Barnes and Noble 2001 Annual Report Download - page 20

The Company leases space for its executive offices in
p ro p e rties in which Leonard Riggio, Chairman of the
B o a rd and principal stockholder of Barnes & Noble, has
a minority interest. The space was rented at an aggre g a t e
annual rent including real estate taxes of appro x i m a t e l y
$4.0 million, $3.4 million and $2.9 million in fiscal years
2001, 2000 and 1999, re s p e c t i v e l y. Rent per square foot
is approximately $28, which is below market.
The Company leases a 75,000-square-foot off i c e / w a re h o u s e
f r om a partnership in which Leonard Riggio has a 50
p e r cent interest, pursuant to a lease expiring in 2023.
Pursuant to such lease, the Company paid $0.5 million,
$0.6 million and $0.6 million in fiscal years 2001, 2000 and
1999, re s p e c t i v e l y.
The Company leases retail space in a building in which
B a rnes & Noble College Bookstores, Inc. (B&N
College), a company owned by Leonard Riggio, subleases
space for its executive offices from the Company.
Occupancy costs allocated by the Company to B&N
College for this space totaled $0.7 million, $0.7 million
and $0.7 million for fiscal years 2001, 2000 and 1999,
re s p e c t i v e l y. The amount paid by B&N College to the
Company approximates the cost per square foot paid by
the Company to its unaffiliated third - p a rty landlord.
The Company subleases warehouse space from Barn e s
& Noble.com in Reno, Nevada. The Company paid
B a rnes & Noble.com $1.8 million and $1.4 million for
such subleased space during fiscal 2001 and 2000,
re s p e c t i v e l y. Additionally, in January 2001, the Company
p u r chased $6.2 million of warehouse equipment (valued
at original cost) from Barnes & Noble.com’s Reno
w a rehouse. Barnes & Noble.com recently determined it
could not effectively utilize the full capacity of the Reno,
Nevada distribution center. As a result, Barnes &
N o b l e . c o m ’s Board of Directors approved the transfer of
the Reno warehouse lease and the sale of inventory
located in Reno to the Company. The Company
p u r chased the inventory from Barnes & Noble.com at
cost for approximately $10.0 million. In addition, the
Company intends to spend approximately $2.0 million
to refurbish the facility. The Company’s Board of
D i r ectors also approved the Company’s assumption of
the lease, which expires in 2010, and the hiring of all of
the employees at the Reno facility. The Company intends
to use the Reno facility to facilitate distribution to its
c u rrent and future West Coast stores. In connection with
the transition, Barnes & Noble.com will pay rent for
the Reno facility through December 31, 2002 of $1.6
million. The Reno lease assignment and the transfer of
the Reno facility to the Company is expected to be
completed during the first half of fiscal 2002.
The Company subleases to Barnes & Noble.com
a p p roximately one-third of a 300,000-square - f o o t
warehouse facility located in New Jersey. The Company
has received from Barnes & Noble.com $0.5 million
annually for such subleased space during each of the
fiscal years 2001, 2000 and 1999. The amount paid by
Barnes & Noble.com to the Company approximates the
cost per square foot paid by the Company as a tenant
pursuant to the lease of the space from an unaffiliated
third party.
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 incre m e n t a l
overhead incurred by the Company in connection with
providing such inventory. The Supply Agreement is
subject to certain termination provisions. Barnes &
Noble.com purchased $119.3 million, $110.5 million
and $74.7 million of merchandise from the Company
during fiscal 2001, 2000 and 1999, respectively, and
B a rnes & Noble.com expects to source purc h a s e s
through the Company in the future.
The Company has entered into agreements where b y
B a r nes & Noble.com receives various services from the
C o m p a n y, including, among others, services for payro l l
p r ocessing, benefits administration, insurance (pro p e rt y
and casualty, medical, dental and life), tax, traff i c ,
fulfillment and telecommunications. In accordance with
the terms of such agreements the Company has re c e i v e d ,
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 $5.5
million, $1.7 million and $2.0 million for such serv i c e s
during fiscal 2001, 2000 and 1999, re s p e c t i v e l y.
The aggregate receivable from Barnes & Noble.com in
connection with the agreements described above was
$47.2 million and $18.0 million as of February 2, 2002
and February 3, 2001, respectively.
The Company and Barnes & Noble.com commenced
a marketing program in November 2000, whereby
a customer purchases a “Readers’ Advantage™ card”
for an annual membership fee of $25.00. With this
c a rd, customers can receive discounts of 10 percent
on all Company purchases and 5 percent on all
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
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