Barnes and Noble 2001 Annual Report Download - page 19

B o r rowings under the Company’s senior and seasonal cre d i t
facilities averaged $689.3 million, $697.8 million and
$397.1 million and peaked at $870.0 million, $918.7
million and $693.5 million during fiscal 2001, 2000 and
1999, respectively. The ratio of debt to equity improved
significantly to 0.51:1.00 as of February 2, 2002 from
0.86:1.00 as of Febru a ry 3, 2001, primarily due to decre a s e d
borrowings under the Company’s senior credit facility.
I n t e rest rate swap agreements are valued based on
market quotes obtained from dealers. The estimated fair
value of the interest rate swaps liability was $2.3 million
and $0.5 million at Febru a ry 2, 2002 and Febru a ry 3,
2001, re s p e c t i v e l y. The interest rate swaps are included
as a component of other long-term liabilities.
Capital Inve st m e n t
Capital expenditures totaled $168.8 million, $134.3
million and $146.3 million during fiscal 2001, 2000 and
1999, re s p e c t i v e l y. Capital expenditures in fiscal 2002,
primarily for the opening of between 40 and 45 new Barn e s
& Noble stores and 175 GameStop stores, are expected to
be between $170 million and $190 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 re p u r chase program for the purchase of up to $250.0
million of the Company’s common shares. As of Febru a ry
3, 2001, the Company has re p u r chased 5,504,700 shares at
a cost of approximately $117.4 million under this pro g r a m .
The re p u r chased shares are held in tre a s u r y.
BARNES & NOBLE.C O M
On November 12, 1998, the Company and Bert e l s m a n n
completed the formation of a joint venture to operate the
online retail bookselling operations of the Company’s
wholly owned subsidiary, Barnes & Noble.com Inc. The
new entity, Barnes & Noble.com, was stru c t u red as a
limited liability company. Under the terms of the re l e v a n t
a g reements, effective as of October 31, 1998, the
Company and Bertelsmann each retained a 50 perc e n t
membership interest in Barnes & Noble.com. The
Company contributed substantially all of the assets and
liabilities of its online operations to the joint venture
and Bertelsmann paid $75.0 million to the Company
and made a $150.0 million cash contribution to the joint
v e n t u re. Bertelsmann also agreed to contribute an
additional $50.0 million to the joint venture for future
working capital re q u i rements. The Company re c o g n i z e d
a pre-tax gain during fiscal 1998 in the amount of $126.4
million, of which $63.8 million was recognized in
e a rnings based on the $75.0 million received directly and
$62.7 million ($36.4 million after taxes) was reflected in
additional paid-in capital based on the Company’s share
of the incremental equity of the joint venture re s u l t i n g
f r om the $150.0 million Bertelsmann contribution.
On May 25, 1999, Barnes & Noble.com Inc. completed
an IPO of 28.75 million shares of Class A Common
Stock and used the proceeds to purchase a 20 perc e n t
i n t e rest in Barnes & Noble.com. As a result, the
Company and Bertelsmann each retained a 40 perc e n t
i n t e rest in Barnes & Noble.com. The Company re c o rd e d
an increase in additional paid-in capital of $200.3 million
($116.2 million after taxes) re p resenting the Company’s
i n c r emental share in the equity 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 rtelsmann in connection with the IPO.
The accompanying consolidated financial statements, in
a c c o rdance with the equity method of accounting, re f l e c t
the Company’s investment in Barnes & Noble.com as a
single line item in the consolidated balance sheets as of
F e b ru a r y 2, 2002 and Febru a ry 3, 2001 and reflect the
C o m p a n y ’s share of the net loss of Barnes & Noble.com
as a single line item in the consolidated statements of
operations for fiscal years 2001, 2000 and 1999.
C E RTAIN RELAT I O N S H I PS AND RELATED TRANSACTIONS
The Company believes that the transactions and
agreements discussed below (including renewals of any
existing agreements) between the Company and its
affiliates are at least as favorable to the Company as
could be obtained from unaffiliated parties. The Board
of Directors and the Audit Committee must approve in
advance any proposed transaction or agreement with
affiliates and will utilize procedures in evaluating the
terms and provisions of such proposed transaction or
agreement as are appropriate in light of the fiduciary
duties of directors under Delaware law.
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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