EX-99.1 2 a4704763ex991.txt PRESS RELEASE EXHIBIT 99.1 Barnes & Noble Announces Second Quarter Results: Barnes & Noble Comparable Store Sales Increase 1.4%; Full Year Sales and Earnings Guidance Raised NEW YORK--(BUSINESS WIRE)--Aug. 19, 2004--Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller, today reported sales and earnings for the second quarter ended July 31, 2004. SECOND QUARTER RESULTS Barnes & Noble store sales were $961.3 million for the quarter, an increase of 5% over the prior year. Second quarter comparable store sales increased 1.4%. The company opened nine new Barnes & Noble stores and closed five locations ending the quarter with 657 stores. B. Dalton sales, which comprise approximately 4% of total bookstore sales, were $39.9 million for the quarter, a decrease of (22%) over the prior year, due primarily to store closings. The company closed five stores ending the quarter with 183 stores. Second quarter comparable store sales decreased (6.8)%. On June 28, 2004, Barnes & Noble announced that it completed the redemption of its $300 million 5.25% convertible subordinated notes due 2009. The unamortized portion of the deferred financing fees from the issuance of the notes and redemption premium resulted in a charge of $14.6 million, or $0.12 per share, during the second quarter. Earnings for the bookstore business were $0.16 per share in the second quarter. Excluding the one-time charge, earnings for the bookstore business were $0.28 per share, versus guidance of $0.17 to $0.19 per share. Bookstore earnings were $0.19 per share in the year-ago period. "We are pleased at having achieved positive comparable store sales growth in the second quarter given the difficult comparisons to last year's sales, which were driven by the extraordinary sales of 'Harry Potter & the Order of the Phoenix' and the attendant traffic it generated," said Steve Riggio, chief executive officer of Barnes & Noble, Inc. "We attribute the buoyancy in book sales to the release of a few titles that received major media coverage, most notably President Clinton's memoir, 'My Life.' The former president's book became the fastest selling non-fiction book in our history, with sales of over 250,000 copies." Barnes & Noble, Inc. completed its previously announced merger of Barnes & Noble.com on May 27, 2004. Barnes & Noble.com's second quarter sales decreased 6% to $84.5 million, resulting in a net loss of ($7.6) million, or ($0.11) per share, versus guidance of ($0.09) to ($0.11) per share. In the year-ago period, net loss was ($0.12) per share on a pro-forma basis, as if Barnes & Noble.com was 100% owned in the prior year. On August 17, 2004, GameStop, the nation's largest video-game and entertainment-software specialty retailer, reported sales of $345.6 million for the quarter, an increase of 13% over the prior year period. Second quarter comparable store sales decreased (2.4)%. The company's share of net earnings was $4.6 million, or $0.07 per share, for the quarter, versus guidance of $0.06 to $0.07 per share. The company's share of net earnings was $0.06 per share in the year-ago period. GameStop opened 77 stores and closed four, ending the quarter with 1,676 stores. Consolidated GAAP net earnings for the second quarter was $8.9 million, or $0.12 per share, versus $13.7 million, or $0.20 per share, in the prior year. Consolidated net earnings excluding the one-time charge was $17.6 million, or $0.24 per share, versus guidance of $0.12 to $0.17 per share. In the year-ago period, consolidated net earnings was $0.13 per share on a pro-forma basis, as if Barnes & Noble.com was 100% owned in the prior year. GUIDANCE For the third and fourth quarters, the company expects comparable store sales at Barnes & Noble stores to increase between 1% and 2%. Full year comparable store sales are expected to increase approximately 3%. For the third quarter, Barnes & Noble.com expects net sales to range between $85 million and $95 million, and GameStop expects comparable store sales to range from 4% to 6%. Consolidated earnings per share guidance, excluding the debt redemption charge, for the full year is now projected to be $2.34 to $2.42, representing pro-forma growth of 23% to 27% over 2003. Previous full year earnings per share guidance was $2.19 to $2.26. The following tables present earnings per share guidance for the third quarter, fourth quarter and the full year. Earnings per share guidance for GameStop is based on the company's approximate 63% ownership interest. THIRD QUARTER EPS 2004 Guidance(a) ----------------- --------------------- 2003 Low High Pro forma (b) ----------- ---------- ------------- Barnes & Noble Bookstores $ 0.08 $ 0.10 $ 0.10 Barnes & Noble.com (0.09) (0.08) (0.11) ---------- --------- --------- Total Book Operating Segment (0.01) 0.02 (0.01) Total Video Game Operating Segment 0.10 0.11 0.09 ---------- --------- --------- Consolidated $ 0.09 $ 0.13 $ 0.08 ========== ========= ========= FOURTH QUARTER EPS 2004 Guidance(a) ------------------ ---------------- 2003 Low High Pro forma (b) ----------- ---------- ------------- Barnes & Noble Bookstores $ 1.54 $ 1.58 $ 1.40 Barnes & Noble.com (0.03) (0.02) (0.02) ---------- --------- --------- Total Book Operating Segment 1.51 1.56 1.38 Total Video Game Operating Segment 0.36 0.38 0.30 ---------- --------- --------- Consolidated $ 1.87 $ 1.94 $ 1.68 ========== ========= ========= FULL YEAR EPS 2004 Guidance(c) ------------- ---------------- 2003 Low High Pro forma (b) ----------- ---------- ------------- Barnes & Noble Bookstores (d) $ 2.06 $ 2.10 $ 1.75 Barnes & Noble.com (0.28) (0.26) (0.34) ---------- --------- --------- Total Book Operating Segment 1.78 1.84 1.41 Total Video Game Operating Segment 0.56 0.58 0.50 ---------- --------- --------- Consolidated before debt redemption 2.34 2.42 1.91 Debt redemption charge (e) (0.11) (0.11) - ---------- --------- --------- Consolidated GAAP EPS $ 2.23 $ 2.31 $ 1.91 ========== ========= ========= (a) Based on a weighted average share count of approximately 72 million. (b) Pro forma as if the company consolidated 100% of Barnes & Noble.com for all periods presented. (c) Based on a weighted average share count of approximately 75 million. (d) Includes the impact of $4 million interest addback, prior to the June 28, 2004 redemption of the convertible notes. (e) A one-time charge of $14.6 million associated with the redemption of the convertible notes. A conference call with Barnes & Noble, Inc.'s senior management will be webcast beginning at 11:00 A.M. ET on Thursday, August 19, 2004, and is accessible at www.barnesandnobleinc.com/financials. The call will also be archived at www.fulldisclosure.com for one year. Barnes & Noble, Inc. will report third quarter earnings on or about November 18, 2004. ABOUT BARNES & NOBLE, INC. Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller and a Fortune 500 company, operates 840 bookstores in 49 states. For the third year in a row, the company is the nation's top retail brand for quality, according to the EquiTrend(R) Brand Study by Harris Interactive(R). Barnes & Noble conducts its e-commerce business through Barnes & Noble.com (www.bn.com), which is ranked fifth in traffic among retailers with their own Web site, according to Media Metrix, and the number-one brand among e-commerce companies, according to the latest EquiTrend survey. In addition to its retail operations, Barnes & Noble is one of the largest book publishers in the world. Its subsidiary, Sterling Publishing, publishes over 1,300 new titles a year and has an active list of over 6,000 titles. Barnes & Noble also has approximately a 63 percent interest in GameStop (NYSE: GME), the nation's largest video-game and entertainment-software specialty retailer with 1,676 stores. General financial information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate Web site: http://www.barnesandnobleinc.com/financials. 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 based on currently available information and represent the beliefs of the management of the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks include, but are not limited to, general economic and market conditions, decreased consumer demand for the company's products, possible disruptions in the company's computer or telephone systems, 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 and other initiatives, the successful integration of acquired businesses, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, product shortages, and other factors which may be outside of the company's control. 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. BARNES & NOBLE, INC. AND SUBSIDIARIES Second Quarter Summary ($ in millions, except per share amounts) 13 weeks ended 26 weeks ended ------------------- ------------------- July 31, August 2, July 31, August 2, 2004 2003 2004 2003 -------- --------- -------- --------- Sales Barnes & Noble Bookstores $ 1,015 977 1,983 1,841 Barnes & Noble.com (a) 85 - 176 - --------- --------- ---------- --------- Total Book operating segment 1,100 977 2,159 1,841 GameStop Total Video Game operating segment 346 306 717 628 --------- --------- ---------- --------- Total sales 1,446 1,283 2,876 2,469 --------- --------- ---------- --------- Operating profit (loss) Barnes & Noble Bookstores 36 25 63 24 Barnes & Noble.com (a) (12) - (23) - --------- --------- ---------- --------- Total Book operating segment 24 25 40 24 GameStop Total Video Game operating segment 13 11 23 22 --------- --------- ---------- --------- Total operating profit 37 36 63 46 --------- --------- ---------- --------- Depreciation and amortization Barnes & Noble Bookstores 30 32 61 65 Barnes & Noble.com (a) 7 - 13 - --------- --------- ---------- --------- Total Book operating segment 37 32 74 65 GameStop Total Video Game operating segment 9 7 17 13 --------- --------- ---------- --------- Total depreciation and amortization 46 39 91 78 --------- --------- ---------- --------- EBITDA (Operating profit (loss) + depreciation and amortization) Barnes & Noble Bookstores 66 58 124 89 Barnes & Noble.com (a) (5) - (10) - --------- --------- ---------- --------- Total Book operating segment 61 58 114 89 GameStop Total Video Game operating segment (b) 14 11 25 22 --------- --------- ---------- --------- Total EBITDA 75 69 139 111 --------- --------- ---------- --------- EPS Barnes & Noble Bookstores 0.28 0.19 0.50 0.14 Barnes & Noble.com (c) (0.11) (0.05) (0.22) (0.09) --------- --------- ---------- --------- Total Book operating segment 0.17 0.14 0.28 0.05 GameStop Total Video Game operating segment (b) 0.07 0.06 0.12 0.12 --------- --------- ---------- --------- Consolidated before debt redemption charge 0.24 0.20 0.40 0.17 Debt redemption charge (d) (0.12) - (0.12) - --------- --------- ---------- --------- Consolidated GAAP EPS $ 0.12 0.20 0.28 0.17 --------- --------- ---------- --------- Weighted average shares outstanding 71,052 66,703 70,884 66,260 (a) Barnes & Noble.com has been consolidated since September 15, 2003. (b) Based on Barnes & Noble, Inc.'s percentage ownership interest in GameStop, approximately 63%. (c) Results accounted for under the equity method through September 15, 2003, and consolidated thereafter. (d) One-time charge of $14.6 million associated with the redemption of the convertible notes. BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Operations (thousands of dollars, except per share data) ---------------------------------------------------------------------- 13 weeks ended 26 weeks ended ----------------------- ----------------------- July 31, August 2, July 31, August 2, 2004 2003 2004 2003 ----------- ----------- ----------- ----------- Sales $1,445,942 1,283,243 2,875,875 2,468,848 Cost of sales and occupancy 1,047,923 946,270 2,097,552 1,831,230 ----------- ----------- ----------- ----------- Gross profit 398,019 336,973 778,323 637,618 ----------- ----------- ----------- ----------- Selling and administrative expenses 312,868 259,184 619,000 509,857 Depreciation and amortization 45,983 39,246 90,718 78,286 Pre-opening expenses 2,622 2,458 5,253 3,960 ----------- ----------- ----------- ----------- Operating profit 36,546 36,085 63,352 45,515 Interest expense, net (3,512) (4,710) (7,856) (9,353) Debt redemption charge (14,582) - (14,582) - Equity in net loss of Barnes & Noble.com - (5,404) - (10,376) ----------- ----------- ----------- ----------- Income before taxes and minority interest 18,452 25,971 40,914 25,786 Income taxes 7,246 10,454 16,342 10,379 ----------- ----------- ----------- ----------- Income before minority interest 11,206 15,517 24,572 15,407 Minority interest (2,296) (1,854) (4,219) (3,770) ----------- ----------- ----------- ----------- Net income 8,910 13,663 20,353 11,637 =========== =========== =========== =========== Income per common share: Basic $ 0.13 0.21 0.30 0.18 Diluted $ 0.12 0.20 0.28 0.17 Weighted average common shares outstanding Basic 68,591,000 64,851,000 68,369,000 64,859,000 Diluted 71,052,000 66,703,000 70,884,000 66,260,000 Percentage of sales: Sales 100.0% 100.0% 100.0% 100.0% Cost of sales and occupancy 72.5% 73.7% 72.9% 74.2% ----------- ----------- ----------- ----------- Gross profit 27.5% 26.3% 27.1% 25.8% ----------- ----------- ----------- ----------- Selling and administrative expenses 21.6% 20.2% 21.5% 20.7% Depreciation and amortization 3.2% 3.0% 3.2% 3.2% Pre-opening expenses 0.2% 0.3% 0.2% 0.1% ----------- ----------- ----------- ----------- Operating profit 2.5% 2.8% 2.2% 1.8% Interest expense, net -0.3% -0.4% -0.3% -0.4% Debt redemption charge -1.0% 0.0% -0.5% 0.0% Equity in net loss of Barnes & Noble.com 0.0% -0.4% 0.0% -0.4% ----------- ----------- ----------- ----------- Income before taxes and minority interest 1.2% 2.0% 1.4% 1.0% Income taxes 0.4% 0.8% 0.5% 0.4% ----------- ----------- ----------- ----------- Income before minority interest 0.8% 1.2% 0.9% 0.6% Minority interest -0.2% -0.1% -0.2% -0.1% ----------- ----------- ----------- ----------- Net income 0.6% 1.1% 0.7% 0.5% =========== =========== =========== =========== BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (thousands of dollars, except per share data) July 31, August 2, January 31, 2004 2003 2004 ------------ ---------- ----------- ASSETS Current assets: Cash and cash equivalents $ 182,607 170,205 487,200 Receivables, net 71,022 71,611 60,529 Barnes & Noble.com receivable - 32,411 - Merchandise inventories 1,512,242 1,434,719 1,526,156 Prepaid expenses and other current assets 129,445 107,735 119,604 ------------- ----------- ---------- Total current assets 1,895,316 1,816,681 2,193,489 ------------- ----------- ---------- Property and equipment: Land and land improvements 5,247 3,247 3,247 Buildings and leasehold improvements 545,476 498,472 533,272 Fixtures and equipment 1,204,692 985,475 1,141,317 ------------- ----------- ---------- 1,755,415 1,487,194 1,677,836 Less accumulated depreciation and amortization 1,063,420 875,052 991,187 ------------- ----------- ---------- Net property and equipment 691,995 612,142 686,649 ------------- ----------- ---------- Goodwill 596,799 397,097 509,244 Intangible assets, net 100,663 47,276 94,574 Investment in Barnes & Noble.com - 14,378 - Other noncurrent assets 69,529 23,766 23,338 ------------- ----------- ---------- Total assets $ 3,354,302 2,911,340 3,507,294 ============= =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 790,931 704,774 858,068 Accrued liabilities 502,786 408,564 583,773 ------------- ----------- ---------- Total current liabilities 1,293,717 1,113,338 1,441,841 ------------- ----------- ---------- Long-term debt 257,400 319,000 300,000 Deferred income taxes 169,879 119,853 170,066 Other long-term liabilities 108,352 115,838 108,441 Minority interest 208,820 197,396 227,287 Shareholders' equity: Common stock; $.001 par value; 300,000,000 shares authorized; 78,302,017, 73,873,637 and 76,854,856 shares issued, respectively 78 74 77 Additional paid-in capital 958,627 840,754 914,319 Accumulated other comprehensive loss (8,872) (11,095) (8,579) Retained earnings 562,324 403,287 543,503 Treasury stock, at cost, 9,007,700, 8,807,700 and 8,807,700 shares, respectively (196,023) (187,105) (189,661) ------------- ----------- ---------- Total shareholders' equity 1,316,134 1,045,915 1,259,659 ------------- ----------- ---------- Commitments and contingencies - - - ------------- ----------- ---------- Total liabilities and shareholders' equity $3,354,302 2,911,340 3,507,294 ============= =========== ========== BARNES & NOBLE, INC. AND SUBSIDIARIES Second Quarter Summary Pro Forma as if the Company Owned 100% of Barnes & Noble.com at the Beginning of Fiscal 2003 ($ in millions, except per share amounts) 13 weeks ended 26 weeks ended ------------------- ------------------- July 31, August 2, July 31, August 2, 2004 2003 2004 2003 -------- --------- -------- --------- Sales Barnes & Noble Bookstores $ 1,015 977 1,983 1,841 Barnes & Noble.com (a) 85 90 176 176 --------- --------- --------- --------- Total Book operating segment 1,100 1,067 2,159 2,017 GameStop Total Video Game operating segment 346 306 717 628 --------- --------- --------- --------- Total sales 1,446 1,373 2,876 2,645 --------- --------- --------- --------- Operating profit (loss) Barnes & Noble Bookstores 36 25 63 24 Barnes & Noble.com (a) (12) (14) (23) (29) --------- --------- --------- --------- Total Book operating segment 24 11 40 (5) GameStop Total Video Game operating segment 13 11 23 22 --------- --------- --------- --------- Total operating profit (loss) 37 22 63 17 --------- --------- --------- --------- Depreciation and amortization Barnes & Noble Bookstores 30 32 61 65 Barnes & Noble.com (a) 7 7 13 14 --------- --------- --------- --------- Total Book operating segment 37 39 74 79 GameStop Total Video Game operating segment 9 7 17 13 --------- --------- --------- --------- Total depreciation and amortization 46 46 91 92 --------- --------- --------- --------- EBITDA (Operating profit (loss) + depreciation and amortization) Barnes & Noble Bookstores 66 57 124 89 Barnes & Noble.com (a) (5) (7) (10) (15) --------- --------- --------- --------- Total Book operating segment 61 50 114 74 GameStop Total Video Game operating segment (b) 14 11 25 22 --------- --------- --------- --------- Total EBITDA 75 61 139 96 --------- --------- --------- --------- EPS Barnes & Noble Bookstores 0.28 0.19 0.50 0.14 Barnes & Noble.com (a) (0.11) (0.12) (0.22) (0.25) --------- --------- --------- --------- Total Book operating segment 0.17 0.07 0.28 (0.11) GameStop Total Video Game operating segment (b) 0.07 0.06 0.12 0.12 --------- --------- --------- --------- Consolidated before debt redemption charge 0.24 0.13 0.40 0.01 Debt redemption charge (c) (0.12) - (0.12) - --------- --------- --------- --------- Consolidated GAAP EPS $0.12 0.13 0.28 0.01 --------- --------- --------- --------- Weighted average shares outstanding 71,052 66,703 70,884 66,260 (a) For pro forma purposes only, the company has included 100% of the results of Barnes & Noble.com for all periods presented. (b) Based on Barnes & Noble, Inc.'s percentage ownership interest in GameStop, approximately 63%. (c) One-time charge of $14.6 million associated with the redemption of the convertible notes. BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Operations Pro Forma as if the Company Owned 100% of Barnes & Noble.com at the Beginning of Fiscal 2003 (thousands of dollars, except per share data) 13 weeks ended 26 weeks ended ----------------------- ------------------------ July 31, August 2, July 31, August 2, 2004 2003 2004 2003 ----------- ----------- ----------- ------------ Sales $1,445,942 1,373,125 2,875,875 2,644,739 Cost of sales and occupancy 1,047,923 1,017,369 2,097,552 1,969,543 ----------- ----------- ----------- ------------ Gross profit 398,019 355,756 778,323 675,196 ----------- ----------- ----------- ------------ Selling and administrative expenses 312,868 285,461 619,000 562,441 Depreciation and amortization 45,983 45,765 90,718 91,983 Pre-opening expenses 2,622 2,458 5,253 3,960 ----------- ----------- ----------- ------------ Operating profit 36,546 22,072 63,352 16,812 Interest expense, net (3,512) (4,694) (7,856) (9,267) Debt redemption charge (14,582) - (14,582) - ----------- ----------- ----------- ------------ Income before taxes and minority interest 18,452 17,378 40,914 7,545 Income taxes 7,246 6,924 16,342 2,893 ----------- ----------- ----------- ------------ Income before minority interest 11,206 10,454 24,572 4,652 Minority interest (2,296) (1,854) (4,219) (3,770) ----------- ----------- ----------- ------------ Net income 8,910 8,600 20,353 882 =========== =========== =========== ============ Income per common share: Basic $ 0.13 0.13 0.30 0.01 Diluted $ 0.12 0.13 0.28 0.01 Weighted average common shares outstanding Basic 68,591,000 64,851,000 68,369,000 64,859,000 Diluted 71,052,000 66,703,000 70,884,000 66,260,000 Percentage of sales: Sales 100.0% 100.0% 100.0% 100.0% Cost of sales and occupancy 72.5% 74.1% 72.9% 74.5% ----------- ----------- ----------- ------------ Gross profit 27.5% 25.9% 27.1% 25.5% ----------- ----------- ----------- ------------ Selling and administrative expenses 21.6% 20.8% 21.5% 21.3% Depreciation and amortization 3.2% 3.3% 3.2% 3.5% Pre-opening expenses 0.2% 0.2% 0.2% 0.1% ----------- ----------- ----------- ------------ Operating profit 2.5% 1.6% 2.2% 0.6% Interest expense, net -0.3% -0.3% -0.3% -0.4% Debt redemption charge -1.0% 0.0% -0.5% 0.0% ----------- ----------- ----------- ------------ Income before taxes and minority interest 1.2% 1.3% 1.4% 0.2% Income taxes 0.4% 0.6% 0.5% 0.1% ----------- ----------- ----------- ------------ Income before minority interest 0.8% 0.7% 0.9% 0.1% Minority interest -0.2% -0.1% -0.2% -0.1% ----------- ----------- ----------- ------------ Net income 0.6% 0.6% 0.7% 0.0% =========== =========== =========== ============ CONTACT: Barnes & Noble, Inc. Media Contact: Mary Ellen Keating, Senior Vice President, Corporate Communications, 212/633-3323 or Investor Contact: Joseph J. Lombardi, Chief Financial Officer, 212/633-3215