Barnes and Noble 2006 Annual Report Download - page 17

Earnings
As a result of the factors discussed above, the Company
reported consolidated net earnings of . million (or
. per share) during fi scal  compared with net
earnings of . million (or . per share) during
fi scal . Components of diluted earnings per share
(EPS) are as follows:
FISCAL YEAR 2005 2004
EPS from continuing operations $ 2.03 1.68
EPS from discontinued operations — 0.25
Consolidated EPS $ 2.03 1.93
SEASONALITY
The Company’s business, like that of many retailers, is
seasonal, with the major portion of sales and operating
profi t realized during the fourth quarter which includes
the holiday selling season.
LIQUIDITY AND CAPITAL RESOURCES
Working capital requirements are generally at their
highest in the Company’s fi scal quarter ending on or
about January  due to the higher payments to vendors
for holiday season merchandise purchases. In addition,
the Company’s sales and merchandise inventory levels
will fl uctuate from quarter to quarter as a result of the
number and timing of new store openings.
Cash and cash equivalents on hand, cash fl ows from
operating activities, funds available under its senior
credit facility and short-term vendor fi nancing continue
to provide the Company with liquidity and capital
resources for store expansion, seasonal working capital
requirements and capital investments.
Cash Flow
Cash fl ows provided from operating activities were .
million, . million and . million during fi scal
,  and , respectively. In fi scal , the
decrease in cash fl ows from operating results was primar-
ily due to an approximate . million diff erence in
the timing of payments on inventory and rent accounts
payable related principally to the impact of the rd week.
In fi scal , the decrease in cash fl ows from operating
results was primarily due to a decrease in the portion of
income taxes expense that was deferred taxes. In fi scal
, the increase in cash fl ows from operating activities
was primarily attributable to improved working capital
management and an increase in net earnings.
The weighted-average age per square foot of the
Company’s  Barnes & Noble stores was . years as of
February ,  and is expected to increase to approxi-
mately . years by February , . As the Barnes &
Noble stores continue to mature, and as the number of
new stores opened during the fi scal year decreases as
a percentage of the existing store base, the increasing
operating profi ts of Barnes & Noble stores are expected
to generate a greater portion of the cash fl ows required
for working capital, including new store inventories,
capital expenditures and other initiatives.
Capital Structure
Strong cash fl ows from operations and a continued
emphasis on working capital management strengthened
the Company’s balance sheet in fi scal .
On August , , the Company entered into
Amendment No.  (Amended New Facility) to the
Company’s Credit Agreement, dated as of June , 
(the New Facility). The Amended New Facility amended
the New Facility to extend the maturity date to July ,
 from June , . The Amended New Facility also
amended the New Facility: () to reduce the applicable
margin that is applied to (x) Eurodollar -based loans
above the publicly stated Eurodollar rate and (y) standby
letters of credit to a spread ranging from . to
. from the current range of . to .; ()
to reduce the fee paid on commercial letters of credit to
a range of . to . from the current range
of . to .; and () to reduce the commit-
ment fee to a range of . to . from a range
of . to .. In each case, the applicable rate
is based on the Company’s consolidated fi xed charge
coverage ratio. Proceeds from the Amended New Facility
will be used for general corporate purposes, including
seasonal working capital needs.
The Amended New Facility, as did the New Facility,
includes an . million fi ve-year revolving credit
facility, which under certain circumstances may be
increased to . billion at the option of the Company.
The New Facility replaced the Amended and Restated
Credit and Term Loan Agreement, dated as of August ,
 (the Prior Facility), which consisted of a .
million revolving credit facility and a . million
term loan. The revolving credit facility portion was
due to expire on May ,  and the term loan had a
maturity date of August , . The Prior Facility was
terminated on June , , at which time the prior
2006 Annual Report 15