EX-99.1 2 a5103573ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Barnes & Noble Reports 2005 Results: Bookselling Earnings Per Share Increase 21%; Generates Record Operating Free Cash Flow; Issues 2006 Guidance NEW YORK--(BUSINESS WIRE)--March 16, 2006--Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller, today reported sales and earnings for the fourth quarter and the full year ended January 28, 2006. Sales for the full year increased 5% to $5.1 billion. Barnes & Noble store sales increased 6% to $4.4 billion, with comparable store sales increasing 2.9% for the year, in line with company guidance for a 2% to 3% increase. B. Dalton sales were $141.6 million for the year, a 20% decrease due to store closings. Comparable store sales at B. Dalton increased 0.9% for the year. Sales at Barnes & Noble.com increased 5% to $439.7 million. Net earnings from Bookselling (continuing operations excluding GameStop) increased 19% for the year to $146.7 million. Net earnings for the year were impacted by a non-cash after-tax charge of $7.5 million, or $0.10 per share, related to the impairment of certain store assets determined to be underperforming. Excluding this charge, net earnings from Bookselling were $154.2 million, a 25% increase over the prior year. Full year net earnings per share from Bookselling increased 21% to $2.03, in line with company guidance of $1.99 to $2.03. Excluding the asset impairment charge noted above, Bookselling net earnings per share were $2.14, a 27% increase over the prior year period. The full year results included after-tax costs of $6.6 million, or $0.09 per share, associated with the previously announced redundancy costs for the new distribution center. Full year results also include the previously announced charges of $0.02 for the write-off of deferred financing fees resulting from the replacement of the company's credit facility and the elimination of the term loan, and $0.06 in legal settlement costs, both of which occurred in the second quarter. FOURTH QUARTER Sales for the fourth quarter increased 5% to $1.8 billion. Barnes & Noble store sales increased 6% to $1.4 billion, with comparable store sales increasing 3.3% for the quarter, in line with company guidance for a low single digit increase. B. Dalton sales were $50.1 million for the quarter, an 18% decrease due to store closings. Comparable store sales at B. Dalton increased 3.8% for the quarter. Sales at Barnes & Noble.com increased 1% to $152.6 million for the period. Net earnings from Bookselling increased 10% for the quarter to $123.0 million. Net earnings for the quarter were impacted by a non-cash after-tax charge of $7.5 million, or $0.11 per share, related to the impairment of certain store assets determined to be underperforming. Excluding this charge, net earnings from Bookselling were $130.5 million, a 16% increase over the prior year. Fourth quarter net earnings per share from Bookselling increased 16% to $1.76, in line with company guidance of $1.72 to $1.76. Excluding the asset impairment charge noted above, net earnings per share were $1.87, a 23% increase over the prior year period. CASH FLOW Due to strong operating results, as well as a continued focus on expense controls and management of working capital, the company generated record operating free cash flow of $362 million for the year. Operating free cash flow is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) minus capital expenditures minus interest and taxes paid plus/minus any changes in working capital. In 2005, the company utilized its operating cash flow to fully prepay its $245 million term loan, acquire 7.7 million shares for $282.7 million pursuant to its share repurchase programs and for the payment of two cash dividends totaling $20 million, paid at $0.15 per share. The company had $373 million of cash remaining at year-end and no borrowings under its Revolving Credit Facility. In the first quarter of 2006, the company has acquired 1.6 million shares for $68.2 million under its share repurchase program. "By every single important financial metric, 2005 was a great year for the company. Strong expense controls and expanding gross margins drove record earnings," said Steve Riggio, chief executive officer. "Our comparable stores sales grew 2.9% for the year without any advertising expenditures or additional coupon promotions. Tight management of inventories helped produce record operating cash flows, which we used to increase shareholder value by repurchasing shares and by initiating a quarterly dividend to stockholders." 2006 GUIDANCE For the first quarter and for the full year the company expects comparable store sales at Barnes & Noble stores to increase in the low single digits. Barnes & Noble, Inc.'s first quarter earnings per share are expected to be in a range of $0.10 to $0.14. Full year earnings per share are expected to be in a range of $2.20 to $2.30, which includes expenses of $0.09 per share related to the conversion and transition plan for the company's new distribution center. The company expects to complete the conversion and incur all associated costs by the end of 2006. The fully diluted weighted average share count used in the computation of earnings per share for the first quarter and full year is 70.3 and 71.0 million, respectively. The company will adopt Statement of Financial Accounting Standards No. 123(R) (As Amended), "Share-Based Payment," and begin expensing stock options as of the beginning of fiscal year 2006. As a result, the company's guidance includes charges of approximately $0.04 per share in the first quarter and $0.15 per share for the full year for all stock compensation expenses. The following table presents 2006 and 2005 adjusted earnings per share with and without stock compensation expenses for stock options and restricted stock: First Quarter Full Year ------------------------ ------------------------ 2006 2005 2006 2005 -------------- --------- -------------- --------- GAAP EPS: Guidance $0.10 - $0.14 $2.20 - $2.30 Actual as reported $0.13 $2.03 Impact of stock compensation expense 0.04 0.00 0.15 0.03 -------------- --------- -------------- --------- Adjusted EPS $0.14 - $0.18 $0.13 $2.35 - $2.45 $2.06 ============== ========= ============== ========= Excluding the impact of expenses associated with stock compensation (adjusted EPS above), the company has forecasted 2006 earnings per share to increase between 14% and 19%. As of January 28, 2006, the company operated 681 Barnes & Noble stores and 118 B. Dalton stores. During the fourth quarter, two Barnes & Noble stores were opened and four were closed. 23 B. Dalton stores were closed during the quarter. A conference call with Barnes & Noble, Inc.'s senior management will be webcast beginning at 11:00 A.M. ET on Thursday, March 16, 2006, and is accessible at www.barnesandnobleinc.com/webcasts. The call will also be archived at www.earnings.com for one year. Barnes & Noble, Inc. will report first quarter earnings on or about May 18, 2006. ABOUT BARNES & NOBLE, INC. Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller and a Fortune 500 company, operates 799 bookstores in 50 states. For the fourth 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 online business through Barnes & Noble.com (www.bn.com), one of the Web's largest e-commerce sites and the number one online bookseller for quality among e-commerce companies, according to the latest EquiTrend survey. General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate Web site: http://www.barnesandnobleinc.com. 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, the successful and timely completion and integration of the company's new New Jersey distribution center, 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 Consolidated Statements of Operations (In thousands, except per share data) ---------------------------------------------------------------------- 13 weeks ended 52 weeks ended --------------------- --------------------- January January January January 28, 2006 29, 2005 28, 2006 29, 2005 ---------- ---------- ---------- ---------- Sales $1,753,249 1,672,772 5,103,004 4,873,595 Cost of sales and occupancy 1,175,422 1,126,963 3,533,009 3,386,619 ---------- ---------- ---------- ---------- Gross profit 577,827 545,809 1,569,995 1,486,976 ---------- ---------- ---------- ---------- Selling and administrative expenses 319,025 295,630 1,134,276 1,052,345 Depreciation and amortization 42,556 44,601 172,957 181,553 Pre-opening expenses 1,668 1,868 10,938 8,862 ---------- ---------- ---------- ---------- Operating profit 214,578 203,710 251,824 244,216 Interest expense, net 496 (670) (1,415) (11,028) Debt redemption charge - - - (14,582) ---------- ---------- ---------- ---------- Income before taxes and minority interest 215,074 203,040 250,409 218,606 Income taxes 87,643 87,667 102,042 94,001 ---------- ---------- ---------- ---------- Income before minority interest 127,431 115,373 148,367 124,605 Minority interest (4,450) (3,076) (1,686) (1,230) ---------- ---------- ---------- ---------- Income from continuing operations 122,981 112,297 146,681 123,375 Income from discontinued operations (net of income tax) - 3,331 - 20,001 ---------- ---------- ---------- ---------- Net income $ 122,981 115,628 146,681 143,376 ========== ========== ========== ========== Basic income per common share: Income from continuing operations $ 1.88 1.60 2.17 1.79 Income from discontinued operations - 0.05 - 0.29 ---------- ---------- ---------- ---------- Net income $ 1.88 1.65 2.17 2.08 ========== ========== ========== ========== Diluted income per common share: Income from continuing operations $ 1.76 1.52 2.03 1.68 Income from discontinued operations - 0.04 - 0.25 ---------- ---------- ---------- ---------- Net income $ 1.76 1.56 2.03 1.93 ========== ========== ========== ========== Weighted average common shares outstanding Basic 65,374 69,894 67,560 69,018 Diluted 69,855 73,960 72,150 75,696 Percentage of sales: Sales 100.0% 100.0% 100.0% 100.0% Cost of sales and occupancy 67.0% 67.4% 69.2% 69.5% ---------- ---------- ---------- ---------- Gross profit 33.0% 32.6% 30.8% 30.5% ---------- ---------- ---------- ---------- Selling and administrative expenses 18.2% 17.7% 22.2% 21.6% Depreciation and amortization 2.4% 2.7% 3.4% 3.7% Pre-opening expenses 0.1% 0.1% 0.2% 0.2% ---------- ---------- ---------- ---------- Operating profit 12.2% 12.2% 4.9% 5.0% Interest expense, net 0.0% 0.0% 0.0% -0.2% Debt redemption charge 0.0% 0.0% 0.0% -0.3% ---------- ---------- ---------- ---------- Income before taxes and minority interest 12.3% 12.1% 4.9% 4.5% Income taxes 5.0% 5.2% 2.0% 1.9% ---------- ---------- ---------- ---------- Income before minority interest 7.3% 6.9% 2.9% 2.6% Minority interest -0.3% -0.2% 0.0% 0.0% ---------- ---------- ---------- ---------- Income from continuing operations 7.0% 6.7% 2.9% 2.5% ========== ========== ========== ========== BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share data) ---------------------------------------------------------------------- January 28, January 29, 2006 2005 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 372,586 535,652 Receivables, net 99,117 91,501 Merchandise inventories 1,313,997 1,274,578 Prepaid expenses and other current assets 86,258 85,140 ----------- ----------- Total current assets 1,871,958 1,986,871 ----------- ----------- Property and equipment: Land and land improvements 3,247 3,247 Buildings and leasehold improvements 984,535 940,616 Fixtures and equipment 1,174,973 1,081,966 ----------- ----------- 2,162,755 2,025,829 Less accumulated depreciation and amortization 1,356,379 1,221,169 ----------- ----------- Net property and equipment 806,376 804,660 ----------- ----------- Goodwill 263,731 268,379 Intangible assets, net 93,834 97,538 Deferred taxes 119,334 123,231 Other noncurrent assets 25,969 37,710 ----------- ----------- Total assets $ 3,181,202 3,318,389 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 828,852 745,073 Accrued liabilities 700,886 580,509 ----------- ----------- Total current liabilities 1,529,738 1,325,582 ----------- ----------- Long-term debt - 245,000 Deferred income taxes 158,035 193,743 Other long-term liabilities 367,531 379,180 Minority interest 10,057 8,942 Shareholders' equity: Common stock; $.001 par value; 300,000 shares authorized; 83,370 and 79,276 shares issued, respectively 83 79 Additional paid-in capital 1,091,018 985,609 Accumulated other comprehensive loss (9,085) (9,857) Retained earnings 512,594 386,134 Treasury stock, at cost, 16,690 and 9,008 shares, respectively (478,769) (196,023) ----------- ----------- Total shareholders' equity 1,115,841 1,165,942 ----------- ----------- Commitments and contingencies - - ----------- ----------- Total liabilities and shareholders' equity $ 3,181,202 3,318,389 =========== =========== CONTACT: Barnes & Noble, Inc. Media: Mary Ellen Keating, 212-633-3323 Senior Vice President Corporate Communications or Investor: Joseph J. Lombardi, 212-633-3215 Chief Financial Officer