Borders Group Reports Increased First Quarter 2004 Sales and Earnings Results; Company Expects Q2 EPS of $0.06 to $0.08 and Full-Year EPS Growth of 12% to 15%.Business Editors 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.--(BUSINESS WIRE)--May 18, 2004 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 that 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 for the first quarter of 2004, which ended April 25, improved to $0.04 per share from a loss of $0.06 per share for the same period last year. Earnings per share in 2003 were negatively impacted by the onset on·set n. A beginning; a start, as of a cold. of the war in Iraq Iraq or Irak (both: ēräk`, ĭrăk`), officially Republic of Iraq, republic (2005 est. pop. 26,075,000), 167,924 sq mi (434,924 sq km), SW Asia. . Borders Group consolidated sales for first quarter 2004 were $830.8 million, representing a 10.6% increase over 2003. Comparable store sales for both Borders and Waldenbooks exceeded company projections. Borders comparable store sales rose 4.3%. Waldenbooks comparable store sales increased 5.6%. Total sales in the company's International segment grew to $102.7 million, which represents a 29.0% increase over the prior year. "While comparisons to last year's war-impacted first quarter were expected to be positive, the quarter shaped up to be solid on the sales side due primarily to continued strength in books," said Borders Group Chief Executive Officer Greg GREG Great Egg Harbor National Scenic and Recreational River (US National Park Service) Josefowicz. "This sales momentum helped us achieve a strong earnings improvement." Consolidated Results--Q1 2004 -- Consolidated sales totaled $830.8 million, which is up 10.6% from a year ago, driven by comparable store sales strength and new store growth. -- Net income improved to $3.0 million, compared to a loss of $4.8 million for the same period last year, as profit margins rose driven primarily by increased sales. -- Gross margin as a percent of sales increased to 25.4% from 25.2%, resulting in large part from leveraging of fixed 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 . -- SG&A as a percent of sales improved to 24.5% from 25.7%, driven by sales leverage combined with disciplined cost control across all business segments. -- The company's financial position remains strong. Cash net of debt improved to $48.1 million compared to a net debt position of $30.3 million a year ago. -- The company repurchased 2.1 million shares of its common stock, totaling $50.1 million for the quarter. -- Borders Group paid its first quarterly dividend of $0.08 per share on January January: see month. 28. Borders Superstores--Q1 2004 -- Segment sales totaled $577.3 million, which is up 10.7% over the same period last year. -- Comparable store sales increased by 4.3% and square footage increased by 7.3% compared to last year. -- Strong sales led to net income of $10.5 million, up from $4.8 million a year ago. -- Category sales strength continued in books and 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. , while multimedia (music 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. combined) sales were slightly positive on a comparable store sales basis. -- Borders opened four new domestic superstores This is a list of superstores by country. Multi-national
end of the first quarter, operates 448 total domestic Borders superstores. International--Q1 2004 -- Total sales increased by 29.0% to $102.7 million, driven by new store growth, comparable store sales increases and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. currency exchange rates. Excluding the impact of foreign currency translation, total International sales would have increased 12.0%. -- Net loss in the segment was $3.2 million compared to a net loss of $4.2 million for the same period a year ago. -- As of the close of the first quarter, Borders operates a total of 37 overseas Borders superstores and 36 Books etc. stores in the U.K. Waldenbooks--Q1 2004 -- Waldenbooks generated sales of $150.8 million, which is up slightly from $150.3 million for the same period one year ago, driven by comparable store sales increases that were offset by a decline in square footage of 7.6%. -- Comparable store sales at Waldenbooks increased by 5.6%, generated by strength in the book category. -- Net income for the segment increased to $2.9 million, compared to $0.5 million a year ago. -- The company closed five under-performing Waldenbooks stores. Q2 2004 Outlook -- Comparable store sales estimates for the second quarter 2004 reflect challenging comparisons of a year ago in all business segments, driven by strong sales of "Harry Potter A potter is someone who makes pottery. Potter may also refer to: People
Order of the Phoenix." -- Comparable stores sales at Borders are expected to decrease in the low- to mid-single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. range. -- Waldenbooks' comparable store sales are expected to decline in the mid- mid- pref. Middle: midbrain. to high-single digit range. -- Total International segment sales are expected to increase by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 15% for the period, due in part to less favorable currency exchange rates. -- Management projects consolidated earnings for the second quarter to range from $0.06 to $0.08 per share. This compares to consolidated earnings per share of $0.06 for the same period last year. Full-Year 2004 Outlook -- Consistent with previous management guidance, consolidated earnings per share for the full year are expected to range from $1.70 to $1.75, representing growth of 12% to 15% over 2003. -- Comparable store sales for Borders superstores are expected to increase in the low single digits. -- Waldenbooks' comparable store sales are expected to be flat. -- Total sales for the International segment are expected to increase by approximately 20% over 2003. -- Full-year earnings per share estimates include the impact of non-operating adjustments projected for the year to be 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 $0.04 to $0.06 per share. Next Financial Release/Conference Call Borders Group will issue second quarter results after market close Aug. 17 with a conference call to follow Aug. 18 at 8 a.m. Eastern. About Borders Group Headquartered in Ann Arbor, Mich., Borders Group is a leading global retailer of books, music and movies with more than 1,200 stores 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," "estimates," "look forward," "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 and closings and its intentions with respect to dividend payments 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. . 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; 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 rate. Exhibit 99.1 to the company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended Jan. 25, 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
Quarter Ended April 25, 2004 April 27, 2003
--------------------------------- ---------------
Operating Adjustments GAAP GAAP
Basis (1) (1) Basis Basis (3)
---------- ----------- --------- ----------
Borders $ 577.3 $ - $ 577.3 $ 521.5
Waldenbooks 150.8 - 150.8 150.3
International 102.7 - 102.7 79.6
--------- -------- ------- --------
Total sales 830.8 - 830.8 751.4
Other revenue (2) 7.3 - 7.3 7.2
--------- -------- ------- --------
Total revenue 838.1 - 838.1 758.6
Cost of goods sold,
including occupancy
costs 627.2 - 627.2 569.6
Inventory writedowns - 0.1 0.1 -
--------- -------- ------- --------
Gross margin 210.9 (0.1) 210.8 189.0
Selling, general and
administrative
expenses 203.4 (0.4) 203.0 193.0
Pre-opening expense 1.0 (0.3) 0.7 1.5
Asset impairments and
other writedowns - 0.4 0.4 -
--------- -------- ------- --------
Operating income
(loss) 6.5 0.2 6.7 (5.5)
Interest expense 1.9 - 1.9 2.2
--------- -------- ------- --------
Income (loss)
before income
taxes 4.6 0.2 4.8 (7.7)
Income tax provision
(benefit) 1.7 0.1 1.8 (2.9)
--------- -------- ------- --------
Net income
(loss) $ 2.9 $ 0.1 $ 3.0 $ (4.8)
========= ======== ======= ========
EPS $ 0.04 $ 0.00 $ 0.04 $ (0.06)
Weighted average
common shares 79.8 79.8 79.8 78.4
Comparable Store
Sales
----------------
Borders 4.3% (5.0)%
Waldenbooks 5.6% (8.8)%
Sales and Earnings Summary (As a Percentage of Total Sales)
Quarter Ended
Quarter Ended April 25, 2004 April 27, 2003
-------------------------------- ---------------
Operating Adjustments GAAP GAAP
Basis (1) (1) Basis Basis (3)
----------- ----------- ------- ----------
Borders 69.5% - % 69.5% 69.4%
Waldenbooks 18.1 - 18.1 20.0
International 12.4 - 12.4 10.6
----------- ----------- ------- ----------
Total sales 100.0 - 100.0 100.0
Other revenue (2) 0.9 - 0.9 1.0
----------- ----------- ------- ----------
Total revenue 100.9 - 100.9 101.0
Cost of goods sold,
including occupancy
costs 75.5 - 75.5 75.8
Inventory writedowns - - - -
----------- ----------- ------- ----------
Gross margin 25.4 - 25.4 25.2
Selling, general and
administrative
expenses 24.5 - 24.5 25.7
Pre-opening expense 0.1 - 0.1 0.2
Asset impairments and
other writedowns - - - -
----------- ----------- ------- ----------
Operating income
(loss) 0.8 - 0.8 (0.7)
Interest expense 0.2 - 0.2 0.3
----------- ----------- ------- ----------
Income (loss)
before income
taxes 0.6 - 0.6 (1.0)
Income tax provision
(benefit) 0.2 - 0.2 (0.4)
----------- ----------- ------- ----------
Net income (loss) 0.4% - % 0.4% (0.6)%
=========== =========== ======= ==========
(1) Results from 2004 were impacted by a number of items, primarily
consisting of an insurance reimbursement related to the loss of
the Borders store at the World Trade Center. Partially offsetting
the reimbursement are asset impairments, store closure costs and
disposals of fixed assets resulting from the remodel program.
Therefore, solely for analytical purposes and as an aid to better
understand underlying trends, Operating Basis data are presented
excluding these items.
(2) Other revenues include gross income received primarily from the
Waldenbooks Preferred Reader membership program.
(3) GAAP Basis results were the same as Operating Basis results during
this period.
Certain reclassifications have been made to prior periods to
conform to current presentations.
Borders Group, Inc. Financial Statements
(dollars in millions)
Condensed Consolidated Balance Sheets
------------ ----------- -------------
April 25, April 27, January 25,
2004 2003 2004
----------- ----------- -------------
Assets
Cash and cash equivalents $ 234.4 $ 136.4 $ 378.8
Inventory 1,271.7 1,189.5 1,235.6
Other current assets 95.6 99.0 98.3
Property and equipment, net 525.9 543.7 577.7
Other assets and deferred
charges 73.4 92.3 71.5
Goodwill 102.5 95.1 104.3
----------- ----------- -------------
Total assets $ 2,303.5 $ 2,156.0 $ 2,466.2
=========== =========== =============
Liabilities, Minority Interest
and Stockholders' Equity
Short-term borrowings and
current portion of long-term
debt $ 130.1 $ 116.7 $ 141.2
Accounts payable 576.5 546.9 595.9
Other current liabilities 322.7 327.7 427.0
Long-term debt 56.2 50.0 57.2
Long-term capital lease
obligations - 19.0 -
Other long-term liabilities 95.5 82.4 90.2
----------- ----------- -------------
Total liabilities 1,181.0 1,142.7 1,311.5
Minority interest 1.7 - 1.7
Total stockholders' equity 1,120.8 1,013.3 1,153.0
----------- ----------- -------------
Total liabilities, minority
interest and stockholders'
equity $ 2,303.5 $ 2,156.0 $ 2,466.2
=========== =========== =============
Certain reclassifications have been made to prior periods to conform
to current presentations.
Store Activity Summary
-------------------------- --------------
Quarter Ended Year Ended
-------------------------- --------------
April 25, April 27, January 25,
2004 2003 2004
------------- ------------ --------------
Borders Superstores
Beginning number of stores 445 404 404
Openings 4 8 41
Closings (1) - -
------------- ------------ --------------
Ending number of stores 448 412 445
============= ============ ==============
Ending square footage (in
millions) 11.3 10.6 11.2
============= ============ ==============
Waldenbooks Stores
Beginning number of stores 716 778 778
Openings 1 2 5
Closings (5) (6) (67)
------------- ------------ --------------
Ending number of stores 712 774 716
============= ============ ==============
Ending square footage (in
millions) 2.8 3.0 2.8
============= ============ ==============
Borders International
Superstores
Beginning number of stores 37 30 30
Openings - 3 7
------------- ------------ --------------
Ending number of stores 37 33 37
============= ============ ==============
Ending square footage (in
millions) 1.0 0.9 1.0
============= ============ ==============
Borders Group, Inc. Segment Financial Information
(dollars in millions, except per share amounts)
Quarter Ended
Quarter Ended April 25, 2004 April 27, 2003
--------------------------------- ---------------
Operating Adjustments GAAP GAAP
Basis (3) (3) Basis Basis (4)
----------- ----------- -------- --------------
Borders
Sales $ 577.3 $ - $ 577.3 $ 521.5
EBITDA (1) 31.6 1.1 32.7 24.3
Depreciation
expense 17.3 - 17.3 17.3
Interest income (1.8) - (1.8) (0.9)
Income tax
provision 6.3 0.4 6.7 3.1
Net income 9.8 0.7 10.5 4.8
Net income per
share $ 0.13 $ - $ 0.13 $ 0.06
Waldenbooks
Sales $ 150.8 $ - $ 150.8 $ 150.3
EBITDA (1) (1.7) (0.5) (2.2) (4.4)
Depreciation
expense 3.5 - 3.5 4.1
Interest income (10.5) - (10.5) (9.3)
Income tax
provision
(benefit) 2.1 (0.2) 1.9 0.3
Net income
(loss) 3.2 (0.3) 2.9 0.5
Net income
(loss) per
share $ 0.04 $ - $ 0.04 $ 0.01
International
Sales $ 102.7 $ - $ 102.7 $ 79.6
EBITDA (1) 2.6 - 2.6 0.3
Depreciation
expense 3.4 - 3.4 2.8
Interest expense 4.7 - 4.7 4.6
Income tax
benefit (2.3) - (2.3) (2.9)
Net loss (3.2) - (3.2) (4.2)
Net loss per
share $ (0.04) $ - $ (0.04) $ (0.05)
Corporate (2)
EBITDA (1) $ (1.8) $ (0.4) $ (2.2) $ (1.5)
Interest expense 9.5 - 9.5 7.8
Income tax
benefit (4.4) (0.1) (4.5) (3.4)
Net loss (6.9) (0.3) (7.2) (5.9)
Net loss per
share $ (0.09) $ - $ (0.09) $ (0.08)
Consolidated
Sales $ 830.8 $ - $ 830.8 $ 751.4
EBITDA (1) 30.7 0.2 30.9 18.7
Depreciation
expense 24.2 - 24.2 24.2
Interest expense 1.9 - 1.9 2.2
Income tax
provision
(benefit) 1.7 0.1 1.8 (2.9)
Net income
(loss) 2.9 0.1 3.0 (4.8)
Net income
(loss) per
share $ 0.04 $ - $ 0.04 $ (0.06)
(1) EBITDA is operating income (loss) before depreciation. EBITDA is
not a Generally Accepted Accounting Principles (GAAP) measurement,
but 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 operating
income (loss) 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) The Corporate segment includes interest expense, various corporate
governance costs and corporate incentive costs.
(3) Results from 2004 were impacted by a number of items, primarily
consisting of an insurance reimbursement related to the loss of
the Borders store at the World Trade Center. Partially offsetting
the reimbursement are asset impairments, store closure costs and
disposals of fixed assets resulting from the remodel program.
Therefore, solely for analytical purposes and as an aid to better
understand underlying trends, Operating Basis data are presented
excluding these items.
(4) GAAP Basis results were the same as Operating Basis results during
this period.
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