-----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, OqV0bmmlGiM1noT+J3FeFgiYSm2NGJZwRQk7U0j32qw+o6BnqJvala/5sMfV28I0 XGiRHC+X40+rGRyMvLBN7g== 0000889812-97-001372.txt : 19970617 0000889812-97-001372.hdr.sgml : 19970617 ACCESSION NUMBER: 0000889812-97-001372 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970616 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARNES & NOBLE INC CENTRAL INDEX KEY: 0000890491 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 061196501 STATE OF INCORPORATION: DE FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12302 FILM NUMBER: 97624699 BUSINESS ADDRESS: STREET 1: 1400 OLD COUNTRY ROAD CITY: WESTBURY STATE: NY ZIP: 11590-5130 BUSINESS PHONE: 5163388119 MAIL ADDRESS: STREET 1: 1400 OLD COUNTRY ROAD CITY: WESTBURY STATE: NY ZIP: 590-5130 10-Q 1 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 May 3, 1997 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 30, 1997: 33,317,786 ---------- BARNES & NOBLE, INC. AND SUBSIDIARIES May 3, 1997 Index to Form 10-Q Page No. -------- PART I - FINANCIAL INFORMATION Item 1: Financial Statements Consolidated Statements of Operations - For the 13 weeks ended May 3, 1997 and April 27, 1996............................... 3 Consolidated Balance Sheets - May 3, 1997, April 27, 1996 and February 1, 1997............................................. 4 Consolidated Statements of Cash Flows - For the 13 weeks ended May 3, 1997 and April 27, 1996......................... 6 Notes to Consolidated Financial Statements..................... 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 8 PART II - OTHER INFORMATION.............................................. 12 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 ----------------------- May 3, April 27, 1997 1996 ------ --------- Revenues $ 595,731 508,755 Cost of sales, buying and occupancy 388,624 333,476 ----------- --------- Gross profit 207,107 175,279 ----------- --------- Selling and administrative expenses 120,240 104,227 Rental expense 62,164 53,115 Depreciation and amortization 17,747 13,589 Pre-opening expenses 3,854 4,489 ----------- --------- Operating profit (loss) 3,102 (141) Interest (net of interest income of $112 and $191, respectively) and amortization of deferred financing fees 9,648 8,344 ----------- --------- Loss before benefit for income taxes (6,546) (8,485) Benefit for income taxes (2,685) (3,092) ----------- --------- Net loss $ (3,861) (5,393) =========== ========= Net loss per common share $ (0.12) (0.16) Weighted average common shares outstanding 33,220,000 32,968,000 See accompanying notes to consolidated financial statements. 3 BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (thousands of dollars) - -------------------------------------------------------------------------------- May 3, April 27, February 1, 1997 1996 1997 ------ --------- ----------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 10,347 9,256 12,447 Receivables, net 40,433 42,024 45,558 Merchandise inventories 731,483 705,600 732,203 Prepaid expenses and other current assets 76,654 45,653 76,747 ---------- --------- --------- Total current assets 858,917 802,533 866,955 ---------- --------- --------- Property and equipment: Land and land improvements 681 681 681 Buildings and leasehold improvements 333,867 281,770 326,392 Fixtures and equipment 307,575 222,845 289,684 ---------- --------- --------- 642,123 505,296 616,757 Less accumulated depreciation and amortization 198,151 146,559 181,983 ---------- --------- --------- Net property and equipment 443,972 358,737 434,774 ---------- --------- --------- Intangible assets, net 92,680 95,985 93,494 Other noncurrent assets 51,601 59,147 51,424 ---------- --------- --------- Total assets $1,447,170 1,316,402 1,446,647 ========== ========= ========= (Continued) 4 BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (thousands of dollars) - -------------------------------------------------------------------------------- May 3, April 27, February 1, 1997 1996 1997 ------ --------- ----------- (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Revolving credit facility $ 79,300 67,500 40,000 Accounts payable 364,166 347,967 373,340 Accrued liabilities 209,160 180,050 240,923 ---------- --------- ---------- Total current liabilities 652,626 595,517 654,263 ---------- --------- ---------- Long-term debt 290,000 290,000 290,000 Other long-term liabilities 50,570 35,341 46,395 Shareholders' equity: Common stock; $.001 par value; 100,000,000 shares authorized; 33,253,337, 32,989,785 and 33,188,125 shares issued and outstanding, respectively 33 33 33 Additional paid-in capital 448,144 442,471 446,298 Retained earnings (deficit) 5,797 (46,960) 9,658 ---------- --------- ---------- Total shareholders' equity 453,974 395,544 455,989 ---------- --------- ---------- Commitments and contingencies ---------- --------- ---------- Total liabilities and shareholders' equity $1,447,170 1,316,402 1,446,647 ========== ========= ========= See accompanying notes to consolidated financial statements. 5 BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (thousands of dollars) (unaudited) 13 weeks ended -------------------- May 3, April 27, 1997 1996 ------- --------- Cash flows from operating activities: Net loss $ (3,861) (5,393) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 18,243 13,946 Loss on disposal of property and equipment 54 223 Increase in other long-term liabilities for scheduled rent increases in long-term leases 4,123 4,322 Changes in operating assets and liabilities, net (34,941) (48,036) --------- -------- Net cash flows from operating activities (16,382) (34,938) --------- -------- Cash flows from investing activities: Purchases of property and equipment (26,191) (51,855) Net increase in other noncurrent assets (673) (9,029) --------- -------- Net cash flows from investing activities (26,864) (60,884) --------- -------- Cash flows from financing activities: Net increase (decrease) in revolving credit facility 39,300 (4,900) Proceeds from issuance of long-term debt -- 100,000 Proceeds from exercise of common stock options 1,846 702 --------- -------- Net cash flows from financing activities 41,146 95,802 --------- -------- Net decrease in cash and cash equivalents (2,100) (20) Cash and cash equivalents at beginning of period 12,447 9,276 --------- -------- Cash and cash equivalents at end of period 10,347 9,256 ========= ======== Changes in operating assets and liabilities, net: Receivables, net $ 5,125 6,995 Merchandise inventories 720 34,751 Prepaid expenses and other current assets 93 3,889 Accounts payable and accrued liabilities (40,879) (93,671) --------- -------- Changes in operating assets and liabilities, net $ (34,941) (48,036) ========= ======== Supplemental cash flow information: Cash paid during the period for: Interest $ 3,673 2,636 Income taxes $ 13,331 11,134 See accompanying notes to consolidated financial statements. 6 BARNES & NOBLE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements For the 13 weeks ended May 3, 1997 and April 27, 1996 (thousands of dollars) (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 May 3, 1997 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 53 weeks ended February 1, 1997. 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 May 3, 1997 are not indicative of the results to be expected for the 52 weeks ending January 31, 1998. (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 79%, 77% and 79% of the Company's merchandise inventories as of May 3, 1997, April 27, 1996 and February 1, 1997, respectively. 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 increase approximately $8,800, $7,826 and $8,800 as of May 3, 1997, April 27, 1996 and February 1, 1997, respectively. (2) Income Taxes The tax provisions for the 13 weeks ended May 3, 1997 and April 27, 1996 are based upon management's estimate of its annualized effective tax rates. Permanent differences include amortization of goodwill which decreases the benefit for income taxes. (3) Earnings Per Common Share In February, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). Under SFAS No. 128, the presentation of Primary and Fully Diluted Earnings per Share will be replaced by Basic and Diluted Earnings per Share. The presentation of Basic Earnings per Share includes no potential common shares and thus no dilution. In accordance with SFAS 128, the Company will adopt the provisions of SFAS No. 128 effective January 31, 1998 and restate all prior periods to conform to this new pronouncement. Adoption is not expected to have any material effect on the Company's reported Earnings per Share. 7 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 for seasonal working capital requirements and capital investments are net cash flows from operating activities, funds available under its revolving credit facility and vendor financing. Cash and cash equivalents were $10.3 million as of May 3, 1997 in comparison to $9.3 million as of April 27, 1996. Cash flows from operating activities improved significantly during the 13 weeks ended May 3, 1997 to ($16.4) million from ($34.9) million during the same period of the prior fiscal year. This improvement was primarily due to improved earnings before interest, taxes, depreciation and amortization ("EBITDA") as well as improvements in inventory management. EBITDA increased $7.4 million to $20.8 million for the 13 weeks ended May 3, 1997 from $13.4 million in the same period last year. Merchandise inventories increased 3.7% to $731.5 million as of May 3, 1997, from $705.6 million as of April 27, 1996. The controlled growth in consolidated inventory levels was achieved during a period of 17.1% revenue growth and 19.7% square footage growth. During the 13 weeks ended May 3, 1997, cash flows were used primarily for capital expenditures related to the Company's Barnes & Noble store expansion and, to a lesser extent, for increases in working capital related to such expansion. Capital expenditures totaled $26.2 million and $51.9 million during the 13 weeks ended May 3, 1997 and April 27, 1996, respectively. These expenditures were primarily for new Barnes & Noble stores, the Company's new online business and enhancements to the Company's management information and in-store systems. Total debt as of May 3, 1997 and April 27, 1996 was $369.3 million and $357.5 million, respectively. Borrowings under the Company's credit facility averaged $165.2 million and $122.5 million during the 13 weeks ended May 3, 1997 and April 27, 1996, respectively, and peaked at $190.2 million and $180.3 million during the same periods, respectively. As of May 3, 1997, the Company's senior credit facility includes a $325,000 revolving credit facility and a $100,000 term loan facility and provides for an additional commitment of $125,000 which became available to the Company in May, 1997. Based upon current operating levels and the planned store expansion, management believes cash flows generated from operations, short-term vendor financing and its borrowing capacity under its credit facility will be sufficient to meet the Company's working capital and debt service requirements, fund restructuring reserves and support the continued rollout of Barnes & Noble stores for at least the next twelve moths. The Company did not declare or pay any cash dividends during the 13-week periods ended May 3, 1997 and April 27, 1996. 8 Results of Operations 13 weeks ended May 3, 1997 and April 27, 1996 Revenues Revenues increased 17.1%, or $86.9 million, to $595.7 million during the 13 weeks ended May 3, 1997 from $508.8 million during the 13 weeks ended April 27, 1996. Barnes & Noble store revenues grew 26.3% to $481.6 million during the 13 weeks ended May 3, 1997, an increase of $100.1 million from $381.5 million during the 13 weeks ended April 27, 1996. With the Company's continued "super" store expansion, Barnes & Noble store revenues, as a percentage of total revenues, rose to 80.8% during the 13 weeks ended May 3, 1997, up from 75.0% during the same period in the prior year. The increase in revenues during the 13 weeks ended May 3, 1997 was primarily attributable to an increase in comparable Barnes & Noble store sales of 9.3% and revenues from the 87 new Barnes & Noble stores opened since April 27, 1996. B. Dalton stores generated 18.2% of total revenues during the 13 weeks ended May 3, 1997 in comparison to 24.0% of total revenues during the same period one year ago. B. Dalton comparable store sales decreased (4.8%) for the period. During the 13 weeks ended May 3, 1997, the Company opened 16 Barnes & Noble stores and closed one, bringing its total number of Barnes & Noble stores to 446. The Company closed ten B. Dalton stores during the quarter and ended the period with 567 stores. As of May 3, 1997 the Company operated 1,013 stores in 50 states and the District of Columbia. Cost of Sales, Buying and Occupancy During the 13 weeks ended May 3, 1997, cost of sales, buying and occupancy increased $55.1 million, or 16.5%, to $388.6 million from $333.5 million for the same period one year ago. As a percentage of revenues, cost of sales, buying and occupancy decreased to 65.2% during the 13 weeks ended May 3, 1997 from 65.5% during the 13 weeks ended April 27, 1996. The decrease in cost of sales, buying and occupancy as a percentage of revenues was primarily due to improvements in merchandise mix and increased direct purchasing through the Company's distribution center. Selling and Administrative Expenses Selling and administrative expenses increased $16.0 million, or 15.4%, to $120.2 million during the 13 weeks ended May 3, 1997 from $104.2 million during the 13 weeks ended April 27, 1996. Selling and administrative expenses decreased as a percentage of revenues to 20.2% during the 13 weeks ended May 3, 1997 from 20.5% during the prior year period primarily due to the Company's focus on expense controls and the continued improvement in the Company's operating leverage resulting from the maturation of the Company's Barnes & Noble stores. 9 Rental Expense, Depreciation and Amortization Rental expense increased $9.1 million, or 17.0%, to $62.2 million during the 13 weeks ended May 3, 1997 from $53.1 million during the 13 weeks ended April 27, 1996. As a percentage of revenues, rental expense was 10.4% for each of the 13 weeks ended May 3, 1997 and April 27, 1996. Depreciation and amortization increased $4.1 million, or 30.6%, to $17.7 million during the 13 weeks ended May 3, 1997 from $13.6 million during the 13 weeks ended April 27, 1996. The increase was primarily a result of the 87 new Barnes & Noble stores opened since April 27, 1996. Pre-opening Expenses Pre-opening expenses decreased $0.6 million, or 14.1%, to $3.9 million during the 13 weeks ended May 3, 1997 from $4.5 million during the 13 weeks ended April 27, 1996 primarily as a result of fewer Barnes & Noble stores opened in the twelve month period ended May 3, 1997 as compared to the corresponding period of the prior year. Operating Profit As a result of the factors discussed above, the Company's operating profit improved to $3.1 million during the 13 weeks ended May 3, 1997 from a ($0.1) million operating loss during the 13 weeks ended April 27, 1996. This marks the first time the Company posted a first-quarter operating profit since it began its "super" store expansion. As a percentage of revenues, operating profit increased to 0.5% for the 13 weeks ended May 3, 1997 from virtually break even for the 13 weeks ended April 27, 1996 reflecting strong Barnes & Noble comparable store sales, expanding gross margins and improving operating leverage. Interest Expense, Net and Amortization of Deferred Financing Fees Interest expense, net of interest income, and amortization of deferred financing fees increased to $9.6 million during the 13 weeks ended May 3, 1997 from $8.3 million during the 13 weeks ended April 27, 1996. The increase in net interest expense reflects an increase in average borrowings during the 13 weeks ended May 3, 1997 in comparison to the prior year period related to the funding of capital expenditures and working capital for the Company's Barnes & Noble store expansion program. Benefit For Income Taxes The benefit for income taxes during the 13 weeks ended May 3, 1997 was $2.7 million compared to $3.1 million during the 13 weeks ended April 27, 1996. The tax benefits were based upon management's estimate of the Company's annualized effective tax rates. 10 Net Loss As a result of the factors discussed above, the Company's results of operations were a net loss of ($3.9) million during the 13 weeks ended May 3, 1997 compared to a net loss of ($5.4) million during the 13 weeks ended April 27, 1996. During the 13 weeks ended May 3, 1997, the net loss per common share improved to ($0.12) per share from ($0.16) per share for the same period in the prior year. Forward-Looking Statements This report contains 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, possible disruptions in the Company's computer or telephone systems, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores, the level and volatility of interest rates, and other factors which may be outside of the Company's control. 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 herein 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. 11 PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (a) Exhibit filed with this Form 10-Q: None. (b) No report on Form 8-K was filed by the registrant during the fiscal quarter for which this report is filed. 12 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) Date: __________, 1997 By: /s/ William F. Duffy -------------------- William F. Duffy Vice President, Finance and Chief Accounting Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1000 3-MOS JAN-31-1998 FEB-2-1997 MAY-3-1997 10,347 0 40,433 0 731,483 858,917 642,123 198,151 1,447,170 656,626 290,000 0 0 33 453,974 1,447,170 595,731 595,731 388,624 388,624 83,765 0 9,648 (6,546) (2,685) (3,861) 0 0 0 (3,861) (0.12) (0.12)
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