Barnes and Noble 2005 Annual Report Download

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2005 Annual Report

Table of contents

  • Page 1
    2005 Annual Report

  • Page 2
    ... OF CONTENTS 2005 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...

  • Page 3

  • Page 4
    ... for our investors. Sales growth of children's books was strong throughout the year. This segment of our business is growing across the board, and for the first time we have listed our children's bestsellers as a separate category in "Barnes & Noble's 2005 Bestsellers" at the end of this report...

  • Page 5
    ...LETTER TO OUR SHAREHOLDERS continued ] 2005 Annual Report During 2005, we opened 27 Barnes & Noble stores, including a new location in Morgantown, West Virginia, giving us a presence in all 50 states. We ended the year with 681 stores. On a net basis, we added 497,000 square feet of space to our...

  • Page 6
    2005 Annual Report [[ LETTER ] ] LETTER TO TO OUR OUR SHAREHOLDERS SHAREHOLDERS continued continued Barnes & Noble, Inc. 5 Our focus on delivering exceptional service to our customers is unwavering. Our consistently high customer satisfaction levels are the direct result of the hard work of our ...

  • Page 7
    ...Inc. [ SELECTED CONSOLIDATED FINANCIAL DATA ] 2005 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...

  • Page 8
    2005 Annual Report [ SELECTED CONSOLIDATED FINANCIAL DATA continued ] Barnes & Noble, Inc. 7 Fiscal Year (In thousands, except per share data) 2005 2004 2003(1) 2002 2001 STATEMENT OF OPERATIONS DATA: Sales Barnes & Noble stores B. Dalton stores Barnes & Noble.com(1) Other(2) Total sales...

  • Page 9
    ... of Barnes & Noble.com under the equity method of accounting. See Note 3 to the Notes to Consolidated Financial Statements. Includes primarily Calendar Club L.L.C. (Calendar Club) (for all periods presented) and third-party sales of Sterling Publishing Co., Inc. (from its acquisition in January...

  • Page 10
    ... experience, management has a strong sense of customers' changing needs and the Company leads book retailing with a "community store" concept. Barnes & Noble's typical store offers a comprehensive title base, a café, a children's section, a music department, a magazine section and a calendar of...

  • Page 11
    ... Merger, bn.com became a privately held company, wholly owned by the Company. Barnes & Noble.com sells books, music and movies, and, to a lesser extent, used books, gifts, educational games, toys and video games. With access to one of the industry's largest in-stock inventories of new books, Barnes...

  • Page 12
    ... STORE SALES INCREASE (DECREASE)(a) Barnes & Noble stores B. Dalton stores STORES OPENED Barnes & Noble stores B. Dalton stores Total STORES CLOSED Barnes & Noble stores B. Dalton stores Total NUMBER OF STORES OPEN AT YEAR END Barnes & Noble stores B. Dalton stores Total SQUARE FEET OF SELLING SPACE...

  • Page 13
    12 Barnes & Noble, Inc. [ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued ] 2005 Annual Report 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 14
    ..., reduced sales of lower margin music and increased sales volume leveraging fixed occupancy costs in the Barnes & Noble stores, offset by the deep discounted selling price on J. K. Rowling's Harry Potter and the Half-Blood Prince book. Selling and Administrative Expenses Selling and administrative...

  • Page 15
    ... relates to the approximate 26% outside interest in Calendar Club L.L.C. (Calendar Club). Income From Discontinued Operations On October 1, 2004, the Board of Directors of the Company approved an overall plan for the complete disposition of all of the Company's Class B common stock in GameStop Corp...

  • Page 16
    ... of Barnes & Noble.com for the full period in fiscal 2004 compared with a partial period in fiscal 2003. Income From Discontinued Operations On October 1, 2004, the Board of Directors of the Company approved an overall plan for the complete disposition of all of its Class B common stock in GameStop...

  • Page 17
    ... timing of new store openings. Cash and cash equivalents on hand, cash flows from operating activities, funds available under its senior credit facility and short-term vendor financing continue to provide the Company with liquidity and capital resources for store expansion, seasonal working capital...

  • Page 18
    ... rate (a publicly published rate which was 4.57% as of January 28, 2006) plus a percentage spread (ranging from 0.750% to 1.375%) based on the Company's consolidated fixed charge coverage ratio. Swing line loans bear interest at the base rate. Under the New Facility, the Company agrees to pay...

  • Page 19
    ... Barnes & Noble.com to approximately 75%. 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 $158.8 million (including acquisition related costs). Under the terms of the Merger, the holders...

  • Page 20
    ... on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Note 17 to the Notes to Consolidated Financial Statements. CRITICAL ACCOUNTING POLICIES Management's Discussion and Analysis of Financial...

  • Page 21
    ... store closing or relocation costs, higher interest rates, the performance of the Company's online initiatives such as Barnes & Noble.com, the performance and successful integration of acquired businesses, the successful and timely completion and integration of the Company's new distribution center...

  • Page 22
    2005 Annual Report [ CONSOLIDATED STATEMENTS OF OPERATIONS ] Barnes & Noble, Inc. 21 Fiscal Year (In thousands, except per share data) 2005 2004 2003 Sales Cost of sales and occupancy Gross profit Selling and administrative expenses Depreciation and amortization Pre-opening expenses ...

  • Page 23
    22 Barnes & Noble, Inc. [ CONSOLIDATED BALANCE SHEETS ] 2005 Annual Report (In thousands, except per share data) January 28, 2006 January 29, 2005 Assets Current assets: Cash and cash equivalents Receivables, net Merchandise inventories Prepaid expenses and other current assets Total current ...

  • Page 24
    2005 Annual Report [ CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ] Accumulated Other Comprehensive Loss Barnes & Noble, Inc. 23 (In thousands) Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock at Cost Total Balance at February 1, 2003 Comprehensive ...

  • Page 25
    ... of property and equipment Payments on GameStop note receivable Net increase in other noncurrent assets Acquisition of consolidated subsidiaries, net of cash acquired Purchase of investments Net cash flows from investing activities Cash flows from financing activities: Purchase of treasury stock...

  • Page 26
    ...-term, highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Barnes & Noble, Inc. (Barnes & Noble), through its subsidiaries (collectively, the Company), is primarily engaged in the sale...

  • Page 27
    ... 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% discount on all purchases made during the twelve-month membership period. The annual membership fee of $25...

  • Page 28
    2005 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 27 costs include the net book value of abandoned fixtures and leasehold improvements and, when a store is closed, a provision for future lease obligations, net of expected sublease recoveries. Costs ...

  • Page 29
    ...of record as of the close of business on November 2, 2004. The Class B shares retained their super voting power of 10 votes per share and are separately listed on the New York Stock Exchange under the symbol GME.B. As a result of the Stock Sale and the Spin-Off, GameStop is no longer a subsidiary of...

  • Page 30
    2005 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 29 meeting held on May 27, 2004. As a result of the Merger, bn.com became a privately held company, wholly owned by the Company. The acquisitions were accounted for by the purchase method of ...

  • Page 31
    ...rate (a publicly published rate which amounted to 4.57% as of January 28, 2006) plus a percentage spread (ranging from 0.750% to 1.375%) based on the Company's consolidated fixed charge coverage ratio. Swing line loans bear interest at the base rate. Under the New Facility, the Company agrees to pay...

  • Page 32
    2005 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 31 Fees expensed with respect to the unused portion of the New and Prior Facilities were $1,320, $1,014 and $1,170, during fiscal 2005, 2004 and 2003, respectively. The amounts outstanding under the ...

  • Page 33
    32 Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2005 Annual Report 9. EMPLOYEES' RETIREMENT AND DEFINED CONTRIBUTION PLANS As of December 31, 1999, substantially all employees of the Company were covered under a noncontributory defined benefit pension plan (the ...

  • Page 34
    2005 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 33 The following table provides a reconciliation of benefit obligations, plan assets and funded status of the Pension Plan and the Postretirement Plan: Pension Plan Fiscal Year 2005 2004 2005 ...

  • Page 35
    34 Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2005 Annual Report The Company's Pension Plan allocation at January 28, 2006 and January 29, 2005 are as follows: Percentage of Plan Assets Fiscal Year 2005 2004 Asset Category Large capitalization equities Mid ...

  • Page 36
    2005 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 35 10. INCOME TAXES The Company files a consolidated federal return with all 80% or more owned subsidiaries. Federal and state income tax provisions (benefits) for fiscal 2005, 2004 and 2003 are as ...

  • Page 37
    ... Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2005 Annual Report 11. 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 2005...

  • Page 38
    ... grants stock awards in the form of restricted stock or options to purchase Barnes & Noble, Inc. (BKS) common stock, and prior to the Merger granted options to purchase barnesandnoble.com inc. (BNBN) common stock under stock-based incentive plans. Through January 28, 2006, the Company has accounted...

  • Page 39
    38 Barnes & Noble, Inc. [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] 2005 Annual Report 2004 Incentive Plan (the 2004 Plan). Additionally, options and restricted stock may continue to be granted in the future under the 1996 Plan and the 2004 Plan. The options to purchase common ...

  • Page 40
    ... to key officers, employees, consultants, advisors, and managers of bn.com and its subsidiaries and affiliates. The 1999 Plan was administered by the Compensation Committee of bn.com's Board of Directors. The 1999 Plan allowed bn.com to grant options to purchase 25,500,000 shares of bn.com's Class...

  • Page 41
    ... pay insurance, taxes and other maintenance costs. Percentage rentals are based on sales performance in excess of specified minimums at various stores. Rental expense under operating leases are as follows: Fiscal Year 2005 2004 2003 The Company provides for minimum rent expense over the lease terms...

  • Page 42
    ... 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 employees. The complaint...

  • Page 43
    ...agreement, Barnes & Noble.com pays Textbooks.com a royalty on revenues (net of product returns, applicable sales tax and excluding shipping and handling) realized by Barnes & Noble.com from the sale of books designated as textbooks. The term of the agreement is for five years and renews annually for...

  • Page 44
    ... 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 incremental...

  • Page 45
    ... reimbursement for gift cards purchased in a Barnes & Noble store and redeemed on the Barnes & Noble.com Web site. 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...

  • Page 46
    2005 Annual Report [ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued ] Barnes & Noble, Inc. 45 19. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) A summary of quarterly financial information for each of the last two fiscal years is as follows: Fiscal 2005 Quarter Ended On or About ...

  • Page 47
    ...Report 2005 Report REPORT OF INDEPENDENT REGISTERED 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 28, 2006 and January 29, 2005 and the related...

  • Page 48
    2003 Annual Annual Report 2005 Report 2 0 0 5 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 49
    ... 2005 filed with the Securities and Exchange Commission, and the Company has submitted to the New York Stock Exchange a certificate of the Chief Executive Officer of the Company certifying that he is not aware of any violation by the Company of New York Stock Exchange corporate governance listing...

  • Page 50
    ... 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 51
    ...Reports, Form 10-K and 10-Q documents and other financial information can be obtained tollfree by calling 1-888-BKS-NEWS. Common Stock: New York Stock Exchange, Symbol: BKS Transfer Agent and Registrar: The Bank of New York Investor Services Department P.O. Box 11258 Church Street Station New York...

  • Page 52
    BARNES & NOBLE BESTSELLERS 2005 TOP 10 HARDCOVER FICTION TOP 10 PAPERBACK FICTION The Kite Runner Khaled Hosseini, Riverhead Books (510,904) Angels & Demons Dan Brown, Pocket Books (282,128) Harry Potter & the Order of the Phoenix J.K. Rowling, Scholastic (263,756) The Chronicles of Narnia C.S. ...

  • Page 53
    ... Chris Raschka (Illustrator) Michael di Capua Books Hyperion Washington's Crossing David Hackett Fischer Oxford University Press History Them Francine du Plessix Gray Penguin Biography NEWBERY MEDAL (2006) Criss Cross Lynne Rae Perkins Greenwillow Books De Kooning Mark Stevens and Annalyn Swan...

  • Page 54
    Barnes & Noble, Inc â- 122 Fifth Avenue â- N e w Yo r k , N Y 1 0 0 1 1