Barnes and Noble 2002 Annual Report Download - page 50

incremental fee, of $44,944, $41,452 and $17,198 from
the Company during fiscal 2002, 2001 and 2000,
respectively. The Company charged B&N College
$2,064, $1,517 and $1,331 for fiscal years 2002, 2001
and 2000, respectively, for capital expenditures, business
insurance and other operating costs incurred on its behalf.
The Company uses a jet aircraft owned by B&N
College and pays for the costs and expenses of
operating the aircraft based upon the Company’s usage.
Such costs which include fuel, insurance, personnel and
other costs approximated $1,872, $2,228 and $2,401
during fiscal 2002, 2001 and 2000, respectively, and are
included in the accompanying consolidated statements
of operations.
In fiscal 1999, the Company acquired Babbage’s Etc.,
one of the nation’s largest video-game and entertainment-
software specialty retailers, a company majority owned
by Leonard Riggio, for $208,670. An independent
Special Committee of the Board of Directors negotiated
and approved the acquisition on behalf of the
Company. The Company made an additional payment
of $9,665 in fiscal 2002 due to certain financial
performance targets having been met during fiscal
2001. In fiscal 2000, the Company acquired Funco, Inc.
Through a corporate restructuring, Babbage’s Etc.
became a wholly owned subsidiary of Funco, Inc. and
the name of Funco, Inc. was changed to GameStop,
Inc. In fiscal 2002, the Company completed an initial
public offering of its GameStop subsidiary. The
Company retained an approximate 63 percent interest
in GameStop.
GameStop operates departments within some of the
Company’s bookstores. GameStop pays a license fee to
the Company in an amount equal to 7 percent of the
gross sales of such departments. The Company charged
GameStop a license fee of $1,103 in fiscal 2002.
GameStop participates in the Company’s worker’s
compensation, property and general liability insurance
programs. The costs incurred by the Company under
these programs are allocated to GameStop based upon
GameStop’s total payroll expense, property and
equipment, and insurance claim history. During fiscal
2002, these charges amounted to $1,726.
In fiscal 2001, Barnes & Noble.com and GameStop
entered into an agreement whereby Barnes &
Noble.com’s Web site refers customers to the GameStop
Web site for purchases of video-game hardware,
software and accessories and PC-entertainment
software. GameStop pays Barnes & Noble.com a
referral fee based on its net sales revenue from certain
eligible purchases made by customers as a result of the
redirection from the Barnes & Noble.com Web site.
Either party may terminate the agreement on 60 days’
notice. Commissions were $14 and $89 for fiscal years
2002 and 2001, respectively.
The Company is provided with national freight
distribution, including trucking, services by the LTA
Group, Inc. (LTA), a company in which a brother
of Leonard Riggio owns a 20 percent interest. The
Company paid LTA $18,509, $17,746 and $16,661
for such services during fiscal years 2002, 2001 and
2000, respectively. The Company believes the cost of
freight delivered to the stores compares favorably to
the prices charged by publishers and other third-party
freight distributors.
Since 1993, the Company has used AEC One Stop
Group, Inc. (AEC) as its primary music and DVD/video
supplier and to provide a music and video database.
AEC is one of the largest wholesale distributors of
music and DVD/videos in the United States. In 1999,
AEC’s parent corporation was acquired by an investor
group in which Leonard Riggio was a minority
investor. The Company paid AEC $246,409, $169,879
and $160,788 for merchandise purchased during fiscal
2002, 2001 and 2000, respectively. In addition, the
Company paid AEC $7,736, $2,554 and $527 for
database equipment and services during fiscal 2002,
2001 and 2000, respectively. Amounts payable to
AEC for merchandise purchased were $21,967 and
$51,121 as of February 1, 2003 and February 2, 2002,
respectively.
[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
49 2002 Annual Report Barnes & Noble, Inc.