Barnes and Noble 2001 Annual Report Download - page 17

Equity in Net Loss of Barnes & Noble.com
As a result of the Barnes & Noble.com Inc. IPO on
May 25, 1999, the Company and Bertelsmann each
retained a 40 percent interest in Barnes & Noble.com.
Accordingly, the Company’s share in the net loss of
Barnes & Noble.com for fiscal 1999 was based on a 50
percent equity interest from the beginning of fiscal 1999
through May 25, 1999 and 40 percent through the end
of 1999. The Company’s equity in the net loss of Barnes
& Noble.com for fiscal 1999 was $42.0 million. In
November 2000, Barnes & Noble.com acquire d
Fatbrain.com, Inc. (Fatbrain), the third largest online
b o o k s e l l e r. Barnes & Noble.com issued shares of its
common stock to Fatbrain shareholders. As a result of
this merg e r, the Company and Bertelsmann each re t a i n e d
an approximate 36 percent interest in Barnes &
Noble.com. Accordingly, the Company’s share in the
net losses of Barnes & Noble.com for fiscal 2000 was
based on an approximate 40 percent equity interest
f rom the beginning of fiscal 2000 through November
2000 and approximately 36 percent there a f t e r. The
C o m p a n y ’s equity in the net loss of Barnes & Noble.com
for fiscal 2000 was $103.9 million.
Gain on Fo r m a tion of Barnes & Noble.com
Under the terms of the November 12, 1998 joint venture
a g r eement between the Company and Bertelsmann, the
Company received a $25.0 million payment fro m
B e r telsmann in fiscal 1999 in connection with the Barn e s
& Noble.com Inc. IPO.
Other Income (Expense)
Other expense of ($9.3) million in fiscal 2000 was
primarily due to the equity losses of iUniverse.com.
Other income of $27.4 million in fiscal 1999 was
primarily attributable to a one-time gain of $11.0 million
on the partial sale of Indigo Books & Music Inc., a one-
time gain of $22.4 million in connection with the sale
of its investment in NuvoMedia Inc. (NuvoMedia)
to Gemstar International Ltd., partially offset by a
one-time charge of ($5.0) million attributable to the
t e rmination of the planned Ingram Book Gro u p
(Ingram) acquisition.
P r ovision for Income Taxes
Barnes & Noble’s effective tax rate in fiscal 2000
i n c reased to (57.5) percent compared with 41.0 perc e n t
during fiscal 1999. The fiscal 2000 increase was primarily
related to the goodwill write-down associated with the
i m p a i r ment charge, which provided no tax benefit.
Earnings (Loss)
As a result of the factors discussed above, the Company
re p o rted a consolidated net loss of ($52.0) million (or
($0.81) per share) in fiscal 2000. The Company’s earn i n g s ,
b e f o r e the effect of the impairment charge, were $40.5
million during fiscal 2000 compared with $124.5 million
during fiscal 1999. Components of earnings per share are
as follows:
Fiscal Year 2000 1999
Retail Earnings Per Share
Bookstores $ 1 . 8 5 1 . 62
Video Game & Entertainment
Software Stores ( 0 .1 6 ) 0 .1 0
Retail EPS $ 1 . 6 9 1 .7 2
EPS Impact of Investing Activities
Cash:
Gain on Barnes & Noble.com $ -- 0 . 2 1
Gain on partial sale of
Indigo Books & Music Inc. -- 0.09
Non-cash:
Share in net losses of
Barnes & Noble.com ( 0 . 9 8 ) ( 0.35 )
Share of net losses from
other equity investments ( 0 . 0 8 ) ( 0 . 0 1 )
Gain on sale of investment
in NuvoMedia -- 0 .1 9
Total Investing Activities $ ( 1 . 0 6 ) 0 .1 3
Other Adjustments
Impairment charge $ ( 1.44 ) --
Ingram write-off -- (0.04 )
Change in accounting for
pre-opening costs -- ( 0.06 )
Total Other Adjustments $ ( 1.44 ) ( 0 .1 0 )
Consolidated EPS $ ( 0 . 8 1 ) 1 .7 5
S E AS O N A L I TY
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
holiday selling season. The Company has now reported
operating profit for 23 consecutive quarters.
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S O F
F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S c o n t i n u e d
2 0 0 1 A n n u a l R e p o r t ■B a r n e s & N o b l e , I n c .
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