Barnes and Noble 2002 Annual Report Download - page 16

$25.3 million ($14.9 million after taxes) to reclassify the
accumulated unrealized losses and to write down the
investments to their current fair market value at the
close of business on May 4, 2002. The investment in
Gemstar was sold in the second quarter of fiscal 2002.
Operating Profit
Operating profit increased to $264.1 million in fiscal
2002 from $245.8 million in fiscal 2001. Operating
profit increased to $289.4 million, before the effect of
the $25.3 million impairment charge during fiscal
2002, from $250.3 million, before the effect of the
$4.5 million legal settlement expense during fiscal
2001. Bookstore operating profit decreased 6.4% to
$202.4 million, before the effect of the $25.3 million
impairment charge from $216.2 million, before the
effect of the $4.5 million legal settlement expense,
primarily attributable to lower comparable store sales.
Bookstore operating margin decreased to 5.2% of sales
during fiscal 2002, before the effect of the impairment
charge, from 5.8% of sales during fiscal 2001, before
the effect of the legal settlement expense.
Interest Expense, Net and Amortization
of Deferred Financing Fees
Interest expense, net of interest income, and amortization
of deferred financing fees, decreased $14.8 million to
$21.5 million in fiscal 2002 from $36.3 million in fiscal
2001. The decrease was primarily the result of reduced
borrowings under the Company’s senior credit facility
due to the pay down of debt with proceeds from the
GameStop IPO.
Equity in Net Loss of Barnes & Noble.com
The Company’s share in the net loss of Barnes &
Noble.com, based on an approximate 36 percent equity
interest, was $26.8 million and $88.4 million in fiscal
2002 and fiscal 2001, respectively.
Other Expense, Primarily Losses Attributable
to Equity-Method Investments
In fiscal 2002, the Company determined that a decrease in
value in certain of its equity investments occurred which
was other than temporary. As a result, other expense
of $16.5 million during fiscal 2002 included the
recognition of losses of $11.5 million in excess of what
would otherwise have been recognized by application
of the equity method in accordance with Accounting
Principles Board Opinion No. 18, “The Equity Method
of Accounting for Investments in Common Stock”. The
$16.5 million loss in other expense was primarily
comprised of $8.5 million attributable to iUniverse.com,
$5.1 million attributable to BOOK®magazine and $2.4
million attributable to enews, inc. Other expense of
$11.7 million in fiscal 2001 was due to $4.0 million in
equity losses in iUniverse.com, $2.5 million in equity
losses in BOOK®magazine and $5.5 million in equity
losses in enews, inc., partially offset by a one-time gain
of $0.3 million from the partial sale of Indigo.
Provision for Income Taxes
Barnes & Noble's effective tax rate in fiscal 2002
decreased to 40.25 percent compared with 41.50 percent
during fiscal 2001.
Minority Interest
During fiscal 2002, minority interest for GameStop was
$19.1 million based on a 36.5% basic weighted average
ownership interest.
Earnings
As a result of the factors discussed above, the Company
reported consolidated net earnings of $99.9 million (or
$1.39 per share) during fiscal 2002 compared with net
earnings of $64.0 million (or $0.94 per share) during
fiscal 2001. Components of diluted earnings per share
are as follows:
Fiscal Year 2002 2001
Retail EPS $ 1.90 1.70
EPS Impact of Investing Activities
Share in net losses of
Barnes & Noble.com $ ( 0.21 ) ( 0.66 )
Share of net losses from
other investments (including
earnings from Calendar Club) $ ( 0.11 ) ( 0.07 )
Total Investing Activities $ ( 0.32 ) ( 0.73 )
Other Adjustments
Impairment charge $ ( 0.19 ) --
Legal settlement expense -- ( 0.03 )
Total Other Adjustments $ ( 0.19 ) ( 0.03 )
Consolidated EPS $ 1.39 0.94
15 2002 Annual Report Barnes & Noble, Inc.
[MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS continued ]