Barnes and Noble 2005 Annual Report Download - page 11

[MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS continued ]
10 2005 Annual ReportBarnes & Noble, Inc.
acquisition of all of Bertelsmann AG’s (Bertelsmann)
interest in barnesandnoble.com inc. (bn.com) and
Barnes & Noble.com. As a result of the acquisition,
the Company increased its economic interest in Barnes
& Noble.com from approximately 38% 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 Merger
was approved by the shareholders of bn.com at a
special meeting held on May 27, 2004. As a result of
the 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 & Noble.com can offer fast delivery throughout
the U.S. Barnes & Noble.com’s unique service,
“Fast&Free Delivery,” enables customers in the
continental U.S. to receive their deliveries within three
business days, with no delivery charge on purchases of
$25 and over. Visited by millions of users each month,
Barnes & Noble.com has shipped products to
customers in 230 countries since its inception in 1997.
Barnes & Noble.com provides exclusive content
features such as “Meet the Writers,” “What America’s
Reading,” and audio and video author interviews,
online reading groups, as well as third-party reviews,
first chapters and table of contents, and thousands of
music clips and video trailers.
In the fourth quarter 2005 American Customer
Satisfaction Index compiled by the University of
Michigan, Barnes & Noble.com received the highest
rating in the e-commerce category for the second year in
a row. This annual survey is recognized as the industry’s
leading indicator of customer satisfaction. According
to the comScore MediaMetrix December 2005 report,
Barnes & Noble.com’s site was the twenty-first most-
trafficked shopping destination, as measured by the
number of unique visitors.
The Company’s subsidiary Sterling is a leading general
trade book publisher. Sterling’s active title list comprises
over 5,000 titles, and publishes several hundred new titles
each year. Sterling’s publication list is particularly extensive
in “books for enthusiasts,” categories that include mind
enhancement, puzzles and games, crafts, home repair and
remodeling, woodworking, photography, and wines and
spirits. Sterling’s list comprises books that it originates itself,
purchases from domestic and international book packagers
and those that it distributes for other publishers.
In fiscal 2004, the Company’s Board of Directors
approved an overall plan for the complete disposition of
all of its Class B common stock in GameStop Corp.
(GameStop), the Company’s former video game
operating segment. This disposition was completed in
two steps. The first step was the sale of 6,107,338
shares of GameStop Class B common stock held by the
Company to GameStop (Stock Sale) for an aggregate
consideration of $111.5 million. The Stock Sale was
completed on October 1, 2004. The second step in the
disposition was the spin-off by the Company of its
remaining 29,901,662 shares of GameStop’s Class B
common stock (Spin-Off). The Spin-Off was completed
on November 12, 2004 with the distribution of
0.424876232 of a share of GameStop Class B common
stock as a tax-free distribution on each outstanding
share of the Company’s common stock to the
Company’s stockholders of record as of the close of
business on November 2, 2004. As a result of the Stock
Sale and the Spin-Off, GameStop is no longer a
subsidiary of the Company. The disposition of all of the
Company’s stockholdings in GameStop resulted in the
Company presenting all historical results of operations
of GameStop as discontinued operations.