Barnes and Noble 1999 Annual Report Download - page 56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued 55
bookstore in such areas for the next 10 years),
disgorgement of alleged discriminatory discounts, rebates,
deductions and payments, punitive damages, interest, costs,
attorneys fees and other relief. The plaintiffs subsequently
amended their complaint to allege eight causes of action on
behalf of the Intimate Bookshop and Wallace Kuralt, accusing
the Company and the other defendants of: (i) violating § 2(f)
of the Robinson-Patman Act; (ii) violating § 2(c) of the
Robinson-Patman Act; (iii) violating § 13a of the Clayton Act;
(iv) inducing every publisher in the United States to breach
contracts with the plaintiffs; (v) interfering with the plaintiff’s
advantageous business relationships; (vi) engaging in unfair
competition; (vii) violating §§ 349 and 350 of the New York
General Business Law; and (viii) being unjustly enriched. The
class action allegations have been removed and the plaintiffs
voluntarily dismissed defendants Harper Collins Publishers,
Inc. and Amazon.com, Inc. from the case.
On April 13, 1999, the Company and the other defendants
filed a motion to dismiss the second through eighth causes of
action in their entireties and for a more definite statement
of the remaining allegations of the first cause of action. As a
result, the plaintiffs’ third through eighth causes of action were
dismissed with prejudice, as were all claims asserted by Wallace
Kuralt in his individual capacity. The Company served an
Answer on April 5, 2000 denying the material allegations of
the Complaint and asserting various affirmative defenses. The
Company intends to continue to vigorously defend this action.
In addition to the above actions, various claims and lawsuits
arising in the normal course of business are pending against the
Company. The subject matter of these proceedings primarily
includes commercial disputes and employment issues. The results
of these proceedings are not expected to have a material
adverse effect on the Company’s consolidated financial position
or results of operations.
18. Certain Relationships
and Related Transactions
The Company leases space for its executive offices in properties
in which Leonard Riggio, chairman, chief executive officer and
principal stockholder of Barnes & Noble, has a minority
interest. The space was rented at an aggregate annual rent
including real estate taxes of approximately $2,753, $1,316 and
$1,309 in fiscal years 1999, 1998 and 1997, respectively.
The Company leases a 75,000 square foot office/warehouse
from a partnership in which Leonard Riggio has a 50 percent
interest, pursuant to a lease expiring in 2023. Pursuant to such
lease, the Company paid $573, $737 and $743 in fiscal years
1999, 1998 and 1997, respectively.
The Company is provided with certain package shipping
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 $13,118, $12,571 and $11,528 for such
services during fiscal years 1999, 1998 and 1997, respectively.
The Company leases retail space in a building in which Barnes
& Noble College Bookstores, Inc. (B&N College), a company
owned by Leonard Riggio, subleases space for its executive
offices. Occupancy costs allocated by the Company to B&N
College for this space totaled $686, $725 and $634 for fiscal
years 1999, 1998 and 1997, respectively. In connection with
the space, the Company reimbursed B&N College during fiscal
1997, for a landmark tax credit totaling $726.
B&N College allocated to the Company certain operating
costs it incurred on its behalf. These charges are included in
the accompanying consolidated statements of operations and
approximated $193, $48 and $75 for fiscal 1999, 1998 and
1997, respectively. The Company charged B&N College
$1,042 and $972 for fiscal years 1999 and 1998, 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 approximate
$2,205, $1,760 and $1,910 during fiscal 1999, 1998 and
1997, respectively, and are included in the accompanying
consolidated statements of operations.
On October 28, 1999, the Company acquired Babbage’s Etc.,
one of the nation’s largest operators of video game and
entertainment software stores, a company majority owned by
Leonard Riggio, for $208,670. If financial performance targets
are met over the next two fiscal years, the Company will make
additional payments of approximately $10,000 in 2001 and
approximately $10,000 in 2002.
Barnes & Noble.com purchased $74,682 and $33,444 of
merchandise from the Company during fiscal 1999 and 1998,
respectively, and Barnes & Noble.com expects to source
purchases through the Company in the future. 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.
The Company has entered into agreements (the Service
Agreements) whereby Barnes & Noble.com receives various
services from the Company, including, among others, services
for payroll processing, benefits administration, insurance
(property and casualty, medical, dental and life), 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 $2,037, $856 and $250 for
such services during fiscal 1999, 1998 and 1997, respectively.