Barnes and Noble 2002 Annual Report Download - page 49

The Company subleases to Barnes & Noble.com
approximately one-third of a 300,000-square-foot
warehouse facility located in New Jersey. The Company
has received from Barnes & Noble.com $498, $479 and
$489 for such subleased space during fiscal 2002, 2001
and 2000, respectively. The amount paid by Barnes &
Noble.com to the Company approximates the cost per
square foot paid by the Company as a tenant pursuant
to the lease of the space from an unaffiliated third party.
The Company has entered into an agreement (the
Supply Agreement) with Barnes & Noble.com whereby
the Company charges Barnes & Noble.com the costs
associated with such purchases plus incremental
overhead incurred by the Company in connection with
providing such inventory. The Supply Agreement is
subject to certain termination provisions. Barnes &
Noble.com purchased $108,269, $119,290 and
$110,462 of merchandise from the Company during
fiscal 2002, 2001 and 2000, respectively, and Barnes &
Noble.com expects to source purchases through the
Company in the future.
The Company has entered into agreements whereby
Barnes & Noble.com receives various services from the
Company, including, among others, services for payroll
processing, benefits administration, insurance (property,
casualty, medical, dental, life, etc.), tax, traffic,
fulfillment and telecommunications. In accordance with
the terms of such agreements, the Company has
received, and expects to continue to receive, fees in an
amount equal to the direct costs plus incremental expenses
associated with providing such services. The Company
received $3,453, $5,465 and $1,699 for such services
during fiscal 2002, 2001 and 2000, respectively.
The aggregate receivable (which is historically settled
within 60 days) from Barnes & Noble.com in connection
with the agreements described above was $55,174 and
$47,204 as of February 1, 2003 and February 2, 2002,
respectively.
The Company and Barnes & Noble.com commenced a
marketing program in November 2000, whereby a
customer purchases a “Readers’ Advantage™ card” for
an annual membership fee of $25.00 which is non-
refundable after the first 30 days of the membership
term. With this card, customers can receive discounts of
10 percent on all Company purchases and 5 percent on
all Barnes & Noble.com purchases. The Company and
Barnes & Noble.com have agreed to share the expenses,
net of revenue from the sale of the cards, related to this
program in proportion to the discounts customers
receive on purchases with each company.
In 2002, the Company through its wholly owned
subsidiary, Marketing Services (Minnesota) Corp.,
entered into an agreement with Barnes & Noble.com
for marketing services, which includes the issuance of
gift cards. Under this agreement, the Company paid
Barnes & Noble.com $5,273 during fiscal 2002, which
represents reimbursement for gift cards purchased in a
Barnes & Noble store and redeemed on the Barnes &
Noble.com Web site.
Barnes & Noble.com, through its fulfillment centers,
ships various customer orders for the Company to its
retail stores as well as to the Company’s customers’
homes. Barnes & Noble.com charges the Company
the costs associated with such shipments plus any
incremental overhead incurred by Barnes & Noble.com to
process these orders. The Company paid Barnes &
Noble.com $1,746, $1,030 and $222 for shipping
and handling during fiscal 2002, 2001 and 2000,
respectively. In addition, during fiscal 2001, the Company
and Barnes & Noble.com reached an agreement whereby
the Company pays a commission on all items ordered by
customers at the Company’s stores and shipped directly to
customers’ homes by Barnes & Noble.com. Commissions
paid for these sales were $1,547 and $359 during fiscal
2002 and 2001, respectively.
The Company paid B&N College certain operating costs
B&N College incurred on the Company’s behalf. These
charges are included in the accompanying consolidated
statements of operations and approximated $219, $188
and $264 for fiscal 2002, 2001 and 2000, respectively.
B&N College purchased inventory, at cost plus an
[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
48 2002 Annual ReportBarnes & Noble, Inc.