Barnes and Noble 2000 Annual Report Download - page 41

retail EBITDA increased to 1.73 times in fiscal 2000
from 1.25 times in fiscal 1999 primarily due to the debt
incurred to fund the Company’s Acquisitions and stock
repurchase program. The weighted-average age per
square foot of the Company’s 569 Barnes & Noble stores
was 4.6 years as of February 3, 2001 and is expected to
increase to approximately 5.3 years by February 2, 2002.
As the relatively young Barnes & Noble stores mature,
and as the number of new stores opened during the fiscal
year decreases as a percentage of the existing store base,
the increasing operating profits of Barnes & Noble stores
are expected to generate a greater portion of cash flows
required for working capital, including new store
inventories, capital expenditures and other initiatives.
Additionally, due to the Barnes & Noble.com Inc. IPO
in fiscal 1999, retail cash flows are now fully available
to support the Company’s working capital requirements.
Capital Structure
Shareholders’ equity decreased 8.1% to $777.7 million as
of February 3, 2001, from $846.4 million as of January
29, 2000. The reduction in shareholders’ equity was
primarily attributable to the net loss recorded by the
Company largely due to the inclusion of the one-time,
non-cash impairment charge recorded in the fourth
quarter of fiscal 2000 and increased equity losses from
Barnes & Noble.com.
The Company has an $850.0 million senior credit
facility (the Facility), obtained in November 1997, with
a syndicate led by The Chase Manhattan Bank. The
Facility is structured as a five-year revolving credit.
The Facility permits borrowings at various interest rate
options based on the prime rate or London Interbank
Offer Rate (LIBOR) depending upon certain financial
tests. In addition, the agreement requires the Company
to pay a commitment fee up to 0.25% of the unused
portion depending upon certain financial tests. The Facility
contains covenants, limitations and events of default
typical of credit facilities of this size and nature.
The amount outstanding under the Facility has been
classified as long-term debt in the accompanying
consolidated balance sheets due to both its terms and the
Company’s intent and ability to maintain principal
amounts.
In fiscal 2000, the Company obtained an additional
$100.0 million senior unsecured seasonal credit facility
(seasonal credit facility) with a syndicate of banks led
by The Chase Manhattan Bank. The seasonal credit
facility, which matured on January 31, 2001, permitted
for borrowings at an interest rate based on LIBOR.
In addition, the agreement required the Company to pay
a commitment fee of 0.375 percent of the unused portion.
The seasonal credit facility was guaranteed by all
restricted subsidiaries of Barnes & Noble.
Additionally, in March of 2001, the Company
announced the successful completion of the sale of
$300.0 million 5.25 percent convertible subordinated
notes due March 15, 2009, further strengthening its
balance sheet. The notes are convertible into the
Company’s common stock at a conversion price of
$32.51 per share.
Borrowings under the Company’s senior and seasonal
credit facilities averaged $697.8 million, $397.1 million
and $380.3 million and peaked at $918.7 million, $693.5
million and $535.0 million during fiscal 2000, 1999 and
1998, respectively. The ratio of debt to equity increased
to 0.86:1.00 as of February 3, 2001 from 0.51:1.00 as of
January 29, 2000, primarily attributable to the increased
borrowings to fund the Acquisitions and the impact of
the non-cash impairment charge.
Capital Investment
Capital expenditures totaled $134.3 million, $146.3
million and $141.4 million during fiscal 2000, 1999 and
1998, respectively. Capital expenditures in fiscal 2001,
primarily for the opening of between 40 and 45 new
Barnes & Noble stores and 75 new video game and
entertainment software stores, are expected to be
between $150 million and $170 million, although
commitment to such expenditures has not yet been made.
Based on current operating levels and the store
expansion planned for the next fiscal year, management
believes cash flows generated from operating activities,
short-term vendor financing and borrowing capacity
under its revolving credit facility will be sufficient to meet
the Company’s working capital and debt service
requirements, and support the development of its short-
and long-term strategies for at least the next 12 months.
In fiscal 1999, the Board of Directors authorized a
common stock repurchase program for the purchase of
up to $250.0 million of the Company’s common shares.
As of February 3, 2001, the Company has repurchased
5,504,700 shares at a cost of approximately $117.4
million under this program. The repurchased shares are
held in treasury.
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2000 Annual Report ■Barnes & Noble, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued