Barnes and Noble 2006 Annual Report Download - page 46
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The Company leases a ,-square-foot offi ce
warehouse from a partnership in which Leonard Riggio
has a interest, pursuant to a lease expiring in
. Pursuant to such lease, the Company paid (net of
subtenant income) , and in fi scal years
, and , respectively.
The Company leases retail space in a building in which
Barnes & Noble College Bookstores, Inc. (B&N College),
a company owned by Leonard Riggio, subleases space
from the Company. Occupancy costs allocated by the
Company to B&N College for this space totaled ,
and for fi scal years , and ,
respectively. The amount paid by B&N College to the
Company approximates the cost per square foot paid by
the Company to its unaffi liated third-party landlord.
Barnes & Noble.com purchases new and used textbooks
directly from MBS Textbook Exchange, Inc. (MBS), a
corporation majority-owned by Leonard Riggio. Total
purchases were ,, , and , for fi scal
years , and , respectively. In fi scal ,
MBS began selling used books as part of the Barnes &
Noble.com dealer network. Barnes & Noble.com earned
a commission of , on the MBS used book sales in
fi scal . In addition, Barnes & Noble.com maintains
a link on its website which is hosted by MBS and through
which Barnes & Noble.com customers are able to sell
used books directly to MBS. Barnes & Noble.com is paid
a commission based on the price paid by MBS to the
consumer. Total commissions were , , and
for fi scal years , and , respectively.
Barnes & Noble.com licenses the “Barnes & Noble”
name under a royalty-free license agreement, dated
October , , as amended, between Barnes &
Noble.com and B&N College (the License Agreement).
Pursuant to the License Agreement, Barnes & Noble.
com has been granted an exclusive license to use the
“Barnes & Noble” name and trademark in perpetuity for
the purpose of selling books over the Internet (excluding
sales of college textbooks). Under a separate agreement
dated as of January , between Barnes & Noble.com
and Textbooks.com, Inc. (Textbooks.com), a corpora-
tion owned by Leonard Riggio, Barnes & Noble.com
was granted the right to sell college textbooks over the
Internet using the “Barnes & Noble” name. Pursuant to
this 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 fi ve years and renews annually for additional
one-year periods unless terminated months prior to
the end of any given term. Royalty expense was ,,
, and , for fi scal years , and ,
respectively, under the terms of this agreement.
In fi scal , GameStop began selling new and used
video games and consoles on the Barnes & Noble.com
website. Barnes & Noble.com receives a commission
on sales made by GameStop. For fi scal years and
, the commission earned by Barnes & Noble.com
was and , respectively.
The Company paid B&N College certain operating costs
B&N College incurred on the Company’s behalf. These
charges are included in the accompanying consolidated
statements of operations and approximated ,
and for fi scal , and , respec-
tively. B&N College purchased inventory, at cost plus
an incremental fee, of ,, , and ,
from the Company during fi scal , and ,
respectively. The Company charged B&N College ,,
, and , for fi scal years , and ,
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 for the costs and expenses of operating the air-
craft based upon the Company’s usage. Such costs which
include fuel, insurance and other costs approximated
,, , and , during fi scal , and
, respectively, and are included in the accompanying
consolidated statements of operations.
GameStop, a company in which Leonard Riggio is
a member of the Board of Directors and a minority
shareholder, operates departments within some of the
Company’s bookstores. GameStop pays a license fee to
the Company in an amount equal to of the gross sales
of such departments. The Company charged GameStop
a license fee of , and during fi scal ,
and , respectively.
Until June , GameStop participated in the
Company’s worker’s compensation, property and
general liability insurance programs. The costs incurred
by the Company under these programs were allocated to
GameStop based upon GameStop’s total payroll expense,
property and equipment, and insurance claim history.
44 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued