			—			—			2,983,797
Less accumulated depreciation and amortization		2,361,142			—			—			2,361,142

Net property and equipment		622,655			—			—			622,655

Goodwill		519,685			—			—			519,685
Intangible assets, net		564,054			—			—			564,054
Other noncurrent assets		61,062			—			—			61,062

Total assets	$	3,765,249			9,450			—		$	3,774,699

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	959,423			(96,200	)		—		$	863,223
Accrued liabilities		546,495			18,598			47,026			612,119
Gift card liabilities		321,362			—			—			321,362

Total current liabilities		1,827,280			(77,602	)		47,026			1,796,704

Long-term debt		324,200			—			—			324,200
Deferred taxes		268,774			(26,026	)		—			242,748
Other long-term liabilities		405,065			8,464			(47,026	)		366,503
Redeemable Preferred Shares; $.001 par value; 5,000 shares authorized; 204 shares issued		192,273			—			—			192,273

Shareholders’ equity:
Common stock; $.001 par value; 300,000 shares authorized; 91,376 shares issued		91			—			—			91
Additional paid-in capital		1,340,909			—			—			1,340,909
Accumulated other comprehensive loss		(16,635	)		—			—			(16,635	)
Retained earnings		481,574			104,614			—			586,188
Treasury stock, at cost, 33,722 shares		(1,058,282	)		—			—			(1,058,282	)

Total Shareholders’ equity		747,657			104,614			—			852,271

Commitments and contingencies		—			—			—			—

Total liabilities and shareholders’ equity	$	3,765,249			9,450			—		$	3,774,699


Statement of Operations Data:	Fiscal 2011
	As Previously Reported			Corrections			Restated
(In thousands, except per share data)
Sales	$	6,998,565			—		$	6,998,565
Cost of sales and occupancy		5,205,712			(8,460	)		5,197,252

Gross profit		1,792,853			8,460			1,801,313

Selling and administrative expenses		1,629,465			—			1,629,465
Depreciation and amortization		228,647			—			228,647

Operating income (loss)		(65,259	)		8,460			(56,799	)
Interest expense, net and amortization of deferred financing fees		(57,350	)		—			(57,350	)

Income (loss) before income taxes (benefit)		(122,609	)		8,460			(114,149	)
Income taxes (benefit)		(48,652	)		3,376			(45,276	)

Net income (loss)		(73,957	)		5,084			(68,873	)
Net loss attributable to noncontrolling interests		37			—			37

Net income (loss) attributable to Barnes & Noble, Inc.	$	(73,920	)		5,084		$	(68,836	)

Diluted income (loss) per common share

Net income (loss) attributable to Barnes & Noble, Inc.	$	(1.31	)		0.09		$	(1.22	)


Statement of Operations Data:	Fiscal 2012
	As Previously Reported			Corrections			Restated
(In thousands, except per share data)
Sales	$	7,129,199			—		$	7,129,199
Cost of sales and occupancy		5,218,383			(6,700	)		5,211,683

Gross profit		1,910,816			6,700			1,917,516

Selling and administrative expenses		1,739,452			—			1,739,452
Depreciation and amortization		232,667			—			232,667

Operating income (loss)		(61,303	)		6,700			(54,603	)
Interest expense, net and amortization of deferred financing fees		(35,304	)		—			(35,304	)

Income (loss) before income taxes (benefit)		(96,607	)		6,700			(89,907	)
Income taxes (benefit)		(27,740	)		2,673			(25,067	)

Net income (loss)	$	(68,867	)		4,027		$	(64,840	)

Diluted income (loss) per common share

Net income (loss)	$	(1.41	)		0.07		$	(1.34	)