Barnes and Noble 2001 Annual Report Download - page 43

Company. Occupancy costs allocated by the Company
to B&N College for this space totaled $748, $709 and
$686 for fiscal years 2001, 2000 and 1999, respectively.
The amount paid by B&N College to the Company
approximates the cost per square foot paid by the
Company to its unaffiliated third-party landlord.
The Company subleases warehouse space from Barnes
& Noble.com in Reno, Nevada. The Company paid
Barnes & Noble.com $1,838 and $1,401 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 purchased $6,186 of warehouse equipment
(valued at original cost) from Barnes & Noble.com’s
Reno warehouse. Barnes & Noble.com re c e n t l y
d e t e rmined it could not effectively utilize the full
capacity of the Reno, Nevada distribution center. As a
result, Barnes & Noble.com’s Board of Dire c t o r s
approved the transfer of the Reno warehouse lease and
the sale of inventory located in Reno to the Company.
The Company purchased the inventory from Barnes &
Noble.com at cost for approximately $10,000. In
addition, the Company intends to spend approximately
$2,000 to refurbish the facility. The Company’s Board
of Directors 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 current 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 $1,600. The Reno lease assignment and the
transfer of the Reno facility to the Company is expected
to be completed during the first half of 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 $479, $489
and $473 for such subleased space during fiscal 2001,
2000 and 1999, respectively. 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 $119,290, $110,462 and
$74,682 of merchandise from the Company during
fiscal 2001, 2000 and 1999, respectively, and Barnes &
Noble.com expects to source purchases through the
Company in the future.
The Company has entered into agreements whereby
Barnes & Noble.com receives various services from the
Company, including, among others, services for payroll
processing, benefits administration, insurance (property
and casualty, medical, dental and life), tax, traffic,
fulfillment and telecommunications. In accordance with
the terms of such agreements the Company has
received, 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 $5,465, $1,699 and $2,037 for such
s e rvices during fiscal 2001, 2000 and 1999,
respectively.
The aggregate receivable from Barnes & Noble.com in
connection with the agreements described above was
$47,204 and $17,987 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 which is non-
refundable after the first 30 days of the membership
term. With this card, customers can receive discounts of
10 percent on all Company purchases and 5 percent on
all Barnes & Noble.com purchases. The Company and
Barnes & Noble.com have agreed to share the expenses,
net of revenue from the sale of the cards, related to this
program in proportion to the discounts customers
receive on purchases with each company.
Barnes & Noble.com, through its fulfillment centers,
ships various customer orders for the Company to its
retail stores as well as to the Company’s customers’
homes. Barnes & Noble.com charges the Company the
costs associated with such shipments plus any
incremental overhead incurred by Barnes & Noble.com
to process these orders. The Company paid Barnes &
Noble.com $1,030 and $222 for shipping and handling
during fiscal 2001 and 2000, respectively. In addition,
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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