Barnes and Noble 2001 Annual Report Download - page 33

8. BARNES & NOBLE.C O M
On November 12, 1998, the Company and
B e r telsmann AG (Bertelsmann) completed the
formation of a limited liability company to operate the
online retail bookselling operations of the Company’s
wholly owned subsidiary, barnesandnoble.com inc. The
new entity, barnesandnoble.com llc (Barnes &
Noble.com), was stru c t u r ed as a limited liability
company. Under the terms of the relevant agreements,
effective as of October 31, 1998, the Company and
Bertelsmann each retained a 50 percent membership
i n t e rest 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 $75,000 to the Company and made a
$150,000 cash contribution to the joint venture .
Bertelsmann also agreed to contribute an additional
$50,000 to the joint venture for future working capital
requirements. The Company recognized a pre-tax gain
during fiscal 1998 in the amount of $126,435, of which
$63,759 was recognized in earnings based on the
$75,000 received directly and $62,676 ($36,351 after
taxes) was reflected in additional paid-in capital based
on the Company’s share of the incremental equity of the
joint venture resulting from the $150,000 Bertelsmann
contribution.
On May 25, 1999, Barnes & Noble.com Inc. completed an
initial public offering (IPO) of 28.75 million shares of Class
A Common Stock and used the proceeds to purchase a 20
p e r cent interest in Barnes & Noble.com. As a result, the
Company and Bertelsmann each retained a 40 perc e n t
i n t e r est in Barnes & Noble.com. The Company re c o rd e d
an increase in additional paid-in capital of $116,158 after
taxes re p r esenting the Company’s incremental share in the
equity of Barnes & Noble.com. In November 2000, Barn e s
& Noble.com acquired Fatbrain.com, Inc. (Fatbrain), the
t h i r d largest online bookseller. Barnes & Noble.com issued
s h a r es of its common stock to Fatbrain shareholders. As a
result of this merg e r, the Company and Bertelsmann each
retained an approximate 36 percent interest in Barnes &
Noble.com. The Company will continue to account for its
investment under the equity method.
Under the terms of the November 12, 1998 joint venture
a g r eement between the Company and Bertelsmann, the
Company received a $25,000 payment from Bert e l s m a n n
in connection with the IPO. The Company re c o g n i z e d
the $25,000 pre-tax gain in fiscal 1999. The estimated
fair market values of the Company’s investment in
B a r nes & Noble.com were $109,825, $122,000 and
$742,000 at Febru a ry 2, 2002, Febru a ry 3, 2001 and
J a n u a r y 29, 2000, re s p e c t i v e l y.
Summarized financial information for Barnes & Noble.com follows:
12 months ended December 31,
2001 2000 1999
Net sales $ 404,600 374,938 (a) 1 9 3 ,7 3 0
Gross profit $ 9 1 , 23 5 70 , 8 1 6 (a) 3 3 ,7 9 3
Net loss(b) $ ( 244,366) ( 3 2 9 , 6 57 )(a) (1 0 2,404 )
Cash and cash equivalents $ 1 1 5 ,266 2 1 2 ,304 47 8 , 0 47
Other current assets 6 8 ,1 3 5 80,332 2 7, 5 67
Noncurrent assets 1 0 3 , 97 5 236,299 1 73 ,904
Current liabilities 1 3 8 ,77 3 1 3 5 , 9 8 7 75,940
Minority interest 1 0 5 ,845 2 8 2,824 482,896
Net assets $ 4 2 ,7 5 8 1 1 0 ,1 2 4 1 2 0 ,682
(a) Includes the pro forma consolidated results of Barnes & Noble.com and Fatbrain as if the acquisition of Fatbrain had taken place
on January 1, 2000.
(b) Includes impairment charge of $88,213 and $75,051 in 2001 and 2000, respectively.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T 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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