Barnes & Noble, Inc. Exceeds Analysts' Consensus Estimates in Third Quarter.Business Editors NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY--(BUSINESS WIRE)--November 16, 2000 Barnes Barnes, former municipal borough, SE England. See Richmond upon Thames. & Noble Booksellers EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Up 54 Percent Comparable "Super" Store Sales Increase 5.6 Percent Babbage's Meets Earnings Forecast Barnes & Noble, Inc. (NYSE NYSE See: New York Stock Exchange :BKS BKS Barracks BKS Best Kept Secret (gaming) BKS Bildung, Kultur Und Sport (German) BKS Brookside (city) BKS Bergen Kirurgiske Sykehus (Bergen, Norway) ), the nation's largest bookseller, today reported earnings from Barnes & Noble Booksellers of $0.20 per share for the third quarter, a 54 percent increase over the prior year. The increase in earnings per share was primarily driven by a 40 percent growth in Barnes & Noble Booksellers' operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. to $29.7 million resulting from strong sales growth and higher operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: realized during the quarter. The operating profit margin Operating profit margin The ratio of operating profit to net sales. for Barnes & Noble Booksellers increased to 3.86 percent of sales, up from 2.97 percent in the prior year, reflecting better occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy leverage and a more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix. Barnes & Noble Booksellers' comparable "super" store sales increased 5.6 percent in the third quarter. Sales from "super" stores were strong across all categories, with sales of children's books, bargain A reciprocal understanding, contract, or agreement of any sort usually pertaining to the loan, sale, or exchange of property between two parties, one of whom wants to dispose of an item that the other wants to obtain. books and music being particularly robust. Barnes & Noble Booksellers' comparable mall mall: see shopping center. (World-Wide Web) mall - A collection of World-Wide Web documents featuring commercial products and services, usually served by one particualr Internet access provider. store sales were down (2.2) percent in the third quarter. At the same time, Barnes & Noble.com reported a 58 percent increase in sales as well as an increase in market share for the third quarter. Sales from Barnes & Noble Booksellers were $768.7 million for the third quarter ended October October: see month. 28, 2000, up 7.4 percent from $715.9 million last year. Barnes & Noble Booksellers "super" store sales rose 10.8 percent to $689.9 million from $622.3 million the prior year and represented 90 percent of total Barnes & Noble Booksellers sales. Barnes & Noble Booksellers contributed $60 million in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become in the third quarter, a 22 percent increase over the prior year period. Babbage's sales for the quarter were $183.2 million. As previously announced, comparable store sales in the third quarter from Babbage's stores were down (16.8) percent, slightly below plan as a result of lower-than-plan sales of PlayStation A video game console from Sony that was introduced in the U.S. in 1995. CD-ROM based and using a 32-bit MIPS CPU, the original PlayStation was the first of a family of desktop and handheld units. 2 due to a product shortage in the market. However, the gross margin for the segment in the third quarter was higher than plan due to greater sales of higher-margin video game products. As a result, this segment's earnings of ($0.08) per share for the third quarter were on plan and in line with analysts' estimates. Babbage's was expected to generate net losses in the first three quarters of 2000 due to the seasonality of the business combined with the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. goodwill amortization and interest expense associated with the acquisitions of Babbage's and Funco. Babbage's contributed $5 million in EBITDA during the third quarter. For the third quarter ended October 28, 2000, the company's investment activities, which include investments in Barnes & Noble.com, iUniverse iUniverse, founded in October 1999, is one of the largest self-publishing companies in the United States. The company uses print-on-demand technology and publishes more than 5,000 new titles each year. iUniverse has offices in New York City, Shanghai and Lincoln, Nebraska. .com and Calendar Club generated a pro-forma loss of ($0.16) per share, in line with analysts' estimates. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: earnings per share as reported for the third quarter was an ($0.08) loss or a ($0.04) pro-forma loss (excluding certain charges related to the Barnes & Noble.com investment), exceeding analysts' consensus estimates. These results compare to earnings of $0.05 per share for the third quarter of 1999. The decrease was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a $0.06 per share increase in the company's non-cash losses from the Barnes & Noble.com investment as well as the third-quarter losses from Babbage's of ($0.08) per share. Based on current trends in both the Barnes & Noble Booksellers and Babbage's businesses, we continue to have an optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op outlook for the fourth quarter and 2001. The company's retail EBITDA for the past twelve months rose 32.1 percent to $384.8 million. Free cash flow (as measured by EBITDA less capital expenditures) grew 76 percent to $248.4 million. As of October 28, 2000, Barnes & Noble Booksellers operated 559 "super" stores and 378 mall stores. During the third quarter, Barnes & Noble Booksellers opened nine new "super" stores and closed one store. Babbage's ended the quarter with 966 video game and entertainment software stores, a net gain of 14 new stores. Third Quarter Highlights During the third quarter, Barnes & Noble announced major initiatives linking Barnes & Noble Booksellers' 559 "super" stores with its popular Web site, Barnes & Noble.com. These initiatives will provide new levels of service and convenience to tens of millions of Barnes & Noble customers. These initiatives are: -- Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Service Counters powered by Barnes & Noble.com will be installed in all Barnes & Noble Booksellers "super" stores. The new counters will enable customers to order any book or other product from Barnes & Noble.com at any Barnes & Noble Booksellers "super" store. Customers will be offered the convenience of picking up their orders at the stores, or have orders delivered to their homes, offices or other addresses of choice. -- A membership loyalty program, called "Readers' Advantage," which offers additional discounts and benefits in Barnes & Noble Booksellers "super" stores and at Barnes & Noble.com. -- A new returns policy, whereby Barnes & Noble.com customers may return purchases at Barnes & Noble Booksellers "super" stores. "We know that multi-channel See multichannel. customers spend more, and we see our Internet Service Counters as keys to increasing sales in both the retail and online channels," said Leonard Leon·ard , Ray Charles Known as "Sugar Ray." Born 1956. American boxer who won the 1976 Olympic light welterweight title. He held five world titles as both a welterweight and middleweight between 1979 and 1987. Noun 1. Riggio, chairman of Barnes & Noble, Inc. A conference call with Barnes & Noble, Inc.'s management will be simulcast Simulcast is a portmanteau of "simultaneous broadcast", and refers to programs or events broadcast across more than one medium, or more than one service on the same medium, at the same time. on the Web at ( www.streetfusion.com ) beginning at 11 A.M. EST EST electroshock therapy. EST abbr. electroshock therapy on Thursday Thursday: see week. , November November: see month. 16, 2000, and is accessible at (http://www.shareholder.com/bks/), where it will be archived until November 30, 2000. About Barnes & Noble, Inc. Barnes & Noble, Inc. (NYSE: BKS) operates 559 Barnes & Noble and 378 B. Dalton Dalton, city (1990 pop. 21,761), seat of Whitfield co., extreme NW Ga., in the Appalachian valley; inc. 1847. It is a highly industrialized city in a farm area. bookstores, and, with its acquisition of Babbage's Etc. and Funco, Inc., is the nation's largest operator of video game and entertainment software stores. Barnes & Noble stores stock an authoritative selection of book titles and provide access to more than one million titles. They offer books from more than 50,000 publisher imprints with an emphasis on small, independent publishers and university presses. Barnes & Noble is one of the world's largest booksellers on the World Wide Web (http://www.bn.com), and the exclusive bookseller on America Online See AOL. (Keyword (1) A word used in a text search. (2) A word in a text document that is used in an index to best describe the contents of the document. (3) A reserved word in a programming or command language. 1. : bn). Barnes & Noble.com has the largest standing inventory of any online bookseller. Barnes & Noble also publishes books under its own imprints for sale through its retail stores and Web site. General financial information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's investor relations Investor relations The process by which the corporation communicates with its investors. Web site: http://www.shareholder.com/bks/. SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. This press release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. ." Barnes & Noble is including this statement for the express purpose of availing itself of the protections of the safe harbor provided by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 with respect to all such forward-looking statements. These forward-looking statements are based on currently available information and represent the beliefs of the management of the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks include, but are not limited to, general economic and market conditions, decreased consumer demand for the company's products, possible disruptions in the company's computer or telephone systems, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores or the inability to obtain suitable sites for new stores, higher than anticipated store closing or relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. costs, higher interest rates, the performance of the company's online and other initiatives, the successful integration of acquired businesses, unanticipated increases in merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain or occupancy costs Occupancy costs are the whole life costs of buildings and their associated land from occupancy until disposal. These costs may be incurred on a regular or irregular basis. Occupancy costs are those costs related to occupying a space including; rent, real estate taxes, personal , unanticipated adverse litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. results or effects, product shortages, and other factors which may be outside of the company's control. Please refer to the company's annual, quarterly and periodic reports on file with the SEC for a more detailed discussion of these and other risks that could cause results to differ materially.
Barnes & Noble, Inc.
Third Quarter Summary
($ in millions, except per share amounts)
13 weeks ended 39 weeks ended
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
BARNES & NOBLE BOOKSELLERS
Sales $ 769 716 2,340 2,161
EBITDA $ 60 49 171 138
EPS $ 0.20 0.13 0.55 0.35
BABBAGE'S
Sales $ 183 - 430 -
EBITDA $ 5 - 7 -
EPS $ (0.08) - (0.22) -
INVESTING ACTIVITIES
Cash:
Gain on Barnes
& Noble.com $ - - - 0.21
Chapters Gain - - - 0.09
Non-Cash:
Share of pro forma net
losses of Barnes
& Noble.com (a) (0.13) (0.07) (0.37) (0.22)
Share of net losses
from other equity
investments (0.03) (0.01) (0.11) (0.04)
------ ----- ----- ------
TOTAL INVESTING
ACTIVITIES $ (0.16) (0.08) (0.48) 0.04
====== ===== ===== ======
OTHER ADJUSTMENTS
Ingram write-off $ - - - (0.04)
Change in accounting
for pre-opening costs - - - (0.06)
------ ----- ----- ------
TOTAL OTHER
ADJUSTMENTS $ - - - (0.10)
====== ===== ===== ======
PRO FORMA
CONSOLIDATED
EPS (a) $ (0.04) 0.05 (0.15) 0.29
====== ===== ===== ======
CONSOLIDATED EPS,
AS REPORTED $ (0.08) 0.05 (0.28) 0.29
====== ===== ===== ======
(a) Pro forma results are presented for informational purposes
only and are not prepared in accordance with generally accepted
accounting principles. Such results present the net loss of
barnesandnoble.com inc., excluding charges related to stock based
compensation and acquisition and investment related costs, including
amortization of intangibles and equity in net loss of equity
investments.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(thousands of dollars, except per share data)
(unaudited)
13 weeks ended 39 weeks ended
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Sales $ 951,834 715,903 2,770,420 2,161,404
Cost of sales
and occupancy 692,963 515,413 2,023,393 1,569,268
------- ------- --------- ----------
Gross profit 258,871 200,490 747,027 592,136
------- ------- --------- ----------
Selling and
administrative
expenses 190,882 149,366 562,873 449,971
Depreciation and
amortization 37,032 27,751 104,599 80,144
Pre-opening expenses 2,755 2,137 6,086 4,463
------- ------- ------- --------
Operating profit 28,202 21,236 73,469 57,558
Interest expense, net (15,008) (5,605) (38,064) (15,352)
Equity in net loss of
Barnes & Noble.com (18,901) (8,736) (54,439) (26,812)
Gain on formation of
Barnes & Noble.com - - - 25,000
Other income
(expense), net (3,143) (1,154) (11,679) 2,803
-------- -------- --------- ---------
Earnings (loss)
before taxes and
cumulative effect
of a change in
accounting principle (8,850) 5,741 (30,713) 43,197
Income taxes (3,673) 2,354 (12,746) 17,711
--------- --------- --------- ---------
Earnings (loss)
before cumulative
effect of a change
in accounting
principle (5,177) 3,387 (17,967) 25,486
Cumulative effect of
a change in accounting
principle, net of tax
benefit of $3,125 - - - (4,500)
------------ --------- ---------- ----------
Net earnings (loss) $ (5,177) 3,387 (17,967) 20,986
============ ========= ========== ==========
Earnings (loss) per
common share:
Basic
Earnings (loss) before
cumulative effect of a
change in accounting
principle $ (0.08) 0.05 (0.28) 0.37
Cumulative effect of a
change in accounting
principle, net of tax $ - - - (0.07)
Net earnings (loss) $ (0.08) 0.05 (0.28) 0.30
Diluted
Earnings (loss) before
cumulative effect of a
change in accounting
principle $ (0.08) 0.05 (0.28) 0.35
Cumulative effect of a
change in accounting
principle, net of tax $ - - - (0.06)
Net earnings (loss) $ (0.08) 0.05 (0.28) 0.29
Weighted average
common shares
outstanding
Basic 64,226,000 69,417,000 64,185,000 69,235,000
Diluted 64,226,000 71,461,000 64,185,000 71,772,000
Percentage of sales:
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales
and occupancy 72.8% 72.0% 73.0% 72.6%
------------ ---------- ----------- -----------
Gross profit 27.2% 28.0% 27.0% 27.4%
------------ ---------- ----------- -----------
Selling and
administrative
expenses 20.1% 20.9% 20.3% 20.8%
Depreciation and
amortization 3.9% 3.9% 3.8% 3.7%
Pre-opening expenses 0.3% 0.3% 0.2% 0.2%
------------ ---------- ----------- -----------
Operating profit 3.0% 3.0% 2.7% 2.7%
Interest expense, net -1.6% -0.8% -1.4% -0.7%
Equity in net loss of
Barnes & Noble.com -2.0% -1.2% -2.0% -1.2%
Gain on formation of
Barnes & Noble.com 0.0% 0.0% 0.0% 1.2%
Other income
(expense), net -0.3% -0.2% -0.4% 0.1%
------------ --------- ---------- ----------
Earnings (loss) before
taxes and cumulative
effect of a change in
accounting principle -0.9% 0.8% -1.1% 2.0%
Income taxes -0.4% 0.3% -0.5% 0.8%
------------ --------- ---------- ----------
Earnings (loss) before
cumulative effect of a
change in accounting
principle -0.5% 0.5% -0.6% 1.2%
Cumulative effect of a
change in accounting
principle, net of tax
benefit of $3,125 0.0% 0.0% 0.0% -0.2%
------------ -------- ---------- ----------
Net earnings (loss) -0.5% 0.5% -0.6% 1.0%
============ ======== ========== ==========
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars, except per share data)
October 28, October 30, January 29,
2000 1999 2000
----------- ----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 36,609 19,234 24,247
Receivables, net 88,294 76,470 58,240
Merchandise inventories 1,454,945 1,275,167 1,102,453
Prepaid expenses and other
current assets 72,575 59,118 56,579
--------- --------- ---------
Total current assets 1,652,423 1,429,989 1,241,519
--------- --------- ---------
Property and equipment:
Land and land improvements 3,247 3,247 3,247
Buildings and leasehold
improvements 438,114 402,581 417,535
Fixtures and equipment 658,887 549,403 565,345
--------- ------- -------
1,100,248 955,231 986,127
Less accumulated depreciation
and amortization 522,387 398,029 418,078
--------- ------- -------
Net property and
equipment 577,861 557,202 568,049
------- ------- -------
Intangible assets,
net 420,136 287,447 298,011
Investment in
Barnes & Noble.com 186,092 255,767 240,531
Other noncurrent assets 63,322 45,049 65,681
---------- --------- ---------
Total assets $2,899,834 2,575,454 2,413,791
========== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $865,203 756,928 599,376
Accrued liabilities 196,631 210,534 323,475
--------- -------- -------
Total current liabilities 1,061,834 967,462 922,851
--------- -------- -------
Long-term debt 820,300 575,000 431,600
Deferred income taxes 123,491 117,552 125,006
Other long-term liabilities 94,776 84,779 87,974
Shareholders' equity:
Common stock; $.001 par value;
300,000,000 shares authorized;
69,814,985, 69,442,074 and
69,553,839 shares issued,
respectively 70 69 70
Additional paid-in capital 658,340 653,037 654,584
Accumulated other comprehensive
income (loss) (3,334) 1,366 (1,198)
Retained earnings 261,734 176,189 279,701
Treasury stock, at cost,
5,504,700, 0 and
4,025,900 shares,
respectively (117,377) - (86,797)
--------- -------- --------
Total shareholders' equity 799,433 830,661 846,360
--------- --------- --------
Commitments and contingencies - - -
--------- --------- --------
Total liabilities and
shareholders' equity $2,899,834 2,575,454 2,413,791
=========== ========== =========
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