Barnes and Noble 2006 Annual Report Download - page 16

Download and view the complete annual report

Please find page 16 of the 2006 Barnes and Noble annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 60

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60

through the Company’s distribution network, reduced
sales of lower margin music and increased sales volume
leveraging fi xed occupancy costs in the Barnes & Noble
stores, off set by the deep discounted selling price on
J. K. Rowling’s Harry Potter and the Half-Blood Prince.
Selling and Administrative Expenses
Selling and administrative expenses increased .
million, or ., to . billion in fi scal  from
. billion in fi scal . As a percentage of sales,
selling and administrative expenses increased to .
in fi scal  from . in fi scal . This increase
was primarily due to a . million charge related to the
impairment of certain store assets, charges associated
with litigation of approximately . million and .
million related to stock compensation costs associated
with the issuance of restricted stock.
Depreciation and Amortization
Depreciation and amortization decreased . million,
or ., to . million in fi scal  from .
million in fi scal . This decrease was primarily
due to lower amortization of the Barnes & Noble.com
customer lists and relationships, and certain Barnes &
Noble store assets becoming fully depreciated.
Pre-Opening Expenses
Pre-opening expenses increased . million, or .,
in fi scal  to . million from . million in
fi scal . The increase in pre-opening expenses was
primarily due to the timing of new Barnes & Noble stores
opened during fi scal  and those to be opened during
the beginning of fi scal .
Operating Profi t
The Company’s consolidated operating profi t increased
. million, or ., to . million in fi scal 
from . million in fi scal . This increase was
primarily due to the matters discussed above.
Interest Expense, Net and Amortization of Deferred
Financing Fees
Interest expense, net of interest income, and amortiza-
tion of deferred fi nancing fees, decreased . million,
or ., to . million in fi scal  from .
million in fi scal . The decrease was primarily due
to reduced average borrowings, the repayment of the
Company’s prior outstanding  million term loan
and interest income increasing . million, or .,
to . million in fi scal  from . million in fi scal
.
Debt Redemption Charge
The Company completed the redemption of its .
million outstanding . convertible subordinated
notes due  in the second quarter of fi scal . The
write-off of the unamortized portion of the deferred
fi nancing fees from the issuance of the notes and the
redemption premium resulted in a charge of .
million. The debt redemption charge of . million in
fi scal  was comprised of an . million redemp-
tion premium and the write-off of . million of
unamortized deferred fi nancing fees from the issuance
of the notes.
Income Taxes
Barnes & Noble’s eff ective tax rate in fi scal 
decreased to . compared with . during
fi scal . The decrease in the eff ective tax rate was
primarily due to adjustments in fi scal  related to
prior year taxes.
Minority Interest
Minority interest was . million in fi scal  com-
pared with . million in fi scal , and relates to the
approximate  outside interest in Calendar Club.
Income From Discontinued Operations
On October , , the Board of Directors of the
Company approved an overall plan for the complete dis-
position of all of the Company’s Class B common stock
in GameStop, the Company’s former video game operat-
ing segment. The plan was completed in November 
with the distribution to the Company’s stockholders
of the GameStop Class B common stock. As a result,
GameStop is no longer a subsidiary of the Company
and, accordingly, the Company is presenting all histori-
cal results of operations of GameStop as discontinued
operations.
14 Barnes & Noble, Inc. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued