Barnes & Noble Announces First Quarter Results; Consolidated Results Exceed Estimates; New $500 Million Credit Facility Closed.Business Editors NEW YORK--(BUSINESS WIRE)--May 23, 2002 Barnes & Noble, Inc. (NYSE:BKS), the world's largest bookseller, today reported financial results for the first quarter ended May 4, 2002. Consolidated net loss (prior to a one-time, non-cash impairment charge) was $1.4 million or ($0.02) per share, beating consensus estimates. RETAIL BOOKSTORES Net sales for the period were $861.5 million, an increase of 6.6% over the comparable period last year. Net earnings were $3.5 million or $0.05 per share, $0.02 better than expected due to savings from lower store expenses and reduced interest expense: -- Barnes & Noble sales were $798.6 million for the quarter, an increase of 8.1%. Comparable store sales increased 2.5%. The company opened eight new locations, ending the quarter with 599 stores. -- B. Dalton Bookseller sales were $60.4 million for the quarter, a decrease of (9.8%). Comparable store sales decreased (1.0%). In the quarter, seven underperforming locations were closed, ending the quarter with 298 stores. GAMESTOP GameStop sales were $271.4 million for the quarter, an increase of 34.8% over the comparable period last year. Comparable store sales increased 28.7% for the first quarter. Net earnings were $4.9 million, exceeding analysts' estimates by $2.5 million. The company's share of GameStop net earnings (based upon approximately 60% fully diluted ownership) for the first quarter was $1.9 million or $0.03 per share, exceeding analysts'estimates by two cents per share. BARNES & NOBLE.COM AND OTHER INVESTMENTS Our share of net losses for Barnes & Noble.com were ($4.4) million, compared to ($7.1) million for the prior year. The decline in operating losses is a result of the continued cost rationalization of the business and productivity improvements. Our share of net losses from other investments was on plan at ($2.6) million. CONSOLIDATED EARNINGS Consolidated net loss for the quarter, prior to a one-time, non-cash impairment charge, was ($1.4) million or ($0.02) per share, exceeding consensus estimates. As previously announced, Barnes & Noble has been monitoring its Gemstar stock investment. At the end of the first quarter as a result of recent events, the company deemed the decline in value to be other than temporary and recorded a one-time, pre-tax, non-cash impairment charge of $25.3 million, $14.9 million net of tax or ($0.23) per share, to write down the investment. NEW $500 MILLION CREDIT FACILITY On May 22nd, the company completed a new $500.0 million revolving credit facility with a syndicate of banks led by Fleet National Bank as administrative agent. The new facility, which will expire in May 2005, will provide ample capacity for future growth. FULL YEAR 2002 OUTLOOK As reported on May 20th, GameStop's strong first-quarter results and its improved second-quarter guidance are expected to produce an increase in net earnings of $3.7 million above previous estimates. Accordingly, Barnes & Noble's share of that increase (based upon approximately 60% fully diluted ownership) will be $0.03 per share, bringing the company's full-year guidance for consolidated earnings from $1.87 per share to $1.90 per share. Guidance for the core book business remains unchanged. "We are very pleased with our first-quarter results. Every one of our businesses exceeded analysts' estimates," said Steve Riggio, chief executive officer of Barnes & Noble, Inc. "Our retail and online channels are nourishing each other, proving the effectiveness of our multi-channel strategy. Additionally, GameStop's strong results reflect its leadership position and momentum in a rapidly growing industry." "Barnes & Noble's financial position has never been stronger," said Maureen O'Connell, chief financial officer of Barnes & Noble, Inc. "Due to the $250.0 million in proceeds received as a result of the GameStop IPO and a new $500.0 million revolving credit facility, Barnes & Noble's debt-to-market capitalization ratio has never been lower." A conference call with Barnes & Noble, Inc.'s management will be simulcast on the Web at (www.companyboardroom.com) beginning at 11 A.M. EST on Thursday, May 23, 2002, and is accessible at (http://www.barnesandnobleinc.com/financials), where it will be archived until June 21, 2002. The next scheduled press release will be the May sales release on June 6, 2002. ABOUT BARNES & NOBLE, INC. Barnes & Noble, Inc. (NYSE: BKS) is the world's largest bookseller, operating 599 Barnes & Noble bookstores in 49 states. It also operates 298 B. Dalton Bookseller stores, primarily in regional shopping malls. The company offers titles from more than 50,000 publisher imprints, including thousands of small, independent publishers and university presses. It conducts its e-commerce business through Barnes & Noble.com (http://www.bn.com) in which it owns a 36% interest. Barnes & Noble also has approximately a 60% interest in GameStop (NYSE: GME), the nation's largest video-game and entertainment-software specialty retailer with 1,068 stores. General financial information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate Web site: http://www.barnesandnobleinc.com/financials. SAFE HARBOR This press release contains "forward-looking statements." 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 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 costs, higher interest rates, the performance of the company's online and other initiatives, the successful integration of acquired businesses, unanticipated increases in merchandise or occupancy costs, unanticipated adverse 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. AND SUBSIDIARIES
First Quarter Summary
($ in millions, except per share amounts)
13 weeks ended
-------------------------
May 4, 2002 May 5, 2001
----------- -----------
BARNES & NOBLE RETAIL OPERATIONS
BARNES & NOBLE BOOKSELLERS
(Retail Bookstores - excludes Calendar Club)
Sales $ 861 808
Operating profit 9 19
EBITDA 39 47
EPS 0.05 0.12
GAMESTOP
(Video Game & Entertainment
Software Stores)
Sales 271 201
Operating profit (loss) 9 (5)
EBITDA 14 2
EPS 0.03 (0.10)
RETAIL EPS 0.08 0.02
INVESTING ACTIVITIES
Share of net losses of
Barnes & Noble.com (1) (0.07) (0.11)
Share of net losses from
other investments
Calendar Club (0.02) (0.02)
iUniverse.com (0.01) (0.01)
----------- -----------
Net losses from
other investments (0.03) (0.03)
----------- -----------
CONSOLIDATED EPS BEFORE
GEMSTAR IMPAIRMENT CHARGE (0.02) (0.12)
----------- -----------
Impairment charge
(Gemstar International Ltd.) (2) (0.23) 0.00
----------- -----------
CONSOLIDATED EPS BEFORE
LEGAL SETTLEMENT EXPENSE (0.25) (0.12)
----------- -----------
Legal settlement expense 0.00 (0.04)
----------- -----------
CONSOLIDATED PRO-FORMA EPS (1) (0.25) (0.16)
=========== ===========
CONSOLIDATED EPS, AS REPORTED $ (0.25) (0.18)
=========== ===========
Weighted average shares outstanding 67,252,000 65,205,000
(1) 2001 results are presented on a pro-forma basis 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
equity in net loss of equity investments.
(2) In fiscal 1998, Barnes & Noble, Inc. purchased an investment
in NuvoMedia, Inc. for $4.8 million. In fiscal 1999, NuvoMedia
was acquired by Gemstar International Ltd. (Gemstar). In
connection with this sale, Barnes & Noble, Inc. recognized a
pre-tax gain of $22.4 million (which was recorded as stock in
Gemstar). As a result of Gemstar's recent financial
difficulties, the Company believes that the decline in the
value of its investment in Gemstar is other than temporary.
Therefore, an impairment charge is being recorded. The current
value of the Company's Gemstar holdings after the impairment
is $3.3 million.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Reconciliation of Summary Reporting to Consolidated
Statements of Operations
First Quarter 2002
($ in thousands, except per share amounts)
13 weeks ended
--------------------------
May 4, 2002 May 5, 2001
------------ ------------
RETAIL BOOKSTORES
Consolidated operating
profit (loss), as reported (10,236) 6,833
Less: GameStop operating
(profit) loss, as reported (8,714) 5,340
Addback: impairment charge 25,328 -
Addback: Calendar Club operating loss 2,577 2,013
------------ ------------
Retail Bookstores operating profit 8,955 14,186
Retail Bookstores interest expense, net (3,055) (5,436)
Legal settlement expense - 4,500
------------ ------------
Retail Bookstores pre-tax profit 5,900 13,250
Income taxes 2,419 5,499
------------ ------------
Retail Bookstores net earnings 3,481 7,751
Retail Bookstores EPS 0.05 0.12
GAMESTOP
Net earnings (loss), as reported 4,914 (6,519)
Less: minority interest
at 38.66% (diluted) (1,900) -
Interest expense on Barnes & Noble, Inc.'s
investment in GameStop, net of tax (1,106) -
------------ ------------
Barnes & Noble's ownership
interest in GameStop 1,908 (6,519)
Share in GameStop EPS 0.03 (0.10)
------------ ------------
Consolidated Retail EPS 0.08 0.02
------------ ------------
BARNES & NOBLE.COM
Net loss, as reported (1) (20,537) (33,684)
Barnes & Noble's ownership
interest (approx. 36%) (7,435) (12,194)
Income taxes (3,048) (5,061)
------------ ------------
Barnes & Noble's ownership interest in
Barnes & Noble.com (4,387) (7,133)
------------ ------------
Share of Barnes & Noble.com EPS (0.07) (0.11)
------------ ------------
OTHER INVESTMENTS
Other expense, as reported (1,813) (885)
Share of Calendar Club net loss (2,559) (2,052)
------------ ------------
Operating losses, other investments (4,372) (2,937)
Income taxes (1,793) (1,219)
------------ ------------
Net losses from other investments (2,579) (1,718)
------------ ------------
Other investments EPS (0.03) (0.03)
------------ ------------
Consolidated EPS before
Gemstar impairment charge (0.02) (0.12)
------------ ------------
Gemstar impairment charge, net of tax (14,944) -
------------ ------------
Gemstar impairment charge EPS (0.23) -
------------ ------------
Legal settlement expense, net of tax - (2,633)
------------ ------------
Legal settlement expense EPS - (0.04)
------------ ------------
CONSOLIDATED PRO-FORMA EPS (1) (0.25) (0.16)
============ ============
CONSOLIDATED EPS, AS REPORTED (0.25) (0.18)
============ ============
Weighted average shares outstanding 67,252,000 65,205,000
(1) 2001 results are presented on a pro-forma basis 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
equity in net loss of equity investments.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(thousands of dollars, except per share data)
13 weeks ended
May 4, 2002 May 5, 2001
------------- ------------
Sales (1) $ 1,133,126 1,009,637
Cost of sales and occupancy 849,493 750,586
------------- ------------
Gross profit 283,633 259,051
------------- ------------
Selling and administrative expenses 231,041 210,170
Legal settlement expense - 4,500
Depreciation and amortization 35,750 36,723
Pre-opening expenses 1,750 825
Impairment charge 25,328 -
------------- ------------
Operating profit (loss) (2) (10,236) 6,833
Interest expense, net (5,406) (11,277)
Equity in net loss of Barnes & Noble.com (7,435) (14,315)
Other expense, net (1,813) (885)
------------- ------------
Loss before taxes and
minority interest (3) (24,890) (19,644)
Minority interest (basic basis) (2,773) -
------------- ------------
Loss before taxes (27,663) (19,644)
Income taxes (11,342) (8,152)
------------- ------------
Net loss $ (16,321) (11,492)
============= ============
Loss per common share:
Basic $ (0.25) (0.18)
Diluted $ (0.25) (0.18)
Weighted average common
shares outstanding
Basic 67,252,000 65,205,000
Diluted 67,252,000 65,205,000
Percentage of sales:
Sales (1) 100.0% 100.0%
Cost of sales and occupancy 75.0% 74.4%
------------- ------------
Gross profit 25.0% 25.6%
------------- ------------
Selling and administrative expenses 20.4% 20.8%
Legal settlement expense 0.0% 0.4%
Depreciation and amortization 3.2% 3.6%
Pre-opening expenses 0.1% 0.1%
Impairment charge 2.2% 0.0%
------------- ------------
Operating profit (loss) (2) -0.9% 0.7%
Interest expense, net -0.5% -1.1%
Equity in net loss of Barnes & Noble.com -0.7% -1.4%
Other expense, net -0.1% -0.1%
------------- ------------
Loss before taxes and
minority interest (3) -2.2% -1.9%
Minority interest (basic basis) -0.2% 0.0%
------------- ------------
Loss before taxes -2.4% -1.9%
Income taxes -1.0% -0.8%
------------- ------------
Net loss -1.4% -1.1%
============= ============
(1) Includes Calendar Club sales of $268 and $370 for the 13 weeks
ended May 4, 2002 and May 5, 2001, respectively.
(2) Includes Calendar Club operating loss of $2,577 and $2,013 for
the 13 weeks ended May 4, 2002 and May 5, 2001, respectively.
(3) Includes Calendar Club pretax losses of $2,559 and $2,053 for
the 13 weeks ended May 4, 2002 and May 5, 2001, respectively.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars, except per share data)
May 4, May 5, February 2,
2002 2001 2002
------------ ----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 183,262 47,670 108,218
Receivables, net 96,092 78,011 98,570
Merchandise inventories 1,354,708 1,255,573 1,285,005
Prepaid expenses and
other current assets 105,964 108,525 99,201
------------ ----------- -----------
Total current assets 1,740,026 1,489,779 1,590,994
------------ ----------- -----------
Property and equipment:
Land and land improvements 3,247 3,247 3,247
Buildings and leasehold
improvements 466,174 402,760 468,954
Fixtures and equipment 842,373 657,142 798,505
------------ ----------- -----------
1,311,794 1,063,149 1,270,706
Less accumulated depreciation
and amortization 719,777 518,238 674,937
------------ ----------- -----------
Net property and equipment 592,017 544,911 595,769
------------ ----------- -----------
Intangible assets, net 340,881 355,063 352,897
Investment in Barnes & Noble.com 40,782 122,280 48,217
Other noncurrent assets 39,317 46,044 35,343
------------ ----------- -----------
Total assets $ 2,753,023 2,558,077 2,623,220
============ =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 677,850 559,605 695,284
Accrued liabilities 336,640 259,856 444,944
------------ ----------- -----------
Total current liabilities 1,014,490 819,461 1,140,228
------------ ----------- -----------
Long-term debt 355,000 790,000 449,000
Deferred income taxes 114,479 72,432 36,178
Other long-term liabilities 107,462 102,907 109,704
Minority interest 183,596 - -
Shareholders' equity:
Common stock; $.001 par value;
300,000,000 shares
authorized; 72,856,628,
70,995,594 and
72,713,069 shares
issued, respectively 73 71 73
Additional paid-in capital 821,572 682,831 728,015
Accumulated other
comprehensive loss (1,653) (8,491) (14,303)
Retained earnings 275,381 216,243 291,702
Treasury stock, at cost,
5,504,700 shares (117,377) (117,377) (117,377)
------------ ----------- -----------
Total shareholders' equity 977,996 773,277 888,110
------------ ----------- -----------
Commitments and contingencies - - -
------------ ----------- -----------
Total liabilities and
shareholders' equity $ 2,753,023 2,558,077 2,623,220
============ =========== ===========
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