BKS » Topics » 53 Weeks Ended February 3, 2007 Compared with 52 Weeks Ended January 28, 2006

This excerpt taken from the BKS 10-K filed Apr 2, 2008.

53 Weeks Ended February 3, 2007 Compared with 52 Weeks Ended January 28, 2006

Sales

The Company’s sales increased $158.3 million, or 3.1%, during fiscal 2006 to $5.261 billion from $5.103 billion during fiscal 2005. This increase was primarily attributable to a $177.3 million increase in sales at Barnes & 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 for 86.2% of total Company sales. The 4.1% increase in Barnes & Noble store sales was primarily attributable to the inclusion of the 53rd week in fiscal 2006 that contributed an increase in sales of $77.7 million, new Barnes & Noble stores that contributed an increase in sales of $168.4 million, offset by closed stores that decreased sales by $68.7 million and a 0.3% decrease in comparable store sales, which decreased sales by $11.7 million.

In fiscal 2006, B. Dalton sales declined $39.6 million or 28.0% and represented 1.9% of total Company sales. The decrease was primarily a result of store closings that contributed to a decrease in sales of $34.7 million, a 6.1% decrease in comparable store sales, which contributed to a decrease in sales of $6.3 million, offset by the inclusion of the 53rd week in fiscal 2006 that contributed an increase to sales of $1.4 million.

In fiscal 2006, the Company opened 32 Barnes & Noble stores and closed 18, bringing its total number of Barnes & Noble stores to 695 with 17.5 million square feet. The Company closed 20 B. Dalton stores, ending the period with 98 B. Dalton stores and 0.4 million square feet. As of February 3, 2007, the Company operated 793 stores in the fifty states and the District of Columbia.

Cost of Sales and Occupancy

The Company’s cost of sales and occupancy includes costs such as merchandise costs, distribution center costs (including payroll, supplies, depreciation and other operating expenses), rental expense, common area maintenance, merchant association dues and lease-required advertising, partially offset by landlord tenant allowances amortized over the life of the lease.

Cost of sales and occupancy increased $87.1 million, or 2.5%, to $3.623 billion in fiscal 2006 from $3.536 billion in fiscal 2005. As a percentage of sales, cost of sales and occupancy decreased to 68.9% in fiscal 2006 from 69.3% in fiscal 2005. This decrease was primarily attributable to favorable inventory shortage results and the deep discounted selling price on J. K. Rowling’s Harry Potter and the Half-Blood Prince in fiscal 2005, offset by the enhancement in the Company’s Member program in fiscal 2006 whereby adult hardcover discounts increased by an additional 10%.

 

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Selling and Administrative Expenses

Selling and administrative expenses increased $70.2 million, or 6.2%, to $1.202 billion in fiscal 2006 from $1.131 billion in fiscal 2005. As a percentage of sales, selling and administrative expenses increased to 22.8% in fiscal 2006 from 22.2% in fiscal 2005. This increase was primarily due to sales deleveraging due to negative comparable store sales as well as an increase in the amount of stock-based compensation expense, primarily related to the adoption of Statement of Financial Accounting Standards (SFAS) No. 123 (Revised), “Share-Based Payment” (SFAS 123R), offset by a lower impairment charge in fiscal 2006 related to property and equipment.

Depreciation and Amortization

Depreciation and amortization decreased $2.6 million, or 1.5%, to $170.3 million in fiscal 2006 from $173.0 million in fiscal 2005. The decrease was primarily due to lower depreciation on certain Barnes & Noble store assets that became fully depreciated, offset by the higher depreciation in the Company’s new distribution center and accelerated depreciation in connection with the closing of the Company’s Internet distribution center in Memphis, Tennessee.

Pre-Opening Expenses

Pre-opening expenses increased $2.0 million, or 17.9%, in fiscal 2006 to $12.9 million from $10.9 million in fiscal 2005. The increase in pre-opening expenses was primarily the result of higher costs associated with the locations of the stores opened in the first quarter of 2006 as well as an increase in new Barnes & Noble stores opened during fiscal 2006 compared to the new Barnes & Noble stores opened during fiscal 2005.

Operating Profit

The Company’s consolidated operating profit increased $1.6 million, or 0.6%, to $253.4 million in fiscal 2006 from $251.8 million in fiscal 2005. This increase was primarily due to the matters discussed above.

Interest Income (Expense), Net and Amortization of Deferred Financing Fees

Interest income (expense), net, and amortization of deferred financing fees, increased $3.0 million, or 208.6%, to $1.5 million in fiscal 2006 from ($1.4) million in fiscal 2005. The increase was due to reduced average borrowings.

Income Taxes

Barnes & Noble’s effective tax rate in fiscal 2006 decreased to 40.25% compared with 40.75% during fiscal 2005. The decrease in the effective tax rate was primarily due to a decrease in the Company’s overall effective state tax rate.

 

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Minority Interest

Minority interest was $1.8 million in fiscal 2006 compared with $1.7 million in fiscal 2005, and relates to the approximate 26% outside interest in Calendar Club.

Earnings

As a result of the factors discussed above, the Company reported consolidated net earnings of $150.5 million (or $2.17 per share) during fiscal 2006 compared with consolidated net earnings of $146.7 million (or $2.03 per share) during fiscal 2005.

This excerpt taken from the BKS 10-K filed Apr 4, 2007.

53 Weeks Ended February 3, 2007 Compared with 52 Weeks Ended January 28, 2006

Sales

The Company’s sales increased $158.3 million, or 3.1%, during fiscal 2006 to $5.261 billion from $5.103 billion during fiscal 2005. This increase was primarily attributable to a $177.3 million increase in sales at Barnes & 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 for 86.2% of total Company sales. The 4.1% increase in Barnes & Noble store sales was primarily attributable to the inclusion of the 53rd week in fiscal 2006 that contributed an increase to sales of $77.7 million, new Barnes & Noble stores that contributed an increase in sales of $168.4 million, offset by closed stores that decreased sales by $68.7 million and a 0.3% decrease in comparable store sales, which decreased sales by $11.7 million.

In fiscal 2006, B. Dalton sales declined $39.6 million or 28.0% and represented 1.9% of total Company sales. The decrease was primarily a result of store closings that contributed to a decrease in sales of $34.7 million, a 6.1% decrease in comparable store sales, which contributed to a decrease in sales of $6.3 million, offset by the inclusion of the 53rd week in fiscal 2006 that contributed an increase to sales of $1.4 million.

In fiscal 2006, the Company opened 32 Barnes & Noble stores and closed 18, bringing its total number of Barnes & Noble stores to 695 with 17.5 million square feet. The Company closed 20 B. Dalton stores, ending the period with 98 B. Dalton stores and 0.4 million square feet. As of February 3, 2007, the Company operated 793 stores in the fifty states and the District of Columbia.

 

F-7


Cost of Sales and Occupancy

The Company’s cost of sales and occupancy includes costs such as merchandise costs, distribution center costs (including payroll, supplies, depreciation and other operating expenses), rental expense, common area maintenance, merchant association dues and lease-required advertising, partially offset by landlord tenant allowances amortized over the life of the lease.

Cost of sales and occupancy increased $87.1 million, or 2.5%, to $3.623 billion in fiscal 2006 from $3.536 billion in fiscal 2005. As a percentage of sales, cost of sales and occupancy decreased to 68.9% in fiscal 2006 from 69.3% in fiscal 2005. This decrease was primarily attributable to favorable inventory shortage results and the deep discounted selling price on J. K. Rowling’s Harry Potter and the Half-Blood Prince in fiscal 2005, offset by the enhancement in the Company’s Member program whereby adult hardcover discounts would increase by an additional 10%.

Selling and Administrative Expenses

Selling and administrative expenses increased $70.2 million, or 6.2%, to $1.202 billion in fiscal 2006 from $1.131 billion in fiscal 2005. As a percentage of sales, selling and administrative expenses increased to 22.8% in fiscal 2006 from 22.2% in fiscal 2005. This increase was primarily due to sales deleveraging due to negative comparable store sales as well as an increase in the amount of stock-based compensation expense, primarily related to the adoption of Statement of Financial Accounting Standards (SFAS) No. 123 (Revised), “Share-Based Payment” (SFAS 123R), offset by a lower impairment charge in fiscal 2006 related to property and equipment.

Depreciation and Amortization

Depreciation and amortization decreased $2.6 million, or 1.5%, to $170.3 million in fiscal 2006 from $173.0 million in fiscal 2005. The decrease was primarily due to lower depreciation on certain Barnes & Noble store assets that became fully depreciated, offset by the higher depreciation in the Company’s new distribution center and accelerated depreciation in connection with the closing of the Company’s Internet distribution center in Memphis, Tennessee.

Pre-Opening Expenses

Pre-opening expenses increased $2.0 million, or 17.9%, in fiscal 2006 to $12.9 million from $10.9 million in fiscal 2005. The increase in pre-opening expenses was primarily the result of higher costs associated with the locations of the stores opened in the first quarter of 2006 as well as an increase in new Barnes & Noble stores opened during fiscal 2006 compared to the new Barnes & Noble stores opened during fiscal 2005.

Operating Profit

The Company’s consolidated operating profit increased $1.6 million, or 0.6%, to $253.4 million in fiscal 2006 from $251.8 million in fiscal 2005. This increase was primarily due to the matters discussed above.

 

F-8


Interest Expense, Net and Amortization of Deferred Financing Fees

Interest income (expense), net, and amortization of deferred financing fees, increased $3.0 million, or 208.6%, to $1.5 million in fiscal 2006 from ($1.4) million in fiscal 2005. The increase was due to reduced average borrowings.

Income Taxes

Barnes & Noble’s effective tax rate in fiscal 2006 decreased to 40.25% compared with 40.75% during fiscal 2005. The decrease in the effective tax rate was primarily due to a decrease in the Company’s overall effective state tax rate.

Minority Interest

Minority interest was $1.8 million in fiscal 2006 compared with $1.7 million in fiscal 2005, and relates to the approximate 26% outside interest in Calendar Club.

Income From Discontinued Operations

On October 1, 2004, the Board of Directors of the Company approved an overall plan for the complete disposition of all of the Company’s Class B common stock in GameStop, the Company’s former video game operating segment. The plan was completed in November 2004 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 historical results of operations of GameStop as discontinued operations.

Earnings

As a result of the factors discussed above, the Company reported consolidated net earnings of $150.5 million (or $2.17 per share) during fiscal 2006 compared with net earnings of $146.7 million (or $2.03 per share) during fiscal 2005.

EXCERPTS ON THIS PAGE:

10-K
Apr 2, 2008
10-K
Apr 4, 2007
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