-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DfvuJrIDxo9PMG6NQl1UjrHh3Hgf9LoJZ67MKiAOpbM5CA+zap6roWzbY7+mLMVc qeH3bg0+i2t/xXIR6clXww== /in/edgar/work/20000613/0000889812-00-002775/0000889812-00-002775.txt : 20000919 0000889812-00-002775.hdr.sgml : 20000919 ACCESSION NUMBER: 0000889812-00-002775 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000429 FILED AS OF DATE: 20000613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARNES & NOBLE INC CENTRAL INDEX KEY: 0000890491 STANDARD INDUSTRIAL CLASSIFICATION: [5940 ] IRS NUMBER: 061196501 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12302 FILM NUMBER: 653898 BUSINESS ADDRESS: STREET 1: 122 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10011 BUSINESS PHONE: 2126333300 MAIL ADDRESS: STREET 1: 122 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10011 10-Q 1 0001.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 29, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ______________ Commission File Number: 1-12302 ------- BARNES & NOBLE, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 06-1196501 - ------------------------------- ---------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 122 Fifth Avenue, New York, NY 10011 - ---------------------------------------- ------------------------------ (Address of Principal Executive Offices) (Zip Code) (212) 633-3300 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of $.001 par value common stock outstanding as of May 31, 2000: 64,110,438. BARNES & NOBLE, INC. AND SUBSIDIARIES April 29, 2000 Index to Form 10-Q
Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations - For the 13 weeks ended April 29, 2000 and May 1, 1999..................................................... 3 Consolidated Balance Sheets - April 29, 2000, May 1, 1999 and January 29, 2000..................................................................... 4 Consolidated Statement of Changes in Shareholders' Equity - April 29, 2000... 6 Consolidated Statements of Cash Flows - For the 13 weeks ended April 29, 2000 and May 1, 1999..................................................... 7 Notes to Consolidated Financial Statements................................... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk................... N/A PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............................................. 17
PART I - FINANCIAL INFORMATION Item 1: Financial Statements 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 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 (net of interest income of $131 and $712, respectively) and amortization of deferred financing fees (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 benefit for income taxes and cumulative effect of a change in accounting principle (7,083) (2,447) Benefit for 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 $ -- (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 $ -- (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
See accompanying notes to consolidated financial statements. 3 BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (thousands of dollars, except per share data)
April 29, May 1, January 29, 2000 1999 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: Land and land improvements 3,247 3,247 3,247 Buildings and leasehold improvements 415,144 389,296 417,535 Fixtures and equipment 582,274 462,936 565,345 ---------- ---------- ---------- 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 ========== ========== ==========
(Continued) 4 BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (thousands of dollars, except per share data)
April 29, May 1, January 29, 2000 1999 2000 ----------- ----------- ----------- (unaudited) 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, 5,504,700, 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 =========== =========== ===========
See accompanying notes to consolidated financial statements. 5 BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Equity (thousands of dollars, except per share data) (unaudited)
Accumulated Additional Other Treasury Common Paid-In Comprehensive Retained Stock at Stock Capital Losses Earnings Cost Total ---------- ---------- ------------- ---------- ---------- ---------- Balance at January 29, 2000 $ 70 $ 654,584 $ (1,198) $ 279,701 $ (86,797) $ 846,360 ---------- ---------- ---------- ---------- ---------- ---------- Net loss -- -- -- (4,144) -- (4,144) Other comprehensive loss (net of deferred income tax benefit of $3,757) -- -- (5,296) -- -- (5,296) Exercise of 59,990 common stock options -- 926 -- -- -- 926 Treasury stock acquired, 1,478,800 shares -- -- -- -- (30,580) (30,580) ---------- ---------- ---------- ---------- ---------- ---------- Balance at April 29, 2000 $ 70 $ 655,510 $ (6,494) $ 275,557 $ (117,377) $ 807,266 ========== ========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 6 BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (thousands of dollars) (unaudited)
- ---------------------------------------------------------------------------------------------------------------------- 13 weeks ended -------------------------------- April 29, 2000 May 1, 1999 -------------- -------------- Cash flows from operating activities: Net loss $ (4,144) (5,944) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 33,313 25,892 Loss on disposal of property and equipment 108 548 Increase in other long-term liabilities for scheduled rent increases in long-term leases 2,541 3,304 Cumulative effect of change in accounting principle, net of tax -- 4,500 Other expense, net 4,034 1,076 Equity in net loss of Barnes & Noble.com 17,598 11,544 Changes in operating assets and liabilities, net (165,059) (113,407) -------------- -------------- Net cash flows from operating activities (111,609) (72,487) -------------- -------------- Cash flows from investing activities: Purchases of property and equipment (15,823) (30,910) Purchase of investment in iUniverse.com (8,000) -- Net increase in other noncurrent assets (6,013) (12,162) -------------- -------------- Net cash flows from investing activities (29,836) (43,072) -------------- -------------- Cash flows from financing activities: Net increase in revolving credit facility 165,800 90,900 Proceeds from exercise of common stock options including related tax benefits 925 9,393 Purchase of treasury stock through repurchase program (30,580) -- -------------- -------------- Net cash flows from financing activities 136,145 100,293 -------------- -------------- Net decrease in cash and cash equivalents (5,300) (15,266) Cash and cash equivalents at beginning of period 24,247 31,081 -------------- -------------- Cash and cash equivalents at end of period $ 18,947 15,815 ============== ============== Changes in operating assets and liabilities, net: Receivables, net $ (181) 14,297 Merchandise inventories (59,644) 4,752 Prepaid expenses and other current assets 6,681 (27,722) Accounts payable and accrued liabilities (111,915) (104,734) -------------- -------------- Changes in operating assets and liabilities, net $ (165,059) (113,407) ============== ============== Supplemental cash flow information: Cash paid during the period for: Interest $ 4,590 5,091 Income taxes $ 36,632 28,450
See accompanying notes to consolidated financial statements. 7 BARNES & NOBLE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements For the 13 weeks ended April 29, 2000 and May 1, 1999 (thousands of dollars, except per share data) (unaudited) The unaudited consolidated financial statements include the accounts of Barnes & Noble, Inc. and its wholly owned subsidiaries (collectively, the Company). In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position as of April 29, 2000 and the results of its operations and its cash flows for the 13 weeks then ended. These consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by generally accepted accounting principles. The consolidated financial statements should be read in conjunction with the Company's annual report on Form 10-K for the 52 weeks ended January 29, 2000 (fiscal 1999). The Company follows the same accounting policies in preparation of interim reports. Due to the seasonal nature of the business, the results of operations for the 13 weeks ended April 29, 2000 are not indicative of the results to be expected for the 52 weeks ending February 3, 2001. (1) Merchandise Inventories Merchandise inventories are stated at the lower of cost or market. Cost is determined using the retail inventory method on the first-in, first-out (FIFO) basis for 83%, 86% and 83% of the Company's merchandise inventories as of April 29, 2000, May 1, 1999 and January 29, 2000, respectively. Merchandise inventories of Babbage's Etc. LLC (Babbage's Etc.), which represent approximately 7% of merchandise inventories as of April 29, 2000, are recorded based on the average cost method. The remaining merchandise inventories are valued on the last-in, first-out (LIFO) method. If substantially all of the merchandise inventories currently valued at LIFO costs were valued at current costs, merchandise inventories would remain unchanged as of April 29, 2000, May 1, 1999 and January 29, 2000. (2) Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. (3) Income Taxes The tax provisions for the periods ended April 29, 2000 and May 1, 1999 are based upon management's estimate of the Company's annualized effective tax rate. 8 BARNES & NOBLE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements For the 13 weeks ended April 29, 2000 and May 1, 1999 (thousands of dollars, except per share data) (unaudited) (4) Comprehensive Earnings In the second quarter of 1999, as a result of the Company's investment activities, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive earnings and its components in the financial statements. Comprehensive earnings are net earnings, plus certain other items that are recorded directly to shareholders' equity. The only such item currently applicable to the Company is the unrealized loss on available-for-sale securities, as follows:
13 weeks ended -------------------------------- April 29, 2000 May 1, 1999 -------------- -------------- Net loss $ (4,144) (5,944) Other comprehensive loss: Unrealized loss on available-for-sale securities, net of deferred income tax benefit of $3,757 and $0, respectively (5,296) -- -------------- -------------- Total comprehensive loss $ (9,440) (5,944) ============== ==============
(5) Other Expense The following table sets forth the components of other expense, in thousands of dollars:
13 weeks ended -------------------------------- April 29, 2000 May 1, 1999 -------------- -------------- Equity in net losses of Chapters LLC (a) $ -- (101) Equity in net losses of iUniverse.com (b) (2,534) -- Equity in net losses of Calendar Club LLC (c) (1,500) (975) -------------- -------------- Total other expense $ (4,034) (1,076) ============== ==============
(a) During fiscal 1999, the Company sold a portion of its investment in Chapters LLC (Chapters). Prior to this transaction, the Company accounted for its investment in Chapters under the equity method. (b) During 1999, the Company acquired a 41 percent interest in iUniverse.com for $20,000. In the first quarter of fiscal 2000, the Company invested an additional $8,000 in iUniverse.com thereby increasing its percentage ownership interest to 49 percent. This investment is being accounted for under the equity method and is reflected as a component of other noncurrent assets. (c) The Company's 50 percent interest in Calendar Club LLC is being accounted for under the equity method and is reflected as a component of other noncurrent assets. 9 BARNES & NOBLE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements For the 13 weeks ended April 29, 2000 and May 1, 1999 (thousands of dollars, except per share data) (unaudited) (6) Segment Information Historically, the Company operated as a single segment. As a result of the acquisition of Babbage's Etc. in 1999, the Company is currently operating under two segments and accordingly, is required to disclose information in accordance with Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131). The Company's reportable segments are strategic groups that offer different products. These groups have been aggregated into two segments: bookstores and video game and entertainment software stores. The accounting policies of the segments are the same as those for the Company as a whole. Segment operating profit includes corporate expenses in each operating segment. Barnes & Noble evaluates the performance of its segments and allocates resources to them based on operating profit. Segment information for the 13 weeks ended April 29, 2000 and May 1, 1999 follows:
Sales April 29, 2000 May 1, 1999 - -------------------------------------------------------------------------------- -------------- -------------- Bookstores $ 774,253 718,336 Video game and entertainment software stores 120,003 -- -------------- -------------- Total $ 894,256 718,336 ============== ============== Operating income April 29, 2000 May 1, 1999 - -------------------------------------------------------------------------------- -------------- -------------- Bookstores $ 23,625 14,915 Video game and entertainment software stores 697 -- -------------- -------------- Total $ 24,322 14,915 ============== ==============
A reconciliation of operating profit reported by reportable segments to earnings before income taxes, extraordinary charge and cumulative effect of a change in accounting principle in the consolidated financial statements for the 13 weeks ended April 29, 2000 and May 1, 1999 is as follows:
April 29, 2000 May 1, 1999 -------------- -------------- Reportable segments operating profit $ 24,322 14,915 Interest, net (9,773) (4,742) Equity in net loss of Barnes & Noble.com (17,598) (11,544) Other expense (4,034) (1,076) -------------- -------------- Consolidated loss before income taxes and cumulative effect of a change in accounting principle $ (7,083) (2,447) ============== ==============
10 (7) Subsequent Event Funco, Inc. As previously announced, Barnes & Noble entered into a merger agreement dated as of May 4, 2000 to acquire Funco, Inc., a Minneapolis-based electronic games retailer, for approximately $161.5 million. Hart-Scott-Rodino Antitrust Improvements Act of 1976 clearance has been received and the acquisition is expected to be completed in June 2000. 11 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The primary sources of the Company's cash are net cash flows from operating activities, funds available under its senior credit facility and short-term vendor financing. The Company's cash and cash equivalents were $18.9 million as of April 29, 2000 compared with $15.8 million as of May 1, 1999. During the 13 weeks ended April 29, 2000, retail earnings before interest, taxes, depreciation and amortization (EBITDA) increased $16.6 million to $57.3 million from $40.7 million during the comparable prior year period, reflecting higher sales levels and improving expense leverage. Merchandise inventories increased to $1,162.1 million as of April 29, 2000, compared with $940.3 million as of May 1, 1999, partially due to the inclusion of Babbage's Etc.'s inventory. The increase supported the Company's 7.8% book sales growth, the opening of 38 Barnes & Noble stores over the last twelve months and the strategic increase in the distribution center standing inventory to over 750,000 in-stock titles available for shipping within 24 hours to both online customers and the retail store network. The Company's investing activities consist principally of capital expenditures for new store construction, system enhancements and store relocations/remodels. Capital expenditures totaled $15.8 million and $30.9 million during the 13 weeks ended April 29, 2000 and May 1, 1999, respectively. The ratio of debt to equity increased to 0.74:1.00 as of April 29, 2000, compared with 0.50:1.00 as of May 1, 1999, primarily attributable to the higher debt levels resulting from the execution of the Company's strategic initiatives. Total debt increased 75.7% to $597.4 million as of April 29, 2000 from $340.0 million as of May 1, 1999. Average borrowings under the Company's senior credit facility were $584.3 million and $328.7 million during the 13 weeks ended April 29, 2000 and May 1, 1999, respectively, and peaked at $627.6 million and $377.6 million during the same periods. The increase in the senior credit facility and average borrowings were primarily attributable to the funding of the Babbage's Etc. acquisition as well as the execution of the common stock repurchase program. As of April 29, 2000, the Company has repurchased 5,504,700 shares at a cost of approximately $117.4 million under this program. The repurchased shares are held in treasury. Based upon the Company's current operating levels, management believes net cash flows from operating activities and the capacity under its $850.0 million senior credit facility will be sufficient to meet the Company's normal working capital and debt service requirements for at least the next twelve months. The Company did not declare or pay any cash dividends during the 13-week periods ended April 29, 2000 and May 1, 1999. 12 Year 2000 The Company completed its Year 2000 compliance plan during 1999. The total costs incurred to implement the plan were approximately $4.3 million. The conversion to the Year 2000 occurred without any disruptions to the Company's critical business systems either internally or from outside sources. The Company has no reason to believe that Year 2000 failures will materially affect it in the future. However, since it may take several additional months before it is known whether the Company or third party vendors, suppliers or service providers may have encountered Year 2000 problems, no assurances can be given that the Company will not experience disruptions as a result of Year 2000 compliance failures. The Company will continue to monitor Year 2000 exposures both internally and with its vendors, suppliers and service providers. Such monitoring will be ongoing and encompassed in normal operations. Associated costs are not expected to be significant. Results of Operations 13 weeks ended April 29, 2000 compared with the 13 weeks ended May 1, 1999 Sales During the 13 weeks ended April 29, 2000, the Company's sales grew 24.5% to $894.3 million from $718.3 million during the 13 weeks ended May 1, 1999. Contributing to this improvement was a 16.7% increase attributable to the inclusion of Babbage's Etc.'s sales for the first quarter of 2000. Babbage's Etc., one of the nation's largest operators of video game and entertainment software stores, was acquired by the Company on October 28, 1999. During the first quarter, Barnes & Noble "super" store sales rose 11.5% to $693 million from $621 million during the same period a year ago and accounted for 77.4% of total Company sales or 89.4% of total bookstore sales. During the first quarter, the 11.5% increase in Barnes & Noble bookstore sales was primarily attributable to a same store sales gain of 6.7% coupled with 38 new stores opened since May 1, 1999 which contributed a 7.9% increase in square footage. Sales were strong across all book categories, particularly children's books, fiction, non-fiction and educational books (teaching aids and workbooks for the growing home school market), as well as music and cafes. In addition, the number of stores included in the comparable store sales base increased to 95.2% as of April 29, 2000 compared with 88.3% as of May 1, 1999. During the first quarter, B. Dalton sales declined 15.9% and represented 8.9% of total Company sales. The decrease was primarily a result of 77 store closings and a 15.3% reduction in its square footage since May 1, 1999. In addition, B. Dalton's same store sales declined 2.5% during the first quarter. During the first quarter, the Company opened three Barnes & Noble stores and closed one, bringing its total number of Barnes & Noble bookstores to 544 with 12.7 million square feet. The Company closed 11 B. Dalton stores, ending the period with 389 B. Dalton stores and 1.5 million square feet. The Company opened nine Babbage's Etc. stores and closed three, bringing its total to 532 video game and entertainment software stores with 0.8 million square feet. As of April 29, 2000 the Company operated 1,465 stores in fifty states, the District of Columbia and Puerto Rico. 13 Cost of Sales and Occupancy During the 13 weeks ended April 29, 2000, cost of sales and occupancy increased $128 million, or 24.4%, to $654 million from $526 million during the 13 weeks ended May 1, 1999 primarily due to the inclusion of Babbage's Etc.'s cost of sales and occupancy in the first quarter of fiscal 2000. As a percentage of sales, cost of sales and occupancy was 73.2%, unchanged from the same period one year ago. Selling and Administrative Expenses Selling and administrative expenses increased $30.4 million to $181.3 million during the 13 weeks ended April 29, 2000 from $150.9 million during the 13 weeks ended May 1, 1999 primarily due to the inclusion of Babbage's Etc.'s selling and administrative expenses in the first quarter of fiscal 2000. During the first quarter, selling and administrative expenses decreased as a percentage of sales to 20.3% from 21.0% during the prior year period. Depreciation and Amortization During the first quarter, depreciation and amortization increased $7.2 million, or 27.9%, to $33.0 million from $25.8 million during the same period last year. The increase was primarily the result of the depreciation on the 38 new Barnes & Noble stores opened since May 1, 1999, the depreciation on the BookMaster system and the inclusion of Babbage's Etc.'s first quarter depreciation and amortization. Pre-opening Expenses Pre-opening expenses increased $0.7 million, or 85.1%, to $1.5 million during the 13 weeks ended April 29, 2000 from $0.8 million for the 13 weeks ended May 1, 1999. Operating Profit The Company's consolidated operating profit increased to $24.3 million during the 13 weeks ended April 29, 2000 from $14.9 million during the 13 weeks ended May 1, 1999. Interest Expense, Net and Amortization of Deferred Financing Fees Net interest expense and amortization of deferred financing fees increased to $9.8 million during the 13 weeks ended April 29, 2000 from $4.7 million during the 13 weeks ended May 1, 1999. This increase was primarily the result of increased borrowings under the Company's revolving credit facility used to fund the Company's acquisition of Babbage's Etc. and the common stock repurchase program. Other Expense Other expense increased to $4.0 million in the first quarter of 2000 from $1.1 million for the same period in the prior year as a result of increased equity losses from the Company's investments. 14 Benefit for Income Taxes The benefit for income taxes during the 13 weeks ended April 29, 2000 was $2.9 million compared with $1.0 million during the 13 weeks ended May 1, 1999. Tax benefits were based upon management's estimate of the Company's annualized effective tax rates. The Company's effective tax rate was 41.5% for the first quarter of 2000, compared to 41.0% for the first quarter of 1999. Net Loss As a result of the factors discussed above, the Company reported a consolidated net loss of ($4.1) million (or ($0.06) per share) during the 13 weeks ended April 29, 2000, compared with a net loss of ($5.9) million (or ($0.09) per share) during the 13 weeks ended May 1, 1999. Components of earnings per share are as follows:
13 weeks ended -------------------------------- April 29, 2000 May 1, 1999 -------------- -------------- Retail Earnings Per Share Bookstores $ 0.16 0.09 Video game and entertainment software stores (0.02) -- -------------- -------------- Retail EPS $ 0.14 0.09 EPS Impact of Investing Activities Non-Cash Share of net losses of Barnes & Noble.com $ (0.16) (0.10) Share of net losses from other equity investments (0.04) (0.01) -------------- -------------- Total Investing Activities $ (0.20) (0.11) Other Adjustments Change in accounting for pre-opening costs $ -- (0.07) -------------- -------------- Total Other Adjustments $ -- (0.07) -------------- -------------- Consolidated EPS $ (0.06) (0.09) ============== ==============
15 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This report may contain certain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to the Company that are based on the beliefs of the management of the Company as well as assumptions made by and information currently available to the management of the Company. When used in this report, the words "anticipate," "believe," "estimate," "expect," "intend," "plan" and similar expressions, as they relate to the Company or the management of the Company, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events, the outcome of which is subject to certain risks, including among others general economic and market conditions, decreased consumer demand for the Company's products, possible disruptions in the Company's computer or telephone systems, increased or unanticipated costs or effects associated with Year 2000 compliance by the Company or its service or supply providers, 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 initiatives such as Barnes & Noble.com, the performance and successful integration of acquired businesses, the success of the Company's strategic investments, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, and other factors which may be outside of the Company's control. In addition, the video game market has historically been cyclical in nature and dependent upon the introduction of new generation systems and related interactive software. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. 16 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit filed with this Form 10-Q: Exhibit 27 : Financial Data Schedule (b) No report on Form 8-K was filed by the registrant during the fiscal quarter for which this report is filed. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BARNES & NOBLE, INC. - -------------------- (Registrant) By: /s/ Maureen O'Connell By: /s/ Michael Archbold ---------------------- --------------------- Maureen O'Connell Michael Archbold Chief Financial Officer Vice President, Chief Financial Officer of Retail June 13, 2000 18 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1000 3-MOS FEB-03-2001 JAN-30-2000 APR-29-2000 18,947 0 58,421 0 1,162,097 1,289,363 1,000,665 447,335 2,427,366 810,967 597,400 0 0 70 807,196 2,427,366 894,256 894,256 654,167 654,167 34,488 0 9,773 (7,083) (2,939) (4,144) 0 0 0 (4,144) (0.06) (0.06)
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