Barnes and Noble 2001 Annual Report Download - page 21

Download and view the complete annual report

Please find page 21 of the 2001 Barnes and Noble annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 52

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52

B a rnes & Noble.com purchases. The Company and
B a rnes & Noble.com have agreed to share the expenses,
net of revenue from the sale of the cards, related to this
p r ogram in pro p o rtion to the discounts customers re c e i v e
on purchases with each company.
B a r nes & Noble.com, through its fulfillment centers,
ships various customer orders for the Company to its
retail stores as well as to the Companys customers
homes. Barnes & Noble.com charges the Company the
costs associated with such shipments plus any incre m e n t a l
o v e rhead incurred by Barnes & Noble.com to pro c e s s
these orders. The Company paid Barnes & Noble.com
$1.0 million and $0.2 million for shipping and handling
during fiscal 2001 and 2000, re s p e c t i v e l y. In addition,
during fiscal 2001, the Company and Barnes &
Noble.com reached an agreement whereby the Company
pays a commission on all items ord e red by customers at
the Company’s stores and shipped directly to customers
homes by Barnes & Noble.com. Commissions paid for
these sales were $0.4 million during fiscal 2001.
The Company paid B&N College certain operating costs
B&N College incurred on the Companys behalf. These
c h a rges are included in the accompanying consolidated
statements of operations and approximated $0.2
million, $0.3 million and $0.2 million for fiscal 2001,
2000 and 1999, re s p e c t i v e l y. B&N College purc h a s e d
$41.5 million, $17.2 million and $16.1 million of
m e r chandise from the Company during fiscal 2001,
2000 and 1999, re s p e c t i v e l y. The Company charg e d
B&N College $1.5 million, $1.3 million and $1.0
million for fiscal years 2001, 2000 and 1999,
re s p e c t i v e l y, for capital expenditures, business insurance
and other operating costs incurred on its behalf.
The Company uses a jet aircraft owned by B&N
College and pays for the costs and expenses of
operating the aircraft based upon the Company’s usage.
Such costs, which include fuel, insurance, personnel and
other costs, approximated $2.2 million, $2.4 million
and $2.2 million during fiscal 2001, 2000 and 1999,
re s p e c t i v e l y, and are included in the accompanying
consolidated statements of operations.
In fiscal 1999, the Company acquired Babbages Etc., one of
the nations largest video-game and entert a i n m e n t - s o f t w a r e
specialty retailers, a company majority owned by
Leonard Riggio, for $208.7 million. An i n d e p e n d e n t
Special Committee of the Board of Directors negotiated
and approved the acquisition on behalf of the Company.
The Company made an additional payment of $9.7
million in 2002 due to certain financial perf o rm a n c e
t a r gets having been met during fiscal year 2001.
The Company is provided with national freight distribution,
including trucking, services by the LTA Group, Inc. (LTA ) ,
a company in which a brother of Leonard Riggio owns
a 20 percent interest. The Company paid LTA $17.7
million, $16.7 million and $13.1 million for such serv i c e s
during fiscal years 2001, 2000 and 1999, re s p e c t i v e l y. The
Company believes the cost of freight delivered to the store s
c o m p a res favorably to the prices charged by publishers
and other third - p a r ty freight distributors.
Since 1993, the Company has used AEC One Stop Gro u p ,
Inc. (AEC) as its primary music and video supplier and to
p r ovide a music and video database. AEC is one of the
l a r gest wholesale distributors of music and videos in the
United States. In 1999, AECs parent corporation was
a c q u i r ed by an investor group in which Leonard Riggio
was a minority investor. The Company paid AEC $168.1
million, $159.2 million and $126.2 million for merc h a n d i s e
p u r chased during fiscal 2001, 2000 and 1999, re s p e c t i v e l y.
Amounts payable to AEC for merchandise purchased were
$51.1 million and $39.4 million as of Febru a r y 2, 2002 and
F e b ru a r y 3, 2001, re s p e c t i v e l y.
N EW LY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board
( FASB) issued SFAS No. 141, “Business Combinations”
and SFAS No. 142, “Goodwill and Other Intangible
Assets”. SFAS No. 141 re q u i res the use of the purc h a s e
method of accounting and prohibits the use of the
p o o l i n g - o f - i n t e r ests method of accounting for business
combinations initiated after June 30, 2001. SFAS No.
141 also re q u i r es that the Company recognize acquire d
intangible assets apart from goodwill if the acquire d
intangible assets meet certain criteria. SFAS No. 141
applies to all business combinations initiated after June
30, 2001 and for purchase business combinations
completed on or after July 1, 2001. It also re q u i r es that,
upon adoption of SFAS No. 142, the Company re c l a s s i f y
the carrying amounts of intangible assets and goodwill
based on the criteria in SFAS No. 141.
SFAS No. 142 requires, among other things, that the
Company no longer amortize goodwill, but instead test
goodwill for impairment at least annually. In addition,
SFAS No. 142 requires that the Company identify
reporting units for the purposes of assessing potential
future impairments of goodwill, reassess the useful lives
of other existing recognized intangible assets, and cease
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 .
21