Barnes and Noble 2004 Annual Report Download

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Table of contents

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    ... 2004 Annual Report â- Barnes & Noble, Inc. 3 6 9 21 22 23 24 25 46 48 49 LETTER TO OUR SHAREHOLDERS SELECTED CONSOLIDATED FINANCIAL DATA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED STATEMENTS OF OPERATIONS CONSOLIDATED BALANCE SHEETS...

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    ... environments. During 2004, we installed WiFi technology in all our stores. This technology allows our customers to use their laptop computers and personal digital assistants to communicate online, surf the Internet and connect to corporate networks at speeds 50 to 100 times faster than a dial-up...

  • Page 6
    ... of Michigan and issued in the fourth quarter of 2004, Barnes & Noble.com received the highest rating of any e-commerce company. This annual survey is recognized as the industry's leading indicator of customer satisfaction. The report confirms feedback we have received from our customers who...

  • Page 7
    ... Annual Report [[ LETTER ] ] LETTER TO TO OUR OUR SHAREHOLDERS SHAREHOLDERS continued continued Barnes & Noble, Inc. 5 Our balance sheet remains strong. We generated free cash flow of approximately $350 million during the fiscal year. Our liquidity position is solid, with a debt-to-equity ratio...

  • Page 8
    ...2004 Annual Report THE SELECTED CONSOLIDATED FINANCIAL DATA of Barnes & Noble, Inc. and its subsidiaries (collectively, the Company) set forth on the following pages should be read in conjunction with the consolidated financial statements and notes included elsewhere in this report. The Company...

  • Page 9
    ... 2000 STATEMENT OF OPERATIONS DATA: Sales Barnes & Noble stores B. Dalton stores Barnes & Noble.com(1) Other(2) Total sales Cost of sales and occupancy Gross profit Selling and administrative expenses Depreciation and amortization Pre-opening expenses Impairment charge(3) Legal settlement expense...

  • Page 10
    ...sales of Sterling Publishing Co., Inc. (from its acquisition in January 2003) and Barnes & Noble Publishing (for all periods presented). In fiscal 2002, the Company recorded a non-cash charge to operating earnings to write down its investments in Gemstar-TV Guide International, Inc. and Indigo Books...

  • Page 11
    ... primarily under the B. Dalton Bookseller trade name. Barnes & Noble conducts the online part of its business through barnesandnoble.com llc (Barnes & Noble.com), one of the largest sellers of books on the Internet. Through Sterling Publishing Co., Inc. (Sterling), the Company is one of the top 25...

  • Page 12
    ... of contents, and thousands of music clips and video trailers. In the fourth quarter 2004 American Customer Satisfaction Index compiled by the University of Michigan, Barnes & Noble.com received the highest rating of any ecommerce company. This annual survey is recognized as the industry's leading...

  • Page 13
    2004 Annual Report [ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued ] Barnes & Noble, Inc. 11 all of its Class B common stock in GameStop Corp. (GameStop), the Company's Video Game operating segment. This disposition was completed in two steps. ...

  • Page 14
    12 Barnes & Noble, Inc. [ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued ] 2004 Annual Report RESULTS OF OPERATIONS The Company's sales, operating profit, comparable store sales, store openings, store closings, number of stores open and square ...

  • Page 15
    2004 Annual Report [ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued ] Barnes & Noble, Inc. 13 The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales of the Company: Fiscal Year...

  • Page 16
    14 Barnes & Noble, Inc. [ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued ] 2004 Annual Report 52 WEEKS ENDED JANUARY 29, 2005 COMPARED WITH 52 WEEKS ENDED JANUARY 31, 2004 Sales The Company's sales increased $501.4 million, or 11.5%, during fiscal...

  • Page 17
    ... Class B common stock as a tax-free (a) Restated to reflect certain adjustments relating to lease accounting as discussed in Note 1 to the Notes to Consolidated Financial Statements. The Company accounted for its approximate 38 percent equity interest in Barnes & Noble.com under the equity method...

  • Page 18
    ...2003, compared with 47 new Barnes & Noble stores during fiscal 2002. Impairment Charge During the first quarter of fiscal 2002, the Company deemed the decline in value in its available-for-sale securities in Gemstar-TV Guide International, Inc. (Gemstar) and Indigo Books & Music Inc. (Indigo) to be...

  • Page 19
    ...] Barnes & Noble, Inc. 17 of deferred financing fees, decreased $1.2 million, or 5.4%, to $20.9 million in fiscal 2003 from $22.1 million in fiscal 2002. The decrease was primarily the result of reduced average borrowings under the Company's senior credit facility due to effective working capital...

  • Page 20
    ... and timing of sales contributed by new stores. Cash flows from operating activities, funds available under its revolving credit facility and short-term vendor financing continue to provide the Company with liquidity and capital resources for store expansion, seasonal working capital requirements...

  • Page 21
    ... a wholly owned subsidiary of the Company. The purchase price paid by the Company was $158.8 million (including acquisition related costs). Under the terms of the Merger, the holders of bn.com's outstanding common stock, other than the Company and its subsidiaries, received $3.05 in cash for each...

  • Page 22
    ... the Company's computer or telephone systems, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores or the inability to obtain suitable sites...

  • Page 23
    2004 Annual Report [ CONSOLIDATED STATEMENTS OF OPERATIONS ] Barnes & Noble, Inc. 21 Fiscal Year (In thousands, except per share data) 2004 2003 Restated 2002 Restated Sales Cost of sales and occupancy Gross profit Selling and administrative expenses Depreciation and amortization Pre-opening...

  • Page 24
    ... Barnes & Noble, Inc. [ CONSOLIDATED BALANCE SHEETS ] 2004 Annual Report (In thousands, except per share data) January 29, 2005 January 31, 2004 Restated Assets Current assets: Cash and cash equivalents Receivables, net Merchandise inventories Prepaid expenses and other current assets Current...

  • Page 25
    ..., including tax benefits of $2,363 Restricted stock Spin-off of GameStop (See Note 2) Conversion of subordinated notes (See Note 5) Change in reporting period of subsidiary (See Note 3) Tax adjustments and costs attributable to the sale of GameStop Class B shares (See Note 2) Acquisition of partial...

  • Page 26
    ... other noncurrent assets Payment on GameStop note receivable Net cash flows from investing activities Cash flows from financing activities: Proceeds from issuance of long-term debt Redemption of convertible subordinated notes Net decrease in revolving credit facility Proceeds from exercise of common...

  • Page 27
    ... sale of books. The Company employs two principal bookselling strategies: its superstore strategy through its wholly owned subsidiary Barnes & Noble Booksellers, Inc., primarily under its Barnes & Noble Booksellers trade name (hereafter collectively referred to as Barnes & Noble stores) and its mall...

  • Page 28
    ... deferred tax assets by $13,164 and decreasing retained earnings and shareholders' equity by $18,582. purchasing management information systems are capitalized and included in property and equipment. These costs are amortized over their estimated useful lives from the date the systems become...

  • Page 29
    ... at the time of sale. Sales returns (which are not significant) are recognized at the time returns are made. The Barnes & Noble Membership Program entitles the customer to receive a 10 percent discount on all purchases made during the twelve-month membership period. The annual membership fee of $25...

  • Page 30
    28 Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2004 Annual Report inc. (BNBN) common shares under stock-based incentive plans. Through January 29, 2005, the Company accounted for all transactions under which employees received such options based on the price of ...

  • Page 31
    ... Barnes & Noble.com to approximately 75 percent. On May 27, 2004, the Company completed a merger (the Merger) of bn.com with a wholly owned subsidiary of the Company. The purchase price paid by the Company was $158,776 (including acquisition related costs). Under the terms of the Merger, the holders...

  • Page 32
    ... pro forma results as if the Company had acquired Barnes & Noble.com (resulting in a 100 percent economic interest) and recorded the above noted allocations of purchase price on the first day of fiscal 2003: Fiscal Year 2003 (a) Current assets Hardware and software Other assets Customer list...

  • Page 33
    ... Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 31 4. RECEIVABLES, NET Receivables represent customer, credit/debit card, advertising, landlord and other receivables due within one year as follows: January 29, 2005 January 31, 2004 outstanding loans...

  • Page 34
    ... STATEMENTS continued ] 2004 Annual Report write-off of the unamortized portion of the deferred financing fees from the issuance of the notes and the redemption premium resulted in a charge of $14,582. The Company from time to time enters into interest rate swap agreements to manage interest-costs...

  • Page 35
    ... assets and pay benefits. The Company maintains a defined contribution plan (the Savings Plan) for the benefit of substantially all employees. In addition, the Company provides certain health care and life insurance benefits (the Postretirement Plan) to retired employees, limited to those receiving...

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    34 Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2004 Annual Report A summary of the components of net periodic cost for the Pension Plan and the Postretirement Plan follows: Pension Plan Fiscal Year 2004 2003 2002 Postretirement Plan 2004 2003 2002 Service cost ...

  • Page 37
    ...change the net periodic cost by approximately $24 and ($22), respectively, during fiscal 2004. The Company's Retirement Plan allocation at January 29, 2005 and January 31, 2004, target allocation for fiscal 2005 and expected long-term rate of return by asset category are as follows: Weighted-Average...

  • Page 38
    36 Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2004 Annual Report 11. INCOME TAXES The Company files a consolidated federal return with all 80 percent or more owned subsidiaries. Federal and state income tax provisions (benefits) for fiscal 2004, 2003 and 2002 ...

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    2004 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 37 12. OTHER COMPREHENSIVE EARNINGS (LOSS), NET OF TAX Comprehensive earnings are net earnings, plus certain other items that are recorded directly to shareholders' equity, as follows: Fiscal Year ...

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    ... plans. Through January 29, 2005, the Company accounted for stock-based awards in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. In accordance with SFAS No. 123, the Company discloses the pro forma...

  • Page 41
    ... shares of the Company's common Volatility Risk-free interest rate Expected life 31% 3.73% 6 years 40% 2.71% 6 years 40% 3.51% 6 years A summary of the status of the Company's BKS stock options is presented below: Shares (000s) Weighted-Average Exercise Price Balance, February 2, 2002 Granted...

  • Page 42
    ... STATEMENTS continued ] 2004 Annual Report The following table summarizes information as of January 29, 2005 concerning outstanding and exercisable options: Options Outstanding Number Outstanding (000s) Weighted-Average Remaining Contractual Life WeightedAverage Exercise Price Options Exercisable...

  • Page 43
    ... employee filed a class action lawsuit in the Superior Court of California, Orange County against the Company. The complaint alleges that the Company improperly classified the assistant store managers, department managers and receiving managers working in its California stores as salaried exempt...

  • Page 44
    ... amended complaint was filed alleging that the Company improperly classified the music managers and café managers working in its California stores as salaried exempt employees. The Company intends to vigorously defend this action, including contesting its certification of a class action. Following...

  • Page 45
    ... others, services for payroll processing, benefits administration, insurance (property, casualty, medical, dental, life, etc.), tax, traffic, fulfillment and telecommunications. In accordance with the terms of such agreements, the Company received fees in an amount equal to the direct costs plus...

  • Page 46
    ... Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2004 Annual Report years 2004, 2003 and 2002, respectively, 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...

  • Page 47
    2004 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 45 20. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) A summary of quarterly financial information for each of the last two fiscal years is as follows: Fiscal 2004 Quarter End On or About (a) ...

  • Page 48
    ... PUBLIC ACCOUNTING FIRM The Board of Directors Barnes & Noble, Inc. New York, New York We have audited the accompanying consolidated balance sheets of Barnes & Noble, Inc. and subsidiaries as of January 29, 2005 and January 31, 2004 and the related consolidated statements of operations, changes in...

  • Page 49
    2003 Annual Annual Report 2004 Report 2 0 0 4 A n n u a l R e p o r t[ ] TK â- Barnes & Noble, Inc. Barnes & & Noble, Noble, Inc. Barnes Inc. 47 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors Barnes & Noble, Inc. New York, New York We have audited management's ...

  • Page 50
    ... the Chief Executive Officer and the Chief Financial Officer of the Company as Exhibits 31.1 and 31.2 to its Annual Report on Form 10-K for fiscal 2004 filed with the Securities and Exchange Commission, and the Company has submitted to the New York Stock Exchange a certificate of the Chief Executive...

  • Page 51
    ... Vice President of Corporate Communications and Public Affairs David S. Deason Vice President of Barnes & Noble Development Christopher Grady-Troia Vice President and Chief Information Officer Mark Bottini Vice President and Director of Stores Michelle Smith Vice President of Human Resources Michael...

  • Page 52
    ... Street Station New York, New York 10286 Shareholder Inquiries: (800) 524-4458 E-mail address: [email protected] Web site: http://www.stockbny.com All other inquiries should be directed to: Investor Relations Department, Barnes & Noble, Inc. 122 Fifth Avenue, New York, New York 10011 Phone...

  • Page 53
    ... Incident of the Dog in the Night-Time Mark Haddon, Vintage (233,018) The Kite Runner Khaled Hosseini, Riverhead Books (220,524) The Wedding Nicholas Sparks, Warner Books (201,969) Life of Pi Yann Martel, Harvest (190,379) The Time Traveler's Wife Audrey Niffenegger, Harvest (185,775) SLEEPERS...

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    ... Giroux Biography/Autobiography NEWBERY MEDAL (2005) Kira-Kira Cynthia Kadohata Atheneum/Simon & Schuster Children's Books Khrushchev William Taubman W.W. Norton Poetry De Kooning Mark Stevens & Annalyn Swan Alfred A. Knopf Criticism Walking to Martha's Vineyard Franz Wright Knopf General Non...

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    Barnes & Noble, Inc â- 122 Fifth Avenue â- N e w Yo r k , N Y 1 0 0 1 1