Barnes & Noble Reports Third Quarter Results: Exceeds Earnings Per Share Guidance; Increases Full Year Guidance.NEW YORK -- Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller, today reported sales and earnings for the third quarter ended October 29, 2005. Sales for the third quarter were $1,081.8 million, an increase of 4% from $1,042.3 million a year ago. Sales at Barnes & Noble stores were $930.5 million, increasing 4% over the prior year. Comparable store sales at Barnes & Noble were 1.5% for the quarter, in line with company guidance for a low-single digit increase. The company estimates comparable store sales were negatively impacted by 0.5% due to the effects from the hurricanes. Sales at B. Dalton stores were $28.4 million, a 21% decrease over the prior year, due primarily to store closings. Comparable store sales at B. Dalton stores declined 1.6%. Sales at Barnes & Noble.com increased 8% over the prior year to $99.4 million. Net earnings for the third quarter were $0.00 per share and exceeded guidance of ($0.01) to ($0.04) per share. Third quarter results included costs of $2 million, or $0.03 per share, associated with the previously announced redundancy costs for the new distribution center. Excluding these costs, net earnings improved $0.03 per share as compared to results from continuing operations a year ago. "Third quarter sales met expectations, benefiting from a strong hardcover release schedule in October," said Steve Riggio, chief executive officer of Barnes & Noble, Inc. "If our sales trend continues, we are optimistic that the company will be able to deliver its fourth quarter results as planned." During the third quarter, the company paid its first ever cash dividend of $0.15 per share, for a total of approximately $10.3 million. The company acquired approximately 2.8 million shares for $105 million and approximately 7.3 million shares for $269 million under its share repurchase programs in the third quarter and year-to-date, respectively. GUIDANCE For the fourth quarter, the company expects comparable store sales at Barnes & Noble stores to be in the low-single digits. For the full year, the company expects comparable store sales to increase between 2% and 3%. In the fourth quarter, the company expects earnings per share of $1.72 to $1.76, a 13% to 16% increase as compared to earnings per share from continuing operations of $1.52 in the prior year. Guidance for the fourth quarter includes redundancy costs of approximately $2 million, or $0.03 per share, associated with the new distribution center, and further costs are expected to continue through 2006 as the transition program is completed. For the full year, the company is increasing its earnings per share guidance to a range of $1.99 to $2.03, up $0.05 per share from previous guidance of $1.94 to $1.98. This increase in guidance reflects year-to-date net earnings exceeding guidance by approximately $1 million, as well as earnings per share accretion resulting from the reduced share count associated with the company's share repurchase activity. The revised 2005 guidance reflects a 12% to 15% increase in earnings per share from continuing operations from $1.79 in 2004, excluding debt redemption fees of $0.11 and $0.02 per share in 2004 and 2005, respectively. The company's full year guidance includes the previously announced charges of $0.02 for the write-off of deferred financing fees resulting from the replacement of the company's credit facility and the elimination of the term loan, and $0.06 in legal settlement costs, both of which occurred in the second quarter. In addition, the full year guidance also includes $0.08 of previously announced redundancy costs in association with our new distribution center. The fully diluted weighted average share count used in the computation of earnings per share for each of the periods in 2005 are as follows:
Fully diluted weighted
average shares
-------------------------
First quarter (actual) 74,400,000
Second quarter (actual) 73,087,000
Third quarter (actual) 71,257,000
Fourth quarter (forecast) 69,600,000
-------------------------
Full year (forecast) 72,100,000
=========================
As of October 29, 2005, the company operated 683 Barnes & Noble stores and 141 B. Dalton stores. During the third quarter, 13 Barnes & Noble stores were opened and three were closed. Five B. Dalton stores were closed during the quarter. A conference call with Barnes & Noble, Inc.'s senior management will be webcast beginning at 11:00 A.M. ET on Thursday, November 17, 2005, and is accessible at www.barnesandnobleinc.com/webcasts. The call will also be archived at www.earnings.com for one year. Barnes & Noble, Inc. will report holiday sales on or about January 5, 2006. ABOUT BARNES & NOBLE, INC. Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller and a Fortune 500 company, operates 824 bookstores in 50 states. For the fourth year in a row, the company is the nation's top retail brand for quality, according to the EquiTrend(R) Brand Study by Harris Interactive(R). Barnes & Noble conducts its online business through Barnes & Noble.com (www.bn.com), one of the Web's largest e-commerce sites and the number one online bookseller for quality among e-commerce companies, according to the latest EquiTrend survey. General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate Web site: http://www.barnesandnobleinc.com. 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, the successful and timely completion and integration of the company's new New Jersey distribution center, 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
Consolidated Statements of Operations
(In thousands, except per share data)
----------------------------------------------------------------------
13 weeks ended 39 weeks ended
------------------------- ------------------------
October 30, October 30,
October 29, 2004 October 29, 2004
2005 Restated(a) 2005 Restated(a)
------------ ------------ ----------- -----------
Sales $1,081,785 1,042,277 3,349,755 3,200,823
Cost of sales and
occupancy 761,367 733,523 2,357,587 2,259,656
------------ ----------- ----------- -----------
Gross profit 320,418 308,754 992,168 941,167
------------ ----------- ----------- -----------
Selling and
administrative
expenses 272,721 259,661 815,251 756,715
Depreciation and
amortization 43,892 46,215 130,401 136,952
Pre-opening expenses 4,161 2,099 9,270 6,994
------------ ----------- ----------- -----------
Operating profit
(loss) (356) 779 37,246 40,506
Interest expense, net (917) (2,155) (1,911) (10,358)
Debt redemption charge - - - (14,582)
------------ ----------- ----------- -----------
Income (loss)
before taxes
and minority
interest (1,273) (1,376) 35,335 15,566
Income taxes (519) (561) 14,399 6,334
------------ ----------- ----------- -----------
Income (loss)
before
minority interest (754) (815) 20,936 9,232
Minority interest 1,081 812 2,764 1,846
------------ ----------- ----------- -----------
Income (loss)
from
continuing
operations 327 (3) 23,700 11,078
Income from
discontinued
operations (net of
income tax) - 7,572 - 16,670
------------ ----------- ----------- -----------
Net income $ 327 7,569 23,700 27,748
============ =========== =========== ===========
Basic income per
common share:
Income from
continuing
operations $ - - 0.35 0.16
Income from
discontinued
operations - 0.11 - 0.24
------------ ----------- ----------- -----------
Net income $ - 0.11 0.35 0.40
============ =========== =========== ===========
Diluted income per
common share:
Income from
continuing
operations $ - - 0.33 0.16
Income from
discontinued
operations - 0.10 - 0.22
------------ ----------- ----------- -----------
Net income $ - 0.10 0.33 0.38
============ =========== =========== ===========
Weighted average common
shares outstanding
Basic 66,819 69,443 68,288 68,727
Diluted 71,257 72,049 72,915 71,273
Percentage of sales:
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales and
occupancy 70.4% 70.4% 70.4% 70.6%
------------ ----------- ----------- -----------
Gross profit 29.6% 29.6% 29.6% 29.4%
------------ ----------- ----------- -----------
Selling and
administrative expenses 25.2% 24.9% 24.3% 23.6%
Depreciation and
amortization 4.1% 4.4% 3.9% 4.3%
Pre-opening expenses 0.4% 0.2% 0.3% 0.2%
------------ ----------- ----------- -----------
Operating profit 0.0% 0.1% 1.1% 1.3%
Interest expense, net -0.1% -0.2% -0.1% -0.3%
Debt redemption charge 0.0% 0.0% 0.0% -0.5%
------------ ----------- ----------- -----------
Income (loss)
before
taxes and
minority interest -0.1% -0.1% 1.1% 0.5%
Income taxes 0.0% -0.1% 0.4% 0.2%
------------ ----------- ----------- -----------
Income (loss)
before
minority interest -0.1% -0.1% 0.6% 0.3%
Minority interest 0.1% 0.1% 0.1% 0.1%
------------ ----------- ----------- -----------
Income from
continuing
operations 0.0% 0.0% 0.7% 0.3%
============ =========== =========== ===========
(a) Restated to reflect certain adjustments relating to lease
accounting.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)
----------------------------------------------------------------------
October 30,
October 29, 2004 January 29,
2005 Restated(a) 2005
----------- ------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 23,038 89,309 535,652
Receivables, net 115,823 134,471 91,501
Merchandise inventories 1,563,502 1,518,140 1,274,578
Prepaid expenses and other
current assets 126,714 81,517 85,140
Current assets of discontinued
operations - 360,235 -
----------- ----------- -----------
Total current assets 1,829,077 2,183,672 1,986,871
Property and equipment:
Land and land improvements 3,247 3,247 3,247
Buildings and leasehold
improvements 993,536 901,464 940,616
Fixtures and equipment 1,143,168 1,061,829 1,081,966
----------- ----------- -----------
2,139,951 1,966,540 2,025,829
Less accumulated depreciation
and amortization 1,331,551 1,184,800 1,221,169
----------- ----------- -----------
Net property and equipment 808,400 781,740 804,660
----------- ----------- -----------
Goodwill 264,826 264,118 268,379
Intangible assets, net 94,548 98,783 97,538
Deferred taxes 124,603 138,969 123,231
Other noncurrent assets 24,072 38,941 37,710
Noncurrent assets of discontinued
operations - 470,204 -
----------- ----------- -----------
Total assets $3,145,526 3,976,427 3,318,389
=========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,009,006 876,531 745,073
Accrued liabilities 536,191 426,367 580,509
Current liabilities of
discontinued operations - 291,667 -
----------- ----------- -----------
Total current liabilities 1,545,197 1,594,565 1,325,582
Long-term debt 62,000 245,000 245,000
Deferred income taxes 193,743 161,756 193,743
Other long-term liabilities 369,038 372,386 379,180
Noncurrent liabilities of
discontinued operations - 297,962 -
Minority interest 5,349 2,782 8,942
Shareholders' equity:
Common stock; $.001 par value;
300,000 shares authorized;
81,659, 78,672 and 79,276
shares issued, respectively 82 79 79
Additional paid-in capital 1,045,852 969,976 985,609
Accumulated other
comprehensive loss (10,271) (8,484) (9,857)
Retained earnings 399,553 536,428 386,134
Treasury stock, at cost, 16,315,
9,008 and 9,008 shares,
respectively (465,017) (196,023) (196,023)
----------- ----------- -----------
Total shareholders' equity 970,199 1,301,976 1,165,942
----------- ----------- -----------
Commitments and contingencies - - -
----------- ----------- -----------
Total liabilities and
shareholders' equity $3,145,526 3,976,427 3,318,389
=========== ========== ===========
(a) Restated to reflect certain adjustments relating to lease
accounting.
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