Barnes and Noble 1997 Annual Report Download - page 20

Depreciation and Amortization
Depreciation and amortization increased $17.2 million,
or 28.8%, to $77.0 million in fiscal 1997 from $59.8 million in
fiscal 1996. The increase was primarily the result of the new
Barnes & Noble stores opened during fiscal 1997 and fiscal 1996.
Pre-Opening Expenses
Pre-opening expenses declined in fiscal 1997 to $12.9 million
from $17.6 million in fiscal 1996 reflecting fewer new stores
compared with prior years.
Operating Profit
Operating profit increased to $147.3 million in fiscal 1997
from $119.7 million in fiscal 1996. Despite the $15.4 million oper-
ating loss from BarnesandNoble.com, operating margin improved
to 5.3% of revenues during fiscal 1997 from 4.9% of revenues
during fiscal 1996. Excluding BarnesandNoble.com, operating
margin for the retail business improved to 5.8% of revenues.
Interest Expense, Net and Amortization of Deferred
Financing Fees
Interest expense, net of interest income, and amortization of
deferred financing fees decreased $0.6 million in fiscal 1997 to
$37.7 million from $38.3 million in fiscal 1996. The decline was
primarily due to lower borrowings under the Company’s senior
credit facilities.
Provision for Income Taxes
Barnes & Noble’s effective tax rate was 41.0% during fiscal
1997 compared with 37.1% during fiscal 1996. The fiscal 1996
provision reflected a non-recurring $3.0 million rehabilitation
tax credit.
Extraordinary Charge
As a result of obtaining a new senior credit facility during
fiscal 1997, the Company called its outstanding $190 million, 117⁄8%
senior subordinated notes on January 15, 1998, at a call premium
of 5.9375%. The extraordinary charge reflects (on an after-tax
basis) such call premium along with the write-off of related
deferred financing fees.
Earnings
Fiscal 1997 earnings before extraordinary charge increased
$13.4 million, or 26.2%, to $64.7 million (or $0.93 per diluted
share) from $51.2 million (or $0.75 per diluted share) during
fiscal 1996. The extraordinary charge in fiscal 1997 of $11.5 mil-
lion equated to $0.17 per diluted share resulting in net earnings
during fiscal 1997 of $53.2 million (or $0.76 per diluted share).
All share and per-share amounts contained in this annual
report have been restated to reflect a two-for-one split of the
Company’s common stock in September of 1997, and the adoption
of Statement of Financial Accounting Standards No. 128,
“Earnings per Share” (SFAS 128). Implementation of SFAS 128
did not have a material effect on the Company’s diluted earnings
per share. SFAS 128 requires the disclosure of basic earnings per
share in addition to diluted earnings per share.
53 WEEKS ENDED FEBRUARY 1, 1997, COMPARED WITH 52 WEEKS
ENDED JANUARY 27, 1996
Revenues
The Company’s revenues increased 23.8% during fiscal 1996
to $2.448 billion from $1.977 billion during fiscal 1995. Fiscal
1996 includes 53 weeks; excluding the impact of the 53rd week,
revenues increased 21.5%. During fiscal 1996, revenues from
Barnes & Noble stores rose 37.9% to $1.861 billion from $1.350
billion during fiscal 1995 and contributed 76.0% of total revenues,
up from 68.3% during fiscal 1995. B. Dalton stores generated
revenues of $564.9 million (or 23.1% of total revenues) during
fiscal 1996, down from $603.2 million (or 30.5% of total revenues)
during fiscal 1995.
The increase in revenues was primarily attributable to an
increase in sales from Barnes & Noble stores. The Company
opened 91 Barnes & Noble stores and closed 18 during fiscal 1996
(12 of which were relocated), increasing square footage by 33% in
fiscal 1996. Comparable store sales for Barnes & Noble stores,
which excludes the impact of the 53rd week of sales, increased
7.3% during fiscal 1996, in comparison to 6.9% during fiscal 1995.
During fiscal 1996, revenues of B. Dalton stores declined, primar-
ily due to the 72 store closings and a comparable store sales
decrease of 1.0%.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations continued