Barnes and Noble 2007 Annual Report Download

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Table of contents

  • Page 1

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  • Page 3
    ... Consolidated Balance Sheets Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Reports of Management Shareholder Information Barnes & Noble Bestsellers...

  • Page 4
    ... Shareholder: Although 2007 was a challenging year for the entire retail sector, including bookselling, Barnes & Noble achieved growth in store sales, a five-year high in online sales growth, and a record increase in our Member Program. The year began with strong sales and a solid line-up of new...

  • Page 5
    ... of Michigan's Customer Satisfaction Index. We will open 35-40 new stores this year, entering new markets as well as upgrading our position in existing locations. A new feature on our bn.com website, Barnes & Noble Studio, is the Internet's first and largest destination for multimedia information...

  • Page 6
    ...fied by reference to, audited consolidated financial statements which are included elsewhere in this report. The Statement of Operations Data for the 52 weeks ended January 29, 2005 (fiscal 2004) and 52 weeks ended January 31, 2004 (fiscal 2003) and the Balance Sheet Data as of January 28, 2006...

  • Page 7
    2007 Annual Report 5 FISCAL YEAR (In thousands, except per share data) STATEMENT OF OPERATIONS DATA 2007 2006 2005 2004 20031 Sales Barnes & Noble stores B. Dalton stores Barnes & Noble.com Other 2 1 $ 4,648,409 84,497 476,870 201,052 5,410,828 3,770,007 1,640,821 1,250,089 172,210 10,387...

  • Page 8
    ...Company acquired a controlling interest in Barnes & Noble.com. Prior to the acquisition date, the Company accounted for the results of Barnes & Noble.com under the equity method of accounting. 2 Includes primarily Calendar Club entities (Calendar Club) and third-party sales of Sterling Publishing Co...

  • Page 9
    ...trade paperback titles) typically represent between 3 and 5 of Barnes & Noble store sales. Complementing this extensive in-store selection, all Barnes & Noble stores provide customers with on-site access to the millions of books available to online shoppers while offering an option to have the book...

  • Page 10
    ... Company's direct-to-home delivery service and as an important broadcast channel and advertising medium for the Barnes & Noble brand. For example, the online store locator at Barnes & Noble.com receives millions of customer visits each year providing store hours, directions, information about author...

  • Page 11
    ... invested the insurance settlement in the redevelopment of the stores that were affected. aff ected. Stock Option Review April 2, 2007, the Special Committee presented its findfindings and recommendations to the Company's Board of filed Directors, as reported in the Company's Form 8-K fi led...

  • Page 12
    ... grant price or the price appropriate to the measurement date as determined by the Special Committee. The Board members and Section 16 officers did not receive any cash payments to compensate them for their voluntary agreements to reprice such options. The total difference in exercise price as...

  • Page 13
    ... attributable to new Barnes & Noble store sales of $159.9 million, coupled with a 1.8 increase in comparable store sales which increased sales by $76.1 million, offset by closed stores that decreased sales by $70.4 million and the inclusion of the 53rd week in fiscal 2006 which accounted for $77...

  • Page 14
    ...Noble stores, a $12.7 million increase in Sterling Publishing third-party sales, offset by a $39.6 million decrease in sales at B. Dalton stores. Barnes & Noble store sales increased $177.3 million, or 4.1 , during fiscal 2006 to $4.534 billion from $4.357 billion during fiscal 2005 and accounted...

  • Page 15
    ... 2006 compared to the new Barnes & Noble stores opened during fiscal 2005. Operating Profit Working capital requirements are generally at their highest in the Company's fiscal quarter ending on or about January 31 due to the higher payments to vendors for holiday season merchandise purchases. In...

  • Page 16
    ... letters of credit under the New Facility. Selected information related to the Company's Amended New and New, New, andPrior PriorFacilities Facilities(in (inthousands): thousands): FISCAL YEAR 2007 2006 2005 2008, primarily for the opening of 55 to 40 new Barnes & Noble stores, the maintenance...

  • Page 17
    ...is generally the selling price. Reserves for non-returnable inventory are based on the Company's history of liquidating non-returnable inventory. The Company also estimates and accrues shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are...

  • Page 18
    ... plans and represents the period of time that stock option awards granted are expected to be outstanding. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application...

  • Page 19
    ... to obtain suitable sites for new stores, higher-thananticipated store closing or relocation costs, higher interest rates, the performance of the Company's online and other initiatives such as Barnes & Noble.com, the performance and successful integration of acquired businesses, the success of the...

  • Page 20
    ...Barnes & Noble, Inc. C O N SOLIDATED STATEMEN TS OF OPERAT I O N S FISCAL YEAR (In thousands, except per share data) 2007 2006 2005 Sales Cost of sales and occupancy Gross profit Selling ...150 $ $ $ 135,799 2.13 2.03 63,662 67,050 See accompanying notes to consolidated financial statements.

  • Page 21
    2007 Annual Report 19 C ONSOLIDATED BALAN CE SHEETS (In thousands, except per share data) ASSETS FEBRUARY 2, 2008 FEBRUARY 3, 2007 Current assets Cash and cash equivalents Receivables, net Merchandise inventories Prepaid expenses and other current assets Total current assets Property and ...

  • Page 22
    20 Barnes & Noble, Inc. C O N SOLIDATED STATEMEN TS OF CHANG E S I N S H A R E H O LD E R S ' E Q U I T Y ACCUMULATED OTHER COMPREHENSIVE LOSS (In thousands) Balance at January 29, 2005 COMPREHENSIVE EARNINGS COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS TREASURY STOCK AT COST ...

  • Page 23
    ... Insurance proceeds from property claims Payments on GameStop note receivable Net increase in other noncurrent assets ï¬,ows from investing activities Net cash ï¬,ows CASH FLOWS FROM FINANCING ACTIVITIES Purchase of treasury stock through repurchase program Cash dividends paid to shareholders...

  • Page 24
    ... imprints of Sterling Publishing Co., Inc. Additionally, the Company owns an approximate 74 interest in Calendar Club, L.L.C., an operator of seasonal kiosks. Consolidation Merchandise inventories are stated at the lower of cost or market. Cost is determined primarily by the retail inventory method...

  • Page 25
    ... at the time of sale. Sales returns (which are not significant) are recognized at the time returns are made. The Barnes & Noble Member program entitles the Member to receive a 10 discount on all purchases made (20 discount for adult hardcover books) during the twelve-month period. The annual fee of...

  • Page 26
    ... year pursuant to Statement of Position 93-7, "Reporting on Advertising Costs." Advertising costs charged to selling and administrative expenses were $27,981, $28,124 and $27,846 during fiscal 2007, 2006 and 2005, respectively. The Company receives payments and credits from vendors pursuant to co...

  • Page 27
    ... Note 3 to the Consolidated Financial Statements for a further discussion on stock-based compensation. Gift Cards 2 . GAIN F ROM IN SURAN CE SETTL EMEN TS In August 2005, the Company sustained significant damage to two of its stores, Gulfport, Mississippi and Metairie, Louisiana, and minor damage...

  • Page 28
    26 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued below. The total compensation expense related to stockbased awards granted under these plans during fiscal 2007 and 2006, including the impact of the implementation of the modified prospective transition method in ...

  • Page 29
    ... Report 27 at the date of grant, straight-line over the period during which the restrictions lapse. For these purposes, the fair market value of the restricted stock is determined based on the closing price of the Company's common stock on the grant date. The Company uses the Black-Scholes option...

  • Page 30
    28 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference difference between the Company's closing stock price on the last trading day of the related fiscal fiscal ...

  • Page 31
    ... grant price or the price appropriate to the measurement date as determined by the Special Committee. The Board members and Section 16 officers did not receive any cash payments to compensate them for their voluntary agreements to reprice such options. The total difference in exercise price as...

  • Page 32
    30 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued 4. RE CE I VA B L E S, NE T Receivables represent customer, credit/debit card, advertising, landlord and other receivables due within one year as follows: FEBRUARY 2, 2008 FEBRUARY 3, 2007 Credit/debit card ...

  • Page 33
    ..., $10,243 and $9,174 during fiscal 2007, 2006 provides certain health In care and life the insurance benefits and 2005, respectively. addition, Company (the Postretirement Plan) toand retired limited provides certain health care life employees, insurance benefi ts to those receiving benefits or...

  • Page 34
    32 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued The tax effects effects of temporary...Stock-based compensation Insurance liability Inventory Pension Investments in equity securities Total deferred tax assets Net deferred tax liabilities BALANCE SHEET CAPTION REPORTED ...

  • Page 35
    200 7 Annual Report 33 10 1 0 . O T H E R CO MP R E H E NS IV E E A R NIN G S (LO S S), N ET OF TAX Comprehensive earnings are net earnings, plus certain other items that are recorded directly to shareholders' equity, as follows: FISCAL YEAR 2007 2006 2005 Net earnings OTHER COMPREHENSIVE ...

  • Page 36
    ... various renewal options for additional periods. The agreements, which have been classified classified as operating leases, generally provide for both minimum and percentage rentals and require the Company to pay insurance, taxes and other maintenance costs. Percentage rentals are based on sales...

  • Page 37
    ... market paperbacks, children's books, bargain books, magazines, music, movies, calendars, games and gift items directly to customers. Most of these products are sourced by third parties while some are sourced through the Company's own publishing activities. These product sales collectively account...

  • Page 38
    ... Barnes & Noble, Inc. Shareholders Derivative solidated purports to set forth .claims under Litigation complaint (the Federal Derivative Action) The conSection 14(a) of the Securities Exchange of 1934 solidated complaint purports to set forthAct claims under (the Exchange Act) under Delaware breach...

  • Page 39
    ... 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 On December 21, 2007, Barnes & Noble.com fi filed led a complaint in the United States District Court for the Eastern District of California...

  • Page 40
    ... sell college textbooks over "Barnes & Noble" Pursuant to thisname. agreement, the Internet usingname. the "Barnes & Noble" Pursuant Barnes & Noble.com pays Textbooks.com a royalty on to this agreement, Barnes & Noble.com pays Textbooks. revenues (neton of revenues product returns, applicable sales...

  • Page 41
    ... 2005, respectively. The Company comparable the charged by publishers and believes the to cost ofprices freight delivered to the stores is other third-party distributors. Argix subleases comparable to thefreight prices charged by publishers and warehouse space from the Company inArgix Jamesburg, New...

  • Page 42
    ...Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued 18. SE L E CT E D Q U AR T E R LY FINA N C IA L INFO R M ATION (UN AUDITED) A summary of quarterly financial information... 2.03 JANUARY TOTAL FISCAL 2007 YEAR 2006 Sales Gross profit Net earnings Earnings per common share...

  • Page 43
    ...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 February 2, 2008 and February 3, 2007 and the related consolidated statements of operations, changes in shareholders' equity and cash...

  • Page 44
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Barnes & Noble, Inc. and subsidiaries as of February 2, 2008 and February 3, 2007, and the related consolidated statements of operations, changes in shareholders' equity, and cash ï¬,ows for...

  • Page 45
    ... the underlying transactions in accordance with the standards of the Public Company Accounting Oversight Board. The report of BDO Seidman, LLP accompanies the Consolidated Financial Statements. The management of Barnes & Noble, Inc. is responsible for establishing and maintaining adequate internal...

  • Page 46
    ... and Chief Information Officer Mark Bottini Chairman and Chief Executive Officer Summit Business Media, LLC Lawrence S. Zilavy Vice President and Director of Stores Michelle Smith Senior Vice President Barnes & Noble College Booksellers, Inc. Vice President of Human Resources Allen W. Lindstrom...

  • Page 47
    ...Services 483 Washington Boulevard Jersey City, NJ 37313-1933 Stockholder Inquiries: (833) 524-4458 Website: www.bnymellon.com/shareowner/isd Counsel Bryan Cave LLP, New York, New York Independent Public Accountants BDO Seidman, LLP, New York, New York Investor Relations Department, Barnes & Noble...

  • Page 48
    ...ICTION Eat, Pray, Love TOP 1 0 PAPERBACK F ICTION The Kite Runner J. K. Rowling Scholastic 2,219,980 1, 749,439 A Thousand Splendid Suns Rhonda Byrne Atria 986,001 The Dangerous Book for Boys Elizabeth Gilbert Penguin 668,682 The Glass Castle Khaled Hosseini Riverhead 288,478 Water for Elephants...

  • Page 49
    ... Klein Abrams 25,467 Born on a Blue Day Philip Lisi Harrison Pullman Random House Little, Brown & Company 100,870 93,756 Goodnight Harry Potter Moon and Daniel Tammet Simon & Schuster 22,162 The Friday Night Knitting Club Margaret WiseStone Brown the Sorcerer's HarperCollins J.K. Rowling 99,118...

  • Page 50
    48 Barnes & Noble, Inc. 2 0 07 AWARD WIN N ERS P UL I T Z E R PRI Z E The Road N AT IO NA L B O O K C R IT IC S C IR C LE AWA R D S The Brief Wondrous Life of Oscar Wao THE MAN BOOKER PRIZE The Gathering Cormac McCarthy Knopf Fiction Rabbit Hole Anne Enright Grove Press CAL DECOTT MEDAL The ...

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