Barnes and Noble 2003 Annual Report Download - page 17

52 WEEKS ENDED FEBRUARY 1, 2003 COMPARED WITH
52 WEEKS ENDED FEBRUARY 2, 2002
Sales
The Company’s sales increased $398.9 million, or 8.2%,
during fiscal 2002 to $5.269 billion from $4.870 billion
during fiscal 2001. Contributing to this improvement
was an increase of $231.4 million from video game
operating segment sales. Fiscal 2002 sales from Barnes
& Noble stores, which contributed 67.8% of total sales
or 91.3% of total bookstore sales, increased 6.4% to
$3.575 billion from $3.359 billion in fiscal 2001.
The increase in book operating segment sales was
primarily attributable to the 47 new Barnes & Noble
stores opened during fiscal 2002. This increase was
partially offset by declining sales of B. Dalton, due to 47
store closings and a comparable store sales decline of
(6.4%) in fiscal 2002.
GameStop sales during fiscal 2002 increased to $1.353
billion from $1.121 billion during fiscal 2001. This
increase in sales was primarily attributable to the
11.4% growth in GameStop comparable store sales and
sales from the 210 new GameStop stores opened during
fiscal 2002.
Cost of Sales and Occupancy
The Company’s cost of sales and occupancy includes
costs such as rental expense, common area maintenance,
merchant association dues and lease-required advertising.
Cost of sales and occupancy increased $288.3 million,
or 8.1%, to $3.847 billion in fiscal 2002 from $3.559
billion in fiscal 2001, primarily due to growth in the
video game operating segment. The Company’s gross
margin rate decreased slightly to 27.0% in fiscal 2002
from 26.9% in fiscal 2001.
Selling and Administrative Expenses
Selling and administrative expenses increased $68.4
million, or 7.6%, to $973.5 million in fiscal 2002 from
$905.1 million in fiscal 2001, primarily due to the
increase in bookstore expenses from the opening of 47
Barnes & Noble stores in fiscal 2002 and to the growth
in the video game operating segment. Selling and
administrative expenses decreased to 18.5% of sales in
fiscal 2002 from 18.6% in fiscal 2001. This decrease
was primarily attributable to the lower selling and
administrative expenses as a percentage of sales in the
video game operating segment.
Legal Settlement Expense
In fiscal 2001, the Company recorded a pre-tax charge
of $4.5 million in connection with a lawsuit brought by
the American Booksellers Association and 26
independent bookstores. The charges included a
settlement of $2.4 million paid to the plaintiffs and
approximately $2.1 million in legal expenses incurred
by the Company.
Depreciation and Amortization
Depreciation and amortization increased $0.9 million,
or 0.6%, to $148.7 million in fiscal 2002 from $147.8
million in fiscal 2001. The increase was primarily the
result of the increase in depreciation related to the 47
new Barnes & Noble stores opened during fiscal 2002.
This increase was partially offset by the result of the
implementation of SFAS No. 142 in fiscal 2002,
whereby goodwill is no longer amortized but is
reviewed for impairment at least annually.
Pre-Opening Expenses
Pre-opening expenses increased in fiscal 2002 to $10.2
million from $8.0 million in fiscal 2001. The increase in
pre-opening expenses was primarily the result of
opening 47 new Barnes & Noble stores and 210 new
GameStop stores during fiscal 2002, compared with 40
new Barnes & Noble stores and 74 new GameStop
stores during fiscal 2001.
Impairment Charge
During the first quarter of fiscal 2002, the Company
deemed the decline in value in its available-for-sale
securities in Gemstar and Indigo to be other than
temporary. The investments had been carried at fair
market value with unrealized gains and losses included
in shareholders’ equity. Events such as Gemstar’s largest
shareholder taking an impairment charge for its
investment, the precipitous decline in the stock price
subsequent to the abrupt resignation of one of its senior
executives, the questioning of aggressive revenue
recognition policies and the filing of a class action
lawsuit against Gemstar, were among the items which
led to management’s decision to record an impairment
for its investment in Gemstar of nearly $24.0 million
(before taxes). The Company’s decision to record an
impairment charge for its investment in Indigo was
[MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS continued ]
16 2003 Annual ReportBarnes & Noble, Inc.