For First Quarter 2000, Barnes & Noble, Inc. Reports: Bookstore Operating Profit up 58 Percent; Barnes & Noble Comparable Store Sales Increase 6.7 Percent.Business Editors NEW YORK--(BUSINESS WIRE)--May 18, 2000 Babbage's Etc. Comparable Store Sales up 11.3 Percent Barnes & Noble, Inc. (NYSE:BKS), the nation's largest bookseller, today reported earnings from bookstores of $0.16 per share for the first quarter ended April 29, 2000, a 78 percent increase over the prior year. Bookstore operating profit increased 58.4 percent to $23.6 million due to strong sales growth and higher operating margins. The operating profit margin for bookstores increased to 3.1 percent of sales, up from 2.1 percent in the prior year, reflecting better occupancy and a more favorable product mix. Barnes & Noble comparable "super" store sales increased 6.7 percent in the first quarter 2000 as compared with a comparable store sales increase of 5.4 percent for the prior year period. Store sales were strong throughout the quarter and across many categories. Children's books, bargain books, music and cafe sales were particularly robust. B. Dalton comparable store sales were down (2.5) percent for the quarter. At the same time, Barnes & Noble.com reported a 142 percent increase in sales in the first quarter ended March 31, 2000. Bookstore sales were $774.3 million for the first quarter, up 7.8 percent from $718.3 million last year. Barnes & Noble "super" store sales rose 11.5 percent to $692.5 million from $620.9 million the prior year and represented 90 percent of total bookstore sales. Babbage's Etc. store sales grew 21.8 percent to $120 million, led by a comparable store sales increase of 11.3 percent. Babbage's Etc., as expected, reported a net loss of ($0.02) per share in the first quarter due to the impact of goodwill amortization and interest expense related to the acquisition. The company's retail cash flow for the past twelve months (as measured by EBITDA) rose 29.2 percent to $361.0 million or $5.62 per share. In addition, over the past twelve months, the company repurchased 5.4 million shares for a total cost of $117.4 million. "Our first-quarter results clearly validate our multi-channel strategy," said Leonard Riggio, chairman of Barnes & Noble, Inc. "Our results--significant increases in retail and online sales--show that if we pay a visit to our customers at home through Barnes & Noble.com, they will return the favor at our stores." Also, as previously announced, Barnes & Noble entered into a merger agreement to acquire Funco Inc., a Minneapolis-based electronic games retailer, for approximately $161.5 million. The acquisition is expected to be completed in June and to be accretive to Barnes & Noble's earnings in the near and long term. As of April 29, 2000, the company operated 544 "super" stores and 389 B. Dalton stores. During the first quarter Barnes & Noble opened three new "super" stores and closed one store. Babbage's Etc. ended the quarter with 532 video game and entertainment software stores, a net gain of six new stores. A conference call for investment analysts with Barnes & Noble, Inc.'s management will be simulcast on the Web at www.streetfusion.com beginning at 11 A.M. on Thursday, May 18, 2000. About Barnes & Noble, Inc. Barnes & Noble stores stock an authoritative selection of book titles and provide access to more than one million titles. They offer books from more than 50,000 publisher imprints with an emphasis on small, independent publishers and university presses. Barnes & Noble is one of the world's largest booksellers on the World Wide Web (http://www.bn.com), and the exclusive bookseller on America Online (Keyword: bn). The company also publishes books under its own imprints for sale through its retail stores and Web site. In October 1999, Barnes & Noble acquired Babbage's Etc., one of the nation's largest operators of video game and entertainment software stores. 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 subject to risks and uncertainties that could cause actual results to differ materially. With respect to the effect of the acquisition of Funco, Inc., these risks include, but are not limited to, the dependence on the continued introduction of new and enhanced video games and PC hardware and software; the cyclical nature of the video game market; the rapid technological changes which occur in the video game and PC industry; the ability to open and operate new stores on a profitable basis; the intensely competitive nature of the electronic game industry and its rapid changes in consumer preferences and frequent new product introductions; the seasonal nature of the retail industry; the successful integration of acquired businesses; the dependence on suppliers for products; and consumer spending patterns and prevailing economic conditions. 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. General financial information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's investor relations Web site: http//www.shareholder.com/bks/.
BARNES & NOBLE, INC.
First Quarter Summary
($ in millions, except per share amounts)
13 weeks ended
-------------------
April 29, 2000 May 1, 1999
-------------- ------------
SALES
Bookstores $774 718
$774 718
% increase 7.8%
Video game and entertainment software stores 120 -
% increase N/A
-------------- ----------------
Consolidated $894 718
============== ================
RETAIL EARNINGS PER SHARE
Bookstores $0.16 0.09
% increase 77.8%
Video game and entertainment software stores (0.02) -
% increase N/A
-------------- -----------------
RETAIL EPS $0.14 0.09
============== =================
EPS IMPACT OF INVESTING ACTIVITIES
Non-Cash:
Share of pro forma net losses of
Barnes & Noble.com(a) ($0.10) (0.10)
Share of net losses from other
equity investments (0.04) (0.01)
--------------- -----------------
TOTAL INVESTING ACTIVITIES ($0.14) (0.11)
=============== =================
OTHER ADJUSTMENTS
Change in accounting for pre-opening
costs - (0.07)
--------------- -----------------
TOTAL OTHER ADJUSTMENTS - (0.07)
--------------- -----------------
PRO FORMA CONSOLIDATED EPS(a) $0.00 (0.09)
=============== =================
CONSOLIDATED EPS, AS REPORTED ($0.06) (0.09)
=============== =================
RETAIL EBITDA $57 41
=============== =================
% increase 39.1%
MARKET VALUE OF PUBLICLY TRADED INVESTMENTS
Barnes & Noble.com $633 -
Chapters 7 40
Gemstar 18 -
--------------- -----------------
TOTAL MARKET VALUE $658 40
=============== =================
TOTAL MARKET VALUE OF PUBLICLY TRADED
INVESTMENTS PER SHARE OF
BARNES & NOBLE, INC. $10.25 0.58
=============== =================
(a) Pro forma results are presented for informational purposes only
and are not prepared in accordance with generally accepted
accounting principles. Such results present the net loss of
barnesandnoble.com inc., excluding charges related to stock based
compensation and acquisition and investment related costs,
including amortization of intangibles and loss on investment.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(thousands of dollars, except per share data)
(unaudited)
13 weeks ended
-------------------
April 29, 2000 May 1, 1999
-------------- -----------
-------------- -----------
Sales $894,256 718,336
$ 894,256 718,336
Cost of sales and occupancy 654,167 525,965
-------------- -----------
Gross profit 240,089 192,371
-------------- -----------
Selling and administrative expenses 181,279 150,856
Depreciation and amortization 33,005 25,799
Pre-opening expenses 1,483 801
-------------- -----------
Operating profit 24,322 14,915
Interest expense, net (9,773) (4,742)
Equity in net loss of Barnes & Noble.com (17,598) (11,544)
Other expense, net (4,034) (1,076)
-------------- -----------
Loss before income taxes and
cumulative effect of a change in
accounting principle (7,083) (2,447)
Income taxes (2,939) (1,003)
-------------- -----------
Loss before cumulative effect of a
change in accounting principle (4,144) (1,444)
Cumulative effect of a change in
accounting principle, net of tax
benefit of $3,125 - (4,500)
-------------- -----------
Net loss $(4,144) (5,944)
============== ===========
Loss per common share:
Basic
Loss before cumulative effect of
a change in accounting principle $(0.06) (0.02)
Cumulative effect of a change in
accounting principle, net of tax $ - (0.07)
Net loss $(0.06) (0.09)
Diluted
Loss before cumulative effect of
a change in accounting principle $(0.06) (0.02)
Cumulative effect of a change in
accounting principle, net of tax $ - (0.07)
Net loss $(0.06) (0.09)
Weighted average common shares outstanding
Basic 64,203,000 68,931,000
Diluted 64,203,000 68,931,000
Percentage of sales:
Sales 100.0% 100.0%
Cost of sales and occupancy 73.2% 73.2%
----------- -----------
Gross profit 26.8% 26.8%
----------- -----------
Selling and administrative expenses 20.3% 21.0%
Depreciation and amortization 3.7% 3.6%
Pre-opening expenses 0.2% 0.1%
----------- -----------
Operating profit 2.7% 2.1%
Interest expense, net -1.1% -0.7%
Equity in net loss of Barnes & Noble.com -2.0% -1.6%
Other expense, net -0.5% -0.1%
----------- -----------
Loss before income taxes and cumulative
effect of a change in accounting
principle -0.8% -0.3%
Income taxes -0.3% -0.1%
----------- -----------
Loss before cumulative effect of
a change in accounting principle -0.5% -0.2%
Cumulative effect of a change in
accounting principle, net of tax
benefit of $3,125 0.0% -0.6%
------------ ------------
Net loss -0.5% -0.8%
============ ============
BARNES & NOBLE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(thousands of dollars, except per share data)
April 29, 2000 May 1, 1999 January 29, 2000
-------------- ----------- ----------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 18,947 15,815 24,247
Receivables, net 58,421 43,226 58,240
Merchandise inventories 1,162,097 940,321 1,102,453
Prepaid expenses and other
current assets 49,898 74,731 56,579
--------- --------- ----------
Total current assets 1,289,363 1,074,093 1,241,519
--------- --------- ----------
Property and equipment 1,000,665 855,479 986,127
Less accumulated
depreciation and
amortization 447,335 339,756 418,078
--------- -------- ---------
Net property and equipment 553,330 515,723 568,049
--------- -------- ---------
Intangible assets, net 299,386 86,166 298,011
Investment in
Barnes & Noble.com 222,933 70,763 240,531
Other noncurrent assets 62,354 50,646 65,681
--------- -------- ---------
Total assets $2,427,366 1,797,391 2,413,791
========== ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable $589,835 439,520 599,376
Accrued liabilities 221,132 225,076 323,475
--------- --------- ---------
Total current liabilities 810,967 664,596 922,851
--------- --------- ---------
Long-term debt 597,400 340,000 431,600
Deferred income taxes 121,249 32,449 125,006
Other long-term liabilities 90,484 78,108 87,974
Shareholders' equity:
Common stock; $.001 par value;
300,000,000 shares
authorized; 69,612,037,
69,092,730 and 69,553,839
shares issued,
respectively 70 69 70
Additional paid-in capital 655,510 532,910 654,584
Accumulated other
comprehensive loss (6,494) - (1,198)
Retained earnings 275,557 149,259 279,701
Treasury stock, at cost,
5,404,700, 0 and
4,025,900 shares,
respectively (117,377) - (86,797)
-------- ------- ---------
Total shareholders' equity 807,266 682,238 846,360
-------- ------- ---------
Commitments and contingencies - - -
Total liabilities and
shareholders' equity $2,427,366 1,797,391 2,413,791
========== ========= ==========
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