Barnes and Noble 2011 Annual Report Download - page 62

The Company purchases new and used textbooks at market
prices directly from MBS. Total purchases were $102,573,
$24,186, $1,799 and $8,250 for fi scal 2011, fi scal 2010, the
transition period and fi scal 2008, respectively. Prior to fi s-
cal 2010, MBS distributed certain proprietary products on
behalf of the Company. Net sales received by the Company
after deducting MBS fees were $9 and $340 for the transi-
tion period and fi scal 2008, respectively, and fees paid to
MBS were $2 and $50 during the transition period and
fi scal 2008, respectively. MBS sells used books through the
Barnes & Noble.com dealer network. Barnes & Noble.com
earned a commission of $5,474, $3,115, $915 and $1,410
on the MBS used book sales in fi scal 2011, fi scal 2010, the
transition period and fi scal 2008, respectively. In addition,
Barnes & Noble.com hosts pages on its website through
which Barnes & Noble.com customers are able to sell used
books directly to MBS. Barnes & Noble.com is paid a fi xed
commission on the price paid by MBS to the customer.
Total commissions paid to Barnes & Noble.com were $184,
$172, $29 and $130 for fi scal 2011, fi scal 2010, the transi-
tion period and fi scal 2008, respectively.
In fi scal 2010, the Company’s wholly owned subsidiary
Barnes & Noble Bookquest LLC (Bookquest) entered into
an agreement with TXTB.com LLC (TXTB), a subsidiary
of MBS, pursuant to which the Bookquest marketplace
database of third party sellers on the Barnes & Noble.
com website was made available on the TXTB website.
Bookquest receives a fee from third party sellers for sales of
Bookquest marketplace items and, upon receipt of such fee,
Bookquest remits a separate fee to TXTB for any market-
place items sold on the TXTB website. Total commissions
paid to TXTB were $775 and $0 during fi scal 2011 and fi scal
2010, respectively. Outstanding amounts payable to TXTB
were $8 and $33 for fi scal 2011 and fi scal 2010, respectively.
In fi scal 2011, Barnes & Noble.com entered into an agree-
ment with TXTB pursuant to which Barnes & Noble.com
became the exclusive provider of trade books to TXTB
customers through www.textbooks.com. TXTB receives a
commission from Barnes & Noble.com on each purchase
by a TXTB customer. Outstanding amounts payable to TXTB
were $4 for fi scal 2011.
Prior to the Acquisition, the Company licensed the “Barnes
& Noble” name under a royalty-free license agreement
dated February 11, 1987, as amended, from B&N College
(the General License Agreement). Barnes & Noble.com
licensed the “Barnes & Noble” name under a royalty-free
license agreement, dated October 31, 1998, as amended,
between Barnes & Noble.com and B&N College (the License
Agreement). Pursuant to the License Agreement, Barnes &
Noble.com had 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 31, 2001 (the Textbook License Agreement),
between Barnes & Noble.com, B&N College and Textbooks.
com, Barnes & Noble.com was granted the right to sell
college textbooks over the Internet using the “Barnes &
Noble” name. Pursuant to the Textbook License Agreement,
Barnes & Noble.com paid 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.
Royalty expense was $3,431, $973 and $5,814 during fi scal
2010 prior to Acquisition, the transition period and fi scal
2008, respectively, under the terms of the Textbook License
Agreement. During fi scal 2010, subsequent to the closing of
the Acquisition, Textbooks.com paid $146 to B&N College
for funds that were received by Textbooks.com and were
earned by B&N College. In connection with the closing of
the Acquisition, the Company terminated the Textbook
License Agreement and as a result no longer pays a royalty
with respect to online textbook sales.
In fi scal 2010, the Company entered into an Aircraft Time
Sharing Agreement with LR Enterprises Management LLC
(LR Enterprises), which is owned by Leonard Riggio and
Louise Riggio, pursuant to which LR Enterprises granted
the Company the right to use a jet aircraft owned by it on a
time-sharing basis in accordance with, and subject to the
reimbursement of certain operating costs and expenses
as provided in, the Federal Aviation Regulations (FAR).
Such operating costs were $932 and $429 during fi scal
2011 and fi scal 2010, respectively. LR Enterprises is solely
responsible for the physical and technical operation of the
aircraft, aircraft maintenance and the cost of maintaining
aircraft liability insurance, other than insurance obtained
for the specifi c fl ight as requested by the Company, as
provided in the FAR. Prior to the Acquisition, the Company
used a jet aircraft owned by B&N College and paid for the
costs and expenses of operating the aircraft based upon the
Company’s usage. Such costs which included fuel, insur-
ance and other costs were $113, $420 and $1,823 during
fi scal 2010 prior to Acquisition, the transition period and
fi scal 2008, respectively, and were included in the accom-
panying consolidated statements of operations.
The Company has leases for two locations for its corporate
offi ces with related parties: the fi rst location is leased from
an entity in which Leonard Riggio has a majority interest
60 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued