Borders Group Reports Fourth Quarter 2004 EPS of $1.62, Up 8.7% Over 2003; Management Reiterates Previous Guidance for Q1 and Full Year 2005.ANN ARBOR Ann Arbor, city (1990 pop. 109,592), seat of Washtenaw co., S Mich., on the Huron River; inc. 1851. It is a research and educational center, with a large number of government and industrial research and development firms, many in high-technology fields such as , Mich. -- Borders Group Inc. (NYSE NYSE See: New York Stock Exchange :BGP (Border Gateway Protocol) The routing protocol that is used to span autonomous systems on the Internet. It is a robust, sophisticated and scalable protocol that was developed by the Internet Engineering Task Force (IETF). ) today reported final fourth quarter and full-year 2004 results for the period ended Jan. 23, 2005. With fourth quarter 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 of $1.62, the company generated earnings per share growth of 8.7% over the same period in 2003. Full-year consolidated earnings per share were $1.69, representing an increase of 15.8% over $1.46 for 2003, which is the restated earnings per share figure after lease-related accounting adjustments. Management also reiterated full-year 2005 consolidated earnings per share guidance of $1.85 to $1.92, representing growth of 10% to 14% over 2004. All earnings per share figures are on a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis and include the impact of lease-related accounting adjustments as well as non-operating adjustments. Prior-year amounts have been restated to correct lease accounting. "Our 2004 performance was satisfactory and consistent with our expectations," said Borders Group Chief Executive Officer Greg GREG Great Egg Harbor National Scenic and Recreational River (US National Park Service) Josefowicz. "The strategic direction for 2005 calls for continued growth and investment in the core Borders domestic superstore su·per·store n. A very large retail store that stocks highly diversified merchandise, such as groceries, toys, and camera equipment, or a wide variety of mechandise in a specific product line, such as computers or sporting goods. business through new and remodeled stores. In addition, we will focus on continued growth in sales and profitability within the International segment and ongoing initiatives to improve results in the Waldenbooks segment. Books will continue to highlight our customer offering and we expect to see strong results in other categories through the initial stages of cafe conversion to Seattle's Best Coffee Seattle's Best Coffee is a specialty coffee retailer and wholesaler based in Seattle, Washington, USA. It became part of Starbucks Corporation on July 14, 2003. Its international division is owned by FOCUS Brands, Inc. and the addition of Paperchase gifts and stationery The term for boilerplate in the Eudora mail client, starting with Version 3.0. Stationery files are stored on disk and brought into new messages or added to replies. See boilerplate. shops in Borders stores." Consolidated Results Borders Group achieved fourth quarter consolidated sales of $1.37 billion, an increase of 4.3% over 2003. For the full year 2004, consolidated sales were $3.88 billion, a 4.9% increase over the prior year. Comparable store sales at Borders superstores This is a list of superstores by country. Multi-national
For the fourth quarter, net income was $122.8 million, up 3.2% compared to a year ago. On a full-year basis, net income increased by 14.5% to $131.9 million. The increase in net income was driven by the Borders domestic and International segments. For the fourth quarter, gross margin as a percent of sales was down 0.4% from 33.5% to 33.1% resulting primarily from de-leveraging of supply chain costs. Gross margin as a percent of sales for the full year 2004 was up 0.1% from 28.2% to 28.3%. Fourth quarter SG&A as a percent of sales increased 1.0% from 17.2% to 18.2% resulting primarily from higher promotional expenses Noun 1. promotional expense - the cost of promoting a product business expense, trade expense - ordinary and necessary expenses incurred in a taxpayer's business or trade as well as one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. , non-operating recoveries recorded as a reduction of SG&A in 2003. For the full year, SG&A as a percent of sales increased 0.2% from 22.2% to 22.4%. The company's overall financial position remains strong. Cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments, net of debt, totaled $143.2 million at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. compared to $180.4 million one year ago. Borders Group continued to provide direct returns to shareholders in the form of dividends and share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . In 2004, Borders Group repurchased stock totaling $177.3 million. In December December: see month. 2004, the company's Board of Directors approved an increase of 12.5% to its quarterly dividend, which currently yields approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1.4%. As previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). , in February February: see month. 2005, the Board of Directors approved a new stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program of $250 million plus proceeds and tax benefits from stock option exercises. Borders In 2004, Borders Group opened 19 new Borders superstores in the U.S., ending the fiscal year with 462 total domestic locations. Final fourth quarter sales at Borders were $854.7 million, an increase of 3.3% over the same period in 2003. Category sales strength came from books and DVD DVD: see digital versatile disc. DVD in full digital video disc or digital versatile disc Type of optical disc. The DVD represents the second generation of compact-disc (CD) technology. , while music continued to decline. For the year, Borders sales increased 4.8% over fiscal 2003, ending the year at $2.59 billion. Net income in the fourth quarter was up slightly over the prior year to $77.1 million and for the full year, net income increased by 15.1% over 2003 to $112.0 million. International Profitability continued to increase in the International segment. For fourth quarter 2004, net income for the International segment was $14.4 million, a 48.5% increase over 2003. Full-year net income for the segment was $5.6 million compared to a full-year 2003 segment loss of $1.3 million. Sales at International stores for the full year were $510.7 million, a 25.3% increase over 2003 with the International segment now representing 13.2% of total Borders Group consolidated sales versus 11.0% last year. In the fourth quarter, International sales were $185.1 million, up 27.7% from the prior year. Excluding the impact of foreign currency translation, total International sales would have increased by 14.9% for the full year 2004 and 20.1% for the fourth quarter over the same periods last year. Borders Group opened five new Borders superstores overseas in fiscal 2004, ending the year with 42 total International superstore locations. The international segment includes the results of Paperchase Products Limited, which was acquired in the second quarter of 2004. Waldenbooks Waldenbooks generated fourth quarter sales of $328.5 million, which is down 3.5% from a year ago due to store closures and a decline in comparable store sales resulting primarily from weakness in bestsellers. Full-year sales in the Waldenbooks segment were $779.9 million, a decrease of 5.0% from 2003. Net income for the segment decreased by 15.7% in the fourth quarter to $38.2 million, due primarily to the sales decline. Borders Group closed 43 under-performing Waldenbooks stores in 2004, ending the fiscal year with 705 total locations. Non-Operating Adjustments All net income and earnings per share figures reported here include the impact of non-operating adjustments, which for the fourth quarter of 2004 totaled an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charge of $.05 per share. This charge is comprised primarily of asset write-offs and accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. related to store remodels, asset impairments and closure costs. Lease-Related Accounting Adjustments In the company's most recent financial disclosure dated Feb. 9, Borders Group detailed plans to correct its accounting for leases, including restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior year financial statements. Based on further clarification Clarification The removal of small amounts of fine, particulate solids from liquids. The purpose is almost invariably to improve the quality of the liquid, and the removed solids often are discarded. of lease accounting issues, in addition to previously disclosed adjustments, Borders Group is also correcting its straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. rent calculation. The calculation has been adjusted to include the build-out Build-out is an urban planner’s estimate of the amount and location of potential development for an area. Build-out is one step of the land use planning process. Evaluation of potential development impacts begins with a build-out analysis. period of new stores, which results in an earlier recognition of rent expense compared to the company's previous method. In all, the combined impact of corrections related to accounting for leases reduced consolidated earnings per share by $.02 in 2004 and by $.06 in 2003, and reduced beginning shareholder's equity in 2003 by $46.6 million or 4.5%. For the fourth quarter, earnings per share were reduced by one penny in both 2004 and 2003. The company does not expect the impact on earnings to be material in 2005. All lease related accounting adjustments are non-cash. The financial tables and amounts presented in this release for all years reflect lease accounting as described above. Q1 2005 Outlook --Consistent with the company's Feb. 9 disclosure, management projects consolidated earnings per share for the first quarter of 2005 to range from $0.00 to $0.02. The earnings projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. includes the impact of non-operating adjustments, estimated to be an after-tax charge of approximately $0.02 per share. --Comparable store sales at Borders superstores are expected to increase in the low single digits. --Comparable store sales at Waldenbooks are expected to decrease in the low single digits. --Total International sales are expected to increase by 20% to 25% in the first quarter. 2005 Full-Year Outlook --Consistent with the company's Feb. 9 disclosure, management projects that full year consolidated earnings per share will range from $1.85 to $1.92, representing an increase of 10% to 14% over 2004 consolidated earnings per share of $1.69. This projected range excludes the impact of stock option expense, anticipated to be approximately $0.02 per share, and includes the impact of non-operating adjustments, estimated to be an after-tax charge of $0.08 to $0.10 per share. --Comparable store sales for Borders superstores are expected to increase in the low single digits. --Waldenbooks comparable store sales are projected to decrease in the low single digits. --Total sales for the full year for the International segment are expected to increase by approximately 20% over 2004. Next Financial Release/Conference Call Borders Group will issue final first quarter results after market close May 17 with a conference call to follow at 8 a.m. Eastern May 18. About Borders Group, Inc. Headquartered in Ann Arbor, Mich., Borders Group is a leading global retailer of books, music and movies with more than 1,200 stores and over 32,000 employees worldwide. More detailed information on the company is available at www.bordersgroupinc.com. 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. Statement This 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. within the meaning of 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. One can identify these forward-looking statements by the use of words such as "projected," "expected," "estimated," "look," "continuing," "plans," "guidance," "will," "may," "intends," "anticipates," and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address matters such as the company's future financial performance (including sales and earnings guidance), its plans relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc store openings, closings and remodels, the addition of the Seattle's Best Coffee and Paperchase brands to new and certain remodeled stores and its intentions with respect to dividend payments and share repurchases. These statements also address the anticipated impact of the lease-related accounting adjustments described in this release. These statements are subject to risks and uncertainties that could cause actual results and plans to differ materially from those included in the company's forward-looking statements. These risks and uncertainties include, but are not limited to, consumer demand for the company's products, particularly during the holiday season, which is believed to be related to general economic and geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. conditions, weather, and other factors; changes in accounting rules; asset impairments relating to under-performing stores or other unusual items; an unexpected increase in competition; uninsured losses from risks such as terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. , earthquakes Earthquakes See also geology. bathyseism an earthquake occurring at very deep levels of the earth. bradyseism the slow upward and downward motion of the earth’s crust. — bradyseismic, adj. , or floods By Chronology Note:This is in reverse chronological order. 2000s
When a person begins a civil lawsuit, the person enters into a process called litigation. expenses or results; unanticipated work stoppages or increased labor costs; higher than anticipated 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 ; the performance of the company's strategic initiatives, including international expansion; the stability and capacity of the company's information systems; and changes in foreign currency exchange rates. With respect to the anticipated impact of the lease-related accounting adjustments, the risks also relate to the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. and audit of the applicable amounts, which have not yet been completed. Exhibit 99.1 to the company's Form 10-Q Form 10-Q See 10-Q. for the fiscal quarter ended Oct. 24, 2004 filed with the Securities and Exchange Commission sets forth a more detailed discussion of these and other risk factors that could cause actual results and plans to differ materially from those included in the forward-looking statements, and that discussion is incorporated herein by reference. The company does not undertake any obligation to update forward-looking statements.
Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
-----------------------------
Quarter Ended January 23,
2005
-----------------------------
Operating Adjustments GAAP
Basis (1) (2) Basis
-----------------------------
Borders $854.7 $- $854.7
Waldenbooks 328.5 - 328.5
International 185.1 - 185.1
--------- ---------- --------
Total sales 1,368.3 - 1,368.3
Other revenue (5) 4.6 - 4.6
--------- ---------- --------
Total revenue 1,372.9 - 1,372.9
Cost of goods sold, including occupancy
costs 920.0 (0.8) 919.2
Inventory writedowns - 1.0 1.0
--------- ---------- --------
Gross margin 452.9 (0.2) 452.7
Selling, general and administrative
expenses 250.0 (0.8) 249.2
Legal settlement expense - -
Pre-opening expense 1.4 - 1.4
Asset impairments and other writedowns - 6.4 6.4
--------- ---------- --------
Operating income 201.5 (5.8) 195.7
Interest expense 2.6 - 2.6
--------- ---------- --------
Income before income taxes 198.9 (5.8) 193.1
Income taxes 72.4 (2.1) 70.3
--------- ---------- --------
Income before cumulative effect of
accounting change 126.5 (3.7) 122.8
Cumulative effect of accounting change
(net of tax) - - -
--------- ---------- --------
Net income $126.5 $(3.7) $122.8
========= ========== ========
EPS $1.67 $(0.05) $1.62
Weighted avg. common shares 75.8 75.8 75.8
Comparable Store Sales
--------------------------------------------------
Borders 0.8%
Waldenbooks (1.6%)
Sales and Earnings Summary (As Percentage of Total Sales)
-----------------------------
Quarter Ended January 23,
2005
-----------------------------
Operating Adjustments GAAP
Basis (1) (2) Basis
-----------------------------
Borders 62.5 % - % 62.5 %
Waldenbooks 24.0 - 24.0
International 13.5 - 13.5
--------- ---------- --------
Total sales 100.0 - 100.0
Other revenue (5) 0.3 - 0.3
--------- ---------- --------
Total revenue 100.3 - 100.3
Cost of goods sold, including occupancy
costs 67.2 (0.1) 67.1
Inventory writedowns - 0.1 0.1
--------- ---------- --------
Gross margin 33.1 - 33.1
Selling, general and administrative
expenses 18.3 (0.1) 18.2
Legal settlement expense - - -
Pre-opening expense 0.1 - 0.1
Asset impairments and other writedowns - 0.5 0.5
--------- ---------- --------
Operating income 14.7 (0.4) 14.3
Interest expense 0.2 - 0.2
--------- ---------- --------
Income before income taxes 14.5 (0.4) 14.1
Income taxes 5.3 (0.2) 5.1
--------- ---------- --------
Income before cumulative effect of
accounting change 9.2 (0.2) 9.0
Cumulative effect of accounting change
(net of tax) - - -
--------- ---------- --------
Net income 9.2 % (0.2)% 9.0 %
========= ========== ========
Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
(Restated)
-----------------------------
Quarter Ended January 25,
2004
-----------------------------
Operating Adjustments GAAP
Basis (3) (4) Basis
-----------------------------
Borders $827.0 $- $827.0
Waldenbooks 340.4 - 340.4
International 145.0 - 145.0
--------- ---------- --------
Total sales 1,312.4 - 1,312.4
Other revenue (5) 8.5 - 8.5
--------- ---------- --------
Total revenue 1,320.9 - 1,320.9
Cost of goods sold, including occupancy
costs 880.6 - 880.6
Inventory writedowns - 0.3 0.3
--------- ---------- --------
Gross margin 440.3 (0.3) 440.0
Selling, general and administrative
expenses 232.0 (6.0) 226.0
Legal settlement expense - 3.5 3.5
Pre-opening expense 1.5 - 1.5
Asset impairments and other writedowns - 12.0 12.0
--------- ---------- --------
Operating income 206.8 (9.8) 197.0
Interest expense 1.7 - 1.7
--------- ---------- --------
Income before income taxes 205.1 (9.8) 195.3
Income taxes 78.0 (3.8) 74.2
--------- ---------- --------
Income before cumulative effect of
accounting change 127.1 (6.0) 121.1
Cumulative effect of accounting change
(net of tax) - 2.1 2.1
--------- ---------- --------
Net income $127.1 $(8.1) $119.0
========= ========== ========
EPS $1.59 $(0.10) $1.49
Weighted avg. common shares 79.9 79.9 79.9
Comparable Store Sales
------------------------------------------------
Borders 2.5%
Waldenbooks 0.3%
Sales and Earnings Summary (As Percentage of Total Sales)
(Restated)
-----------------------------
Quarter Ended January 25,
2004
-----------------------------
Operating Adjustments GAAP
Basis (3) (4) Basis
-----------------------------
Borders 63.0 % - % 63.0 %
Waldenbooks 26.0 - 26.0
International 11.0 - 11.0
--------- ---------- --------
Total sales 100.0 - 100.0
Other revenue (5) 0.6 - 0.6
--------- ---------- --------
Total revenue 100.6 - 100.6
Cost of goods sold, including occupancy
costs 67.1 - 67.1
Inventory writedowns - - -
--------- ---------- --------
Gross margin 33.5 - 33.5
Selling, general and administrative
expenses 17.7 (0.5) 17.2
Legal settlement expense - 0.3 0.3
Pre-opening expense 0.1 - 0.1
Asset impairments and other writedowns - 0.9 0.9
--------- ---------- --------
Operating income 15.7 (0.7) 15.0
Interest expense 0.1 - 0.1
--------- ---------- --------
Income before income taxes 15.6 (0.7) 14.9
Income taxes 5.9 (0.3) 5.6
--------- ---------- --------
Income before cumulative effect of
accounting change 9.7 (0.4) 9.3
Cumulative effect of accounting change
(net of tax) - 0.2 0.2
--------- ---------- --------
Net income 9.7 % (0.6)% 9.1 %
========= ========== ========
(1) Operating results from fiscal 2004 include the impact of the
changes in accounting for leases, primarily in occupancy, totaling
an after-tax charge of $0.7 million, or $0.01 per share.
(2) Results from fiscal 2004 were impacted by a number of
non-operating items including asset impairments, store closure
costs and disposals of fixed assets resulting from the remodel
program. Partially offsetting these costs are other reserve
adjustments. Therefore, solely for analytical purposes and as an
aid to better understand underlying trends, operating basis data
are presented excluding these items.
(3) Operating results from fiscal 2003 have been restated to include
the impact of the changes in accounting for leases, primarily in
SG&A, totaling an after-tax charge of $0.8 million, or $0.01 per
share.
(4) Results from fiscal 2003 were impacted by a number of
non-operating items including asset impairments, FIN 46 adoption,
a legal settlement and a receivable write-down. Partially
offsetting these costs are an insurance reimbursement related to
the loss of Borders store at the World Trade Center and other
reserve adjustments. Therefore, solely for analytical purposes and
as an aid to better understand underlying trends, operating basis
data are presented excluding these items.
(5) Other revenues include gross income received primarily from the
Waldenbooks Preferred Reader membership program.
Certain reclassifications have been made to conform to current
presentation.
Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
-------------------------------
Year Ended January 23, 2005
-------------------------------
Operating Adjustments GAAP
Basis (1) (2) Basis
-------------------------------
Borders $2,588.9 $- $2,588.9
Waldenbooks 779.9 - 779.9
International 510.7 - 510.7
---------- ---------- ---------
Total sales 3,879.5 - 3,879.5
Other revenue (5) 23.5 - 23.5
---------- ---------- ---------
Total revenue 3,903.0 - 3,903.0
Cost of goods sold, including
occupancy costs 2,802.2 0.2 2,802.4
Inventory writedowns - 1.2 1.2
---------- ---------- ---------
Gross margin 1,100.8 (1.4) 1,099.4
Selling, general and administrative
expenses 872.9 (2.2) 870.7
Legal settlement expense - - -
Pre-opening expense 5.1 (0.3) 4.8
Asset impairments and other writedowns - 7.2 7.2
---------- ---------- ---------
Operating income 222.8 (6.1) 216.7
Interest expense 9.1 - 9.1
---------- ---------- ---------
Income before income taxes 213.7 (6.1) 207.6
Income taxes 77.9 (2.2) 75.7
---------- ---------- ---------
Income before cumulative effect of
accounting change 135.8 (3.9) 131.9
Cumulative effect of accounting change
(net of tax) - - -
---------- ---------- ---------
Net income $135.8 $(3.9) $131.9
========== ========== =========
EPS $1.74 $(0.05) $1.69
Weighted avg. common shares 77.9 77.9 77.9
Comparable Store Sales
-------------------------------------------------
Borders 0.6%
Waldenbooks (2.0%)
Sales and Earnings Summary (As Percentage of Total Sales)
-------------------------------
Year Ended January 23, 2005
-------------------------------
Operating Adjustments GAAP
Basis (1) (2) Basis
-------------------------------
Borders 66.7 % - % 66.7 %
Waldenbooks 20.1 - 20.1
International 13.2 - 13.2
---------- ---------- ---------
Total sales 100.0 - 100.0
Other revenue (5) 0.6 - 0.6
---------- ---------- ---------
Total revenue 100.6 - 100.6
Cost of goods sold, including
occupancy costs 72.2 - 72.2
Inventory writedowns - 0.1 0.1
---------- ---------- ---------
Gross margin 28.4 (0.1) 28.3
Selling, general and administrative
expenses 22.5 (0.1) 22.4
Legal settlement expense - - -
Pre-opening expense 0.1 - 0.1
Asset impairments and other writedowns - 0.2 0.2
---------- ---------- ---------
Operating income 5.8 (0.2) 5.6
Interest expense 0.2 - 0.2
---------- ---------- ---------
Income before income taxes 5.6 (0.2) 5.4
Income taxes 2.1 (0.1) 2.0
---------- ---------- ---------
Income before cumulative effect of
accounting change 3.5 (0.1) 3.4
Cumulative effect of accounting change
(net of tax) - - -
---------- ---------- ---------
Net income 3.5 % (0.1)% 3.4 %
========== ========== =========
Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
(Restated)
-------------------------------
Year Ended January 25, 2004
-------------------------------
Operating Adjustments GAAP
Basis (3) (4) Basis
-------------------------------
Borders $2,470.2 $- $2,470.2
Waldenbooks 820.9 - 820.9
International 407.5 - 407.5
--------- ----------- ---------
Total sales 3,698.6 - 3,698.6
Other revenue (5) 32.4 - 32.4
--------- ----------- ---------
Total revenue 3,731.0 - 3,731.0
Cost of goods sold, including
occupancy costs 2,687.8 0.4 2,688.2
Inventory writedowns - 0.8 0.8
--------- ----------- ---------
Gross margin 1,043.2 (1.2) 1,042.0
Selling, general and administrative
expenses 827.4 (6.0) 821.4
Legal settlement expense - 3.5 3.5
Pre-opening expense 7.3 (0.3) 7.0
Asset impairments and other writedowns - 12.0 12.0
--------- ----------- ---------
Operating income 208.5 (10.4) 198.1
Interest expense 8.7 - 8.7
--------- ----------- ---------
Income before income taxes 199.8 (10.4) 189.4
Income taxes 76.1 (4.0) 72.1
--------- ----------- ---------
Income before cumulative effect of
accounting change 123.7 (6.4) 117.3
Cumulative effect of accounting change
(net of tax) - 2.1 2.1
--------- ----------- ---------
Net income $123.7 $(8.5) $115.2
========= =========== =========
EPS $1.57 $(0.11) $1.46
Weighted avg. common shares 79.1 79.1 79.1
Comparable Store Sales
----------------------------------------------
Borders 0.5%
Waldenbooks (0.6%)
Sales and Earnings Summary (As Percentage of Total Sales)
(Restated)
-------------------------------
Year Ended January 25, 2004
-------------------------------
Operating Adjustments GAAP
Basis (3) (4) Basis
-------------------------------
Borders 66.8 % - % 66.8 %
Waldenbooks 22.2 - 22.2
International 11.0 - 11.0
--------- ----------- ---------
Total sales 100.0 - 100.0
Other revenue (5) 0.9 - 0.9
--------- ----------- ---------
Total revenue 100.9 - 100.9
Cost of goods sold, including
occupancy costs 72.7 - 72.7
Inventory writedowns - - -
--------- ----------- ---------
Gross margin 28.2 - 28.2
Selling, general and administrative
expenses 22.4 (0.2) 22.2
Legal settlement expense - 0.1 0.1
Pre-opening expense 0.2 - 0.2
Asset impairments and other writedowns - 0.3 0.3
--------- ----------- ---------
Operating income 5.6 (0.2) 5.4
Interest expense 0.2 - 0.2
--------- ----------- ---------
Income before income taxes 5.4 (0.2) 5.2
Income taxes 2.1 (0.1) 2.0
--------- ----------- ---------
Income before cumulative effect of
accounting change 3.3 (0.1) 3.2
Cumulative effect of accounting change
(net of tax) - 0.1 0.1
--------- ----------- ---------
Net income 3.3 % (0.2)% 3.1 %
========= =========== =========
(1) Operating results from fiscal 2004 include the impact of the
changes in accounting for leases, primarily in occupancy, totaling
an after-tax charge of $1.6 million, or $0.02 per share.
(2) Results from fiscal 2004 were impacted by a number of
non-operating items including asset impairments, store closure
costs and disposals of fixed assets from the remodel program.
Partially offsetting these costs are income resulting from the
deconsolidation of certain variable interest entities pursuant to
the provisions of FIN 46, an insurance reimbursement related to
the loss of Borders store at the World Trade Center and other
reserve adjustments. Therefore, solely for analytical purposes and
as an aid to better understand underlying trends, operating basis
data are presented excluding these items.
(3) Operating results from fiscal 2003 have been restated to include
the impact of the changes in accounting for leases, primarily in
occupancy, totaling an after-tax charge of $4.8 million, or $0.06
per share.
(4) Results from fiscal 2003 were impacted by a number of
non-operating items including asset impairments, FIN 46 adoption,
a legal settlement and a receivable write-down. Partially
offsetting these costs are an insurance reimbursement related to
the loss of the Borders store at the World Trade Center and other
reserve adjustments. Therefore, solely for analytical purposes and
as an aid to better understand underlying trends, operating basis
data are presented excluding these items.
(5) Other revenues include gross income received primarily from the
Waldenbooks Preferred Reader membership program.
Certain reclassifications have been made to conform to current
presentation.
Borders Group, Inc. Financial Statements
(dollars in millions)
Condensed Consolidated Balance Sheets
-------------- -------------
(Restated)
-------------- -------------
January 23, January 25,
2005 2004
-------------- -------------
ASSETS
Cash and cash equivalents $244.8 $260.8
Investments 95.4 118.0
Inventory 1,306.9 1,235.6
Other current assets 118.3 98.3
Property and equipment, net 635.6 671.8
Other assets and deferred charges 101.4 94.7
Goodwill 126.4 104.3
-------------- -------------
Total assets $2,628.8 $2,583.5
============== =============
LIABILITIES, MINORITY INTEREST
AND STOCKHOLDERS' EQUITY
Short-term debt $141.2 $141.2
Accounts payable 615.1 595.9
Other current liabilities 439.7 418.5
Long-term debt 55.8 57.2
Other long-term liabilities 286.7 268.4
-------------- -------------
Total liabilities 1,538.5 1,481.2
Minority interest 1.4 1.7
Total stockholders' equity 1,088.9 1,100.6
-------------- -------------
Total liabilities, minority interest
and stockholders' equity $2,628.8 $2,583.5
============== =============
Certain reclassifications were made to conform to current year
presentation.
Condensed Consolidated Statements of Cash Flows
-------------- -------------
(Restated)
-------------- -------------
Year Ended
-------------- -------------
January 23, January 25,
2005 2004
-------------- -------------
CASH PROVIDED BY (USED FOR):
OPERATIONS
Income from continuing operations $131.9 $115.2
Depreciation 112.9 111.3
Other adjustments to reconcile net income
to operating cash flows
and changes in assets and liabilities (20.4) 11.8
-------------- -------------
Net cash provided by operations 224.4 238.3
INVESTING
Capital expenditures (115.5) (110.9)
Other financing activities and
acquisitions (1) 26.1 (120.9)
-------------- -------------
Net cash used for investing (89.4) (231.8)
FINANCING
Net funding from long-term debt and
financing obligations 6.8 0.8
Issuance and repurchase of common stock (132.5) (16.6)
Cash dividends paid (25.1) -
-------------- -------------
Net cash used for financing (150.8) (15.8)
Effect of exchange rates on cash and
equivalents (0.2) 1.0
NET DECREASE IN CASH AND EQUIVALENTS (16.0) (8.3)
-------------- -------------
Cash and equivalents at beginning of year 260.8 269.1
-------------- -------------
Cash and equivalents at end of year $244.8 $260.8
============== =============
(1) Includes primarily short-term investments in auction rate
securities, which have been liquidated to cash subsequent to
each respective year-end period.
Borders Group, Inc. Financial Statements
Store Activity Summary
----------------------- -----------------------
Quarter Ended Year Ended
----------------------- -----------------------
January 23, January 25, January 23, January 25,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Borders Superstores
Beginning number of
stores 459 436 445 404
Openings 4 9 19 41
Closings (1) - (2) -
=========== =========== =========== ===========
Ending number of stores 462 445 462 445
=========== =========== =========== ===========
Ending square footage
(in millions) 11.6 11.2 11.6 11.2
=========== =========== =========== ===========
Waldenbooks Stores (1)
Beginning number of
stores 729 770 733 795
Openings 6 1 15 12
Closings (30) (38) (43) (74)
----------- ----------- ----------- -----------
Ending number of stores 705 733 705 733
=========== =========== =========== ===========
Ending square footage
(in millions) 2.8 2.8 2.8 2.9
=========== =========== =========== ===========
Borders International
Stores
Beginning number of
stores 39 37 37 30
Openings 3 0 5 7
Closings - - - -
----------- ----------- ----------- -----------
Ending number of stores 42 37 42 37
=========== =========== =========== ===========
Ending square footage
(in millions) 1.1 1.0 1.1 1.0
=========== =========== =========== ===========
Books, etc.
International Stores
Beginning number of
stores 36 36 36 37
Openings - - 1 1
Closings (1) - (2) (2)
----------- ----------- ----------- -----------
Ending number of stores 35 36 35 36
=========== =========== =========== ===========
Ending square footage
(in millions) 0.2 0.2 0.2 0.2
=========== =========== =========== ===========
Paperchase Stand Alone
Stores
Beginning number of
stores 13 -
Acquired stores - 10
Openings - 3
Closings - -
----------- -----------
Ending number of stores 13 13
=========== ===========
Ending square footage
(in millions) 0.1 0.1
=========== ===========
(1) Includes all small format stores in malls, airports and outlet
malls.
Borders Group, Inc. Segment Financial Information
(dollars in millions, except per share amounts)
----------------------------------
Quarter Ended January 23, 2005
----------------------------------
Operating Adjustments GAAP
Basis (2) (3) Basis
----------------------------------
BORDERS
----------------------------
Sales $854.7 $- $854.7
EBITDA (1) 148.6 (1.7) 146.9
Depreciation expense 20.0 2.4 22.4
Interest expense (1.4) - (1.4)
Income taxes 50.4 (1.6) 48.8
Income before cumulative
effect 79.6 (2.5) 77.1
Cumulative effect - - -
Net income 79.6 (2.5) 77.1
Net income per share $1.05 $(0.03) $1.02
WALDENBOOKS
----------------------------
Sales $328.5 $- $328.5
EBITDA (1) 57.8 (0.3) 57.5
Depreciation expense 6.1 - 6.1
Interest expense (11.2) - (11.2)
Income taxes 24.5 (0.1) 24.4
Net income 38.4 (0.2) 38.2
Net income per share $0.51 $(0.01) $0.50
INTERNATIONAL
----------------------------
Sales $185.1 $- $185.1
EBITDA (1) 31.3 (1.4) 29.9
Depreciation expense 4.3 - 4.3
Interest expense 5.2 - 5.2
Income taxes 6.4 (0.4) 6.0
Net income 15.4 (1.0) 14.4
Net income per share $0.20 $(0.01) $0.19
CORPORATE
----------------------------
EBITDA (1) $(5.8) $- $(5.8)
Interest expense 10.0 - 10.0
Income taxes (8.9) - (8.9)
Net loss (6.9) - (6.9)
Net loss per share $(0.09) $- $(0.09)
CONSOLIDATED
----------------------------
Sales $1,368.3 $- $1,368.3
EBITDA (1) 231.9 (3.4) 228.5
Depreciation expense 30.4 2.4 32.8
Interest expense 2.6 - 2.6
Income taxes 72.4 (2.1) 70.3
Income before cumulative
effect 126.5 (3.7) 122.8
Cumulative effect - - -
Net income 126.5 (3.7) 122.8
Net income per share $1.67 $(0.05) $1.62
(Restated)
-------------------------------
Quarter Ended January 25, 2004
-------------------------------
Operating Adjustments GAAP
Basis (4) (5) Basis
-------------------------------
BORDERS
----------------------------
Sales $827.0 $- $827.0
EBITDA (1) 153.6 (5.6) 148.0
Depreciation expense 20.2 - 20.2
Interest expense (0.5) - (0.5)
Income taxes 51.4 (2.2) 49.2
Income before cumulative
effect 82.5 (3.4) 79.1
Cumulative effect - 2.1 2.1
Net income 82.5 (5.5) 77.0
Net income per share $1.04 $(0.07) $0.97
WALDENBOOKS
----------------------------
Sales $340.4 $- $340.4
EBITDA (1) 69.8 (0.4) 69.4
Depreciation expense 6.3 - 6.3
Interest expense (10.5) - (10.5)
Income taxes 28.5 (0.2) 28.3
Net income 45.5 (0.2) 45.3
Net income per share $0.57 $- $0.57
INTERNATIONAL
----------------------------
Sales $145.0 $- $145.0
EBITDA (1) 22.1 - 22.1
Depreciation expense 3.6 - 3.6
Interest expense 5.0 - 5.0
Income taxes 3.8 - 3.8
Net income 9.7 - 9.7
Net income per share $0.11 $- $0.11
CORPORATE
----------------------------
EBITDA (1) $(8.6) $(3.8) $(12.4)
Interest expense 7.7 - 7.7
Income taxes (5.7) (1.4) (7.1)
Net loss (10.6) (2.4) (13.0)
Net loss per share $(0.13) $(0.03) $(0.16)
CONSOLIDATED
----------------------------
Sales $1,312.4 $- $1,312.4
EBITDA (1) 236.9 (9.8) 227.1
Depreciation expense 30.1 - 30.1
Interest expense 1.7 - 1.7
Income taxes 78.0 (3.8) 74.2
Income before cumulative
effect 127.1 (6.0) 121.1
Cumulative effect - 2.1 2.1
Net income 127.1 (8.1) 119.0
Net income per share $1.59 $(0.10) $1.49
(1) EBITDA is operating income (loss) before depreciation and
amortization. EBITDA is not a Generally Accepted Accounting
Principles (GAAP) measurement. EBITDA information is being
included as we believe it is a commonly used measure of operating
performance in the retail industry. EBITDA is provided to enhance
an investor's understanding of our operating results. It should
not be construed as an alternative to income from operations as an
indicator of operating performance or as an alternative to cash
flows from operating activities as a measure of liquidity as
determined in accordance with GAAP. All companies do not calculate
EBITDA in the same manner. As a result, EBITDA as reported may not
be comparable to EBITDA as reported by other companies.
(2) Operating results from fiscal 2004 include the impact of the
changes in accounting for leases, totaling an after-tax charge of
$0.1 million for Borders and $0.6 million for International.
(3) Results from fiscal 2004 were impacted by a number of
non-operating items including asset impairments, store closure
costs and disposals of fixed assets resulting from the remodel
program. Partially offsetting these costs are other reserve
adjustments. Therefore, solely for analytical purposes and as an
aid to better understand underlying trends, operating basis data
are presented excluding these items.
(4) Operating results from fiscal 2003 have been restated to include
the impact of the changes in accounting for leases, totaling an
after-tax charge of $0.7 million for Borders, after-tax income of
$0.1 million for Walden and an after-tax charge of $0.2 million
for International.
(5) Results from fiscal 2003 were impacted by a number of
non-operating items including asset impairments, FIN 46 adoption,
a legal settlement and a receivable write-down. Partially
offsetting these costs are an insurance reimbursement related to
the loss of Borders store at the World Trade Center and other
reserve adjustments. Therefore, solely for analytical purposes and
as an aid to better understand underlying trends, operating basis
data are presented excluding these items.
Borders Group, Inc. Segment Financial Information
(dollars in millions, except per share amounts)
----------------------------------
Year Ended January 23, 2005
----------------------------------
Operating Adjustments GAAP
Basis (2) (3) Basis
----------------------------------
BORDERS
----------------------------
Sales $2,588.9 $- $2,588.9
EBITDA (1) 257.5 0.4 257.9
Depreciation expense 78.0 2.4 80.4
Interest expense (5.4) - (5.4)
Income taxes 71.7 (0.8) 70.9
Income before cumulative
effect 113.2 (1.2) 112.0
Cumulative effect - - -
Net income 113.2 (1.2) 112.0
Net income per share $1.46 $(0.02) $1.44
WALDENBOOKS
----------------------------
Sales $779.9 $- $779.9
EBITDA (1) 43.9 (1.3) 42.6
Depreciation expense 16.7 - 16.7
Interest expense (42.2) - (42.2)
Income taxes 27.1 (0.5) 26.6
Net income 42.3 (0.8) 41.5
Net income per share $0.54 $(0.01) $0.53
INTERNATIONAL
----------------------------
Sales $510.7 $- $510.7
EBITDA (1) 42.6 (2.4) 40.2
Depreciation expense 15.8 - 15.8
Interest expense 19.1 - 19.1
Income taxes 0.5 (0.8) (0.3)
Net income (loss) 7.2 (1.6) 5.6
Net income (loss) per share $0.09 $(0.02) $0.07
CORPORATE
----------------------------
EBITDA (1) $(10.7) $(0.4) $(11.1)
Interest expense 37.6 - 37.6
Income taxes (21.4) (0.1) (21.5)
Net loss (26.9) (0.3) (27.2)
Net loss per share $(0.35) $- $(0.35)
CONSOLIDATED
----------------------------
Sales $3,879.5 $- $3,879.5
EBITDA (1) 333.3 (3.7) 329.6
Depreciation expense 110.5 2.4 112.9
Interest expense 9.1 - 9.1
Income taxes 77.9 (2.2) 75.7
Income before cumulative
effect 135.8 (3.9) 131.9
Cumulative effect - - -
Net income 135.8 (3.9) 131.9
Net income per share $1.74 $(0.05) $1.69
(Restated)
-------------------------------
Year Ended January 25, 2004
-------------------------------
Operating Adjustments GAAP
Basis (4) (5) Basis
-------------------------------
BORDERS
----------------------------
Sales $2,470.2 $- $2,470.2
EBITDA (1) 243.3 (4.5) 238.8
Depreciation expense 79.5 - 79.5
Interest expense (1.9) - (1.9)
Income taxes 63.6 (1.8) 61.8
Income before cumulative
effect 102.1 (2.7) 99.4
Cumulative effect - 2.1 2.1
Net income 102.1 (4.8) 97.3
Net income per share $1.29 $(0.06) $1.23
WALDENBOOKS
----------------------------
Sales $820.9 $- $820.9
EBITDA (1) 61.1 (2.1) 59.0
Depreciation expense 18.5 - 18.5
Interest expense (38.8) - (38.8)
Income taxes 31.3 (0.8) 30.5
Net income 50.1 (1.3) 48.8
Net income per share $0.64 $(0.02) $0.62
INTERNATIONAL
----------------------------
Sales $407.5 $- $407.5
EBITDA (1) 27.4 - 27.4
Depreciation expense 13.3 - 13.3
Interest expense 19.0 - 19.0
Income taxes (3.6) - (3.6)
Net income (loss) (1.3) - (1.3)
Net income (loss) per share $(0.02) $- $(0.02)
CORPORATE
----------------------------
EBITDA (1) $(12.0) $(3.8) $(15.8)
Interest expense 30.4 - 30.4
Income taxes (15.2) (1.4) (16.6)
Net loss (27.2) (2.4) (29.6)
Net loss per share $(0.34) $(0.03) $(0.37)
CONSOLIDATED
----------------------------
Sales $3,698.6 $- $3,698.6
EBITDA (1) 319.8 (10.4) 309.4
Depreciation expense 111.3 - 111.3
Interest expense 8.7 - 8.7
Income taxes 76.1 (4.0) 72.1
Income before cumulative
effect 123.7 (6.4) 117.3
Cumulative effect - 2.1 2.1
Net income 123.7 (8.5) 115.2
Net income per share $1.57 $(0.11) $1.46
(1) EBITDA is operating income (loss) before depreciation and
amortization. EBITDA is not a Generally Accepted Accounting
Principles (GAAP) measurement. EBITDA information is being
included as we believe it is a commonly used measure of operating
performance in the retail industry. EBITDA is provided to enhance
an investor's understanding of our operating results. It should
not be construed as an alternative to income from operations as an
indicator of operating performance or as an alternative to cash
flows from operating activities as a measure of liquidity as
determined in accordance with GAAP. All companies do not calculate
EBITDA in the same manner. As a result, EBITDA as reported may not
be comparable to EBITDA as reported by other companies.
(2) Operating results from fiscal 2004 include the impact of the
changes in accounting for leases, totaling an after-tax charge of
$0.1 million for Borders and $1.5 million for International.
(3) Results from fiscal 2004 were impacted by a number of
non-operating items including asset impairments, store closure
costs and disposals of fixed assets resulting from the remodel
program. Partially offsetting these costs are income resulting
from the deconsolidation of certain variable interest entities
pursuant to the provisions of FIN 46, an insurance reimbursement
related to the loss of the Borders store at the World Trade Center
and other reserve adjustments. Therefore, solely for analytical
purposes and as an aid to better understand underlying trends,
operating basis data are presented excluding these items.
(4) Operating results from fiscal 2003 have been restated to include
the impact of the changes in accounting for leases, totaling an
after-tax charge of $3.2 million for Borders, an after-tax charge
of $0.2 million for Walden and an after-tax charge of $1.4 million
for International.
(5) Results from fiscal 2003 were impacted by a number of
non-operating items including asset impairments, FIN 46 adoption,
a legal settlement and a receivable write-down. Partially
offsetting these costs are an insurance reimbursement related to
the loss of the Borders store at the World Trade Center and other
reserve adjustments. Therefore, solely for analytical purposes and
as an aid to better understand underlying trends, operating basis
data are presented excluding these items.
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