Barnes and Noble 2000 Annual Report Download - page 40

The Company recognized a pre-tax gain of $22.4 million
in connection with the sale of its investment in
NuvoMedia to Gemstar International Ltd.
Provision for Income Taxes
Barnes & Noble’s effective tax rate was 41 percent during
both fiscal 1999 and fiscal 1998.
Earnings
Fiscal 1999 earnings increased $32.1 million, or 34.8%,
to $124.5 million (or $1.75 per diluted share) from $92.4
million (or $1.29 per diluted share) during fiscal 1998.
Components of earnings per share are as follows:
Fiscal Year 1999 1998
Retail Earnings Per Share
Bookstores $ 1.62 1.32
Babbage’s Etc. 0.10 --
Retail EPS $ 1.72 1.32
EPS Impact of Investing Activities
Cash:
Gain on Barnes & Noble.com $ 0.21 0.53
Gain on partial sale of Chapters 0.09 --
Non-cash:
Share in net losses of
Barnes & Noble.com ( 0.35 ) (0.59 )
Share of net earnings (losses)
from other equity investments (0.01) 0.03
Gain on sale of investment
in NuvoMedia 0.19 --
Total Investing Activities $ 0.13 (0.03 )
Other Adjustments
Ingram write-off $(0.04) --
Change in accounting for
pre-opening costs ( 0.06 ) --
Total Other Adjustments $( 0.10 ) --
Consolidated EPS $ 1.75 1.29
SEASONALITY
The Company’s business, like that of many retailers, is
seasonal, with the major portion of sales and operating
profit realized during the quarter which includes the
Christmas selling season. The Company has now
reported operating profit for 19 consecutive quarters.
LIQUIDITY AND CAPITAL RESOURCES
Working capital requirements are generally at their
highest during the Company’s fiscal quarter ending on or
about January 31 due to the higher payments to vendors
for holiday season merchandise purchases and the
replenishment of merchandise inventories following this
period of increased sales. In addition, the Company’s
sales and merchandise inventory levels will fluctuate
from quarter-to-quarter as a result of the number and
timing of new store openings, as well as the amount and
timing of sales contributed by new stores.
Cash flows from operating activities, funds available
under its revolving credit facility and vendor financing
continue to provide the Company with liquidity and
capital resources for store expansion, seasonal working
capital requirements and capital investments.
Cash Flow
Cash flows provided from operating activities were $80.5
million, $187.3 million and $177.7 million during fiscal
2000, 1999 and 1998, respectively. In fiscal 2000, the
decrease in cash flows from operating activities was
primarily attributable to a weaker than expected holiday
season which resulted in lower net earnings and an
increase in standing inventory as well as an increase in
prepaid rent due to the fiscal year-end date. In fiscal
1999, the improvement in cash flows was primarily due
to the improvement in net earnings. The slight decrease
in retail operating cash flows in fiscal 1998 was due to a
strategic increase in the distribution center standing
inventory, the implementation of a new wage plan in
fiscal 1998 and increased operating expenses associated
with implementing the Company’s new store system
enhancements.
Retail earnings before interest, taxes, depreciation and
amortization (EBITDA) increased $41.0 million or
11.9% to $385.4 million in fiscal 2000 from $344.4
million in fiscal 1999. This improvement in EBITDA is
due to a combination of the continuing maturation of the
Barnes & Noble stores and the inclusion of the Video
Game & Entertainment Software segment. Total debt to
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued