EX-99.3 3 k35167exv99w3.htm EX-99.3 EX-99.3
EXHIBIT 99.3
Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
                         
    Quarter Ended May 5, 2007  
    Operating     Adjustments     GAAP  
    Basis (1) (3)     (1) (3)     Basis  
     
Domestic Borders Superstores
   $ 615.0     $ —     $ 615.0  
Waldenbooks Specialty Retail
     108.1       —       108.1  
International
     28.3       —       28.3  
 
                  
Total sales
     751.4       —       751.4  
Other revenue
     5.3       —       5.3  
 
                  
Total revenue
     756.7       —       756.7  
Cost of goods sold, including occupancy costs
     577.5       4.3       581.8  
 
                  
Gross margin
     179.2       (4.3 )     174.9  
Selling, general and administrative expenses
     211.6       1.2       212.8  
Pre-opening expense
     0.9       —       0.9  
Asset impairments and other writedowns
     —       0.9       0.9  
 
                  
Operating income (loss)
     (33.3 )     (6.4 )     (39.7 )
Interest expense
     8.8       —       8.8  
 
                  
Income (loss) before income taxes
     (42.1 )     (6.4 )     (48.5 )
Income taxes
     (18.5 )     (1.5 )     (20.0 )
 
                  
Income (loss) from continuing operations
   $ (23.6 )   $ (4.9 )   $ (28.5 )
 
                  
Loss on continuing operations of discontinued operations (net of tax)
     (6.3 )     0.5       (5.8 )
Loss on disposal of discontinued operations (net of tax)
     —       (1.6 )     (1.6 )
 
                  
Loss from discontinued operations (net of tax)
     (6.3 )     (1.1 )     (7.4 )
 
                  
Net Income (loss)
   $ (29.9 )   $ (6.0 )   $ (35.9 )
 
                  
 
                        
Basic EPS from continuing operations
   $ (0.40 )   $ (0.08 )   $ (0.48 )
Basic EPS from discontinued operations
   $ (0.11 )   $ (0.02 )   $ (0.13 )
Basic EPS including discontinued operations
   $ (0.51 )   $ (0.10 )   $ (0.61 )
Basic Weighted avg. common shares
     58.6       58.6       58.6  
                         
    Quarter Ended August 4, 2007  
    Operating     Adjustments     GAAP  
    Basis (1) (3)     (1) (3)     Basis  
     
Domestic Borders Superstores
   $ 658.6     $ —     $ 658.6  
Waldenbooks Specialty Retail
     116.7       —       116.7  
International
     29.3       —       29.3  
 
                  
Total sales
     804.6       —       804.6  
Other revenue
     7.8       —       7.8  
 
                  
Total revenue
     812.4       —       812.4  
Cost of goods sold, including occupancy costs
     609.1       0.9       610.0  
 
                  
Gross margin
     203.3       (0.9 )     202.4  
Selling, general and administrative expenses
     214.4       7.1       221.5  
Pre-opening expense
     1.6       —       1.6  
Asset impairments and other writedowns
     —       0.3       0.3  
 
                  
Operating income (loss)
     (12.7 )     (8.3 )     (21.0 )
Interest expense
     10.3       —       10.3  
 
                  
Income (loss) before income taxes
     (23.0 )     (8.3 )     (31.3 )
Income taxes
     (10.9 )     (2.3 )     (13.2 )
 
                  
Income (loss) from continuing operations
   $ (12.1 )   $ (6.0 )   $ (18.1 )
 
                  
Loss on continuing operations of discontinued operations (net of tax)
     (3.2 )     (2.1 )     (5.3 )
Loss on disposal of discontinued operations (net of tax)
     —       (1.7 )     (1.7 )
 
                  
Loss from discontinued operations (net of tax)
     (3.2 )     (3.8 )     (7.0 )
 
                  
Net Income (loss)
   $ (15.3 )   $ (9.8 )   $ (25.1 )
 
                  
 
                        
Basic EPS from continuing operations
   $ (0.21 )   $ (0.10 )   $ (0.31 )
Basic EPS from discontinued operations
   $ (0.05 )   $ (0.07 )   $ (0.12 )
Basic EPS including discontinued operations
   $ (0.26 )   $ (0.17 )   $ (0.43 )
Basic Weighted avg. common shares
     58.8       58.8       58.8  

 

 

Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
                         
    Quarter Ended November 3, 2007  
    Operating     Adjustments     GAAP  
    Basis (1) (3)     (1) (3)     Basis  
     
Domestic Borders Superstores
   $ 615.8     $ —     $ 615.8  
Waldenbooks Specialty Retail
     109.7       —       109.7  
International
     32.3       —       32.3  
 
                  
Total sales
     757.8       —       757.8  
Other revenue
     7.4       —       7.4  
 
                  
Total revenue
     765.2       —       765.2  
Cost of goods sold, including occupancy costs
     597.3       1.2       598.5  
 
                  
Gross margin
     167.9       (1.2 )     166.7  
Selling, general and administrative expenses
     217.5       (0.2 )     217.3  
Pre-opening expense
     1.3       —       1.3  
Asset impairments and other writedowns
     —       1.4       1.4  
 
                  
Operating income (loss)
     (50.9 )     (2.4 )     (53.3 )
Interest expense
     11.9       —       11.9  
 
                  
Income (loss) before income taxes
     (62.8 )     (2.4 )     (65.2 )
Income taxes
     (24.7 )     (0.8 )     (25.5 )
 
                  
Income (loss) from continuing operations
   $ (38.1 )   $ (1.6 )   $ (39.7 )
 
                  
Loss on continuing operations of discontinued operations (net of tax)
     (3.9 )     —       (3.9 )
Loss on disposal of discontinued operations (net of tax)
     —       (117.5 )     (117.5 )
 
                  
Loss from discontinued operations (net of tax)
     (3.9 )     (117.5 )     (121.4 )
 
                  
Net Income (loss)
   $ (42.0 )   $ (119.1 )   $ (161.1 )
 
                  
 
                        
Basic EPS from continuing operations
   $ (0.65 )   $ (0.03 )   $ (0.68 )
Basic EPS from discontinued operations
   $ (0.06 )   $ (2.00 )   $ (2.06 )
Basic EPS including discontinued operations
   $ (0.71 )   $ (2.03 )   $ (2.74 )
Basic Weighted avg. common shares
     58.8       58.8       58.8  
                         
    Quarter Ended February 2, 2008  
    Operating     Adjustments     GAAP  
    Basis (1) (3)     (1) (3)     Basis  
     
Domestic Borders Superstores
   $ 957.8     $ —     $ 957.8  
Waldenbooks Specialty Retail
     228.3       —       228.3  
International
     55.2       —       55.2  
 
                  
Total sales
     1,241.3       —       1,241.3  
Other revenue
     20.4       —       20.4  
 
                  
Total revenue
     1,261.7       —       1,261.7  
Cost of goods sold, including occupancy costs
     871.5       6.5       878.0  
 
                  
Gross margin
     390.2       (6.5 )     383.7  
Selling, general and administrative expenses
     256.1       (0.7 )     255.4  
Pre-opening expense
     1.2       —       1.2  
Asset impairments and other writedowns
     —       10.4       10.4  
 
                  
Operating income (loss)
     132.9       (16.2 )     116.7  
Interest expense
     10.5       —       10.5  
 
                  
Income (loss) before income taxes
     122.4       (16.2 )     106.2  
Income taxes
     48.8       (9.2 )     39.6  
 
                  
Income (loss) from continuing operations
   $ 73.6     $ (7.0 )   $ 66.6  
 
                  
Income (loss) on continuing operations of discontinued operations (net of tax)
     11.1       (5.0 )     6.1  
Loss on disposal of discontinued operations (net of tax)
     —       (8.0 )     (8.0 )
 
                  
Income (loss) from discontinued operations (net of tax)
     11.1       (13.0 )     (1.9 )
 
                  
Net Income (loss)
   $ 84.7     $ (20.0 )   $ 64.7  
 
                  
 
                        
Diluted EPS from continuing operations
   $ 1.25     $ (0.12 )   $ 1.13  
Diluted EPS from continuing operations
   $ 0.19     $ (0.22 )   $ (0.03 )
Diluted EPS from continuing operations
   $ 1.44     $ (0.34 )   $ 1.10  
Diluted Weighted avg. common shares
     58.8       58.8       58.8  

 

 

Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
                         
    Year Ended February 2, 2008  
    Operating     Adjustments     GAAP  
    Basis (1) (3)     (1) (3)     Basis  
Domestic Borders Superstores
   $ 2,847.2     $ —     $ 2,847.2  
Waldenbooks Specialty Retail
     562.8       —       562.8  
International
     145.1       —       145.1  
 
                  
Total sales
     3,555.1       —       3,555.1  
Other revenue
     40.9       —       40.9  
 
                  
Total revenue
     3,596.0       —       3,596.0  
Cost of goods sold, including occupancy costs
     2,655.4       12.9       2,668.3  
 
                  
Gross margin
     940.6       (12.9 )     927.7  
Selling, general and administrative expenses
     899.6       7.4       907.0  
Pre-opening expense
     5.0       —       5.0  
Asset impairments and other writedowns
     —       13.0       13.0  
 
                  
Operating income (loss)
     36.0       (33.3 )     2.7  
Interest expense
     41.5       —       41.5  
 
                  
Income (loss) before income taxes
     (5.5 )     (33.3 )     (38.8 )
Income taxes
     (5.3 )     (13.8 )     (19.1 )
 
                  
Income (loss) from continuing operations
   $ (0.2 )   $ (19.5 )   $ (19.7 )
 
                  
Loss on continuing operations of discontinued operations (net of tax)
     (2.3 )     (6.6 )     (8.9 )
Loss on disposal of discontinued operations (net of tax)
     —       (128.8 )     (128.8 )
 
                  
Loss from discontinued operations (net of tax)
     (2.3 )     (135.4 )     (137.7 )
 
                  
Net Income (loss)
   $ (2.5 )   $ (154.9 )   $ (157.4 )
 
                  
 
                        
Basic EPS from continuing operations
   $ —     $ (0.33 )   $ (0.33 )
Basic EPS from discontinued operations
   $ (0.04 )   $ (2.31 )   $ (2.35 )
Basic EPS including discontinued operations
   $ (0.04 )   $ (2.64 )   $ (2.68 )
Basic Weighted avg. common shares
     58.7       58.7       58.7  

 

 

Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Sales and Earnings Summary
                         
    Quarter Ended May 3, 2008  
    Operating     Adjustments     GAAP  
    Basis (2) (4)     (2) (4)     Basis  
Domestic Borders Superstores
   $ 600.7     $ —     $ 600.7  
Waldenbooks Specialty Retail
     96.0       —       96.0  
International
     32.8       —       32.8  
 
                  
Total sales
     729.5       —       729.5  
Other revenue
     6.3       —       6.3  
 
                  
Total revenue
     735.8       —       735.8  
Cost of goods sold, including occupancy costs
     565.6       1.5       567.1  
 
                  
Gross margin
     170.2       (1.5 )     168.7  
Selling, general and administrative expenses
     210.4       2.2       212.6  
Pre-opening expense
     1.0       —       1.0  
Asset impairments and other writedowns
     —       —       —  
 
                  
Operating income (loss)
     (41.2 )     (3.7 )     (44.9 )
Interest expense
     8.3       (2.4 )     5.9  
 
                  
Income (loss) before income taxes
     (49.5 )     (1.3 )     (50.8 )
Income taxes
     (19.0 )     (1.7 )     (20.7 )
 
                  
Income (loss) from continuing operations
   $ (30.5 )   $ 0.4     $ (30.1 )
 
                  
Loss on continuing operations of discontinued operations (net of tax)
     (1.2 )     —       (1.2 )
Loss on disposal of discontinued operations (net of tax)
     —       (0.4 )     (0.4 )
 
                  
Loss from discontinued operations (net of tax)
     (1.2 )     (0.4 )     (1.6 )
 
                  
Net Income (loss)
   $ (31.7 )   $ —     $ (31.7 )
 
                  
 
                        
Basic EPS from continuing operations
   $ (0.51 )   $ 0.01     $ (0.50 )
Basic EPS from discontinued operations
   $ (0.02 )   $ (0.01 )   $ (0.03 )
Basic EPS including discontinued operations
   $ (0.53 )   $ —     $ (0.53 )
Basic Weighted avg. common shares
     59.4       59.4       59.4  
                         
    Quarter Ended August 2, 2008  
    Operating     Adjustments     GAAP  
    Basis (2) (4)     (2) (4)     Basis  
Domestic Borders Superstores
   $ 614.5     $ —     $ 614.5  
Borders.com
     7.4       —       7.4  
Waldenbooks Specialty Retail
     96.9       —       96.9  
International
     30.4       —       30.4  
 
                  
Total sales
     749.2       —       749.2  
Other revenue
     9.3       —       9.3  
 
                  
Total revenue
     758.5       —       758.5  
Cost of goods sold, including occupancy costs
     575.7       —       575.7  
 
                  
Gross margin
     182.8       —       182.8  
Selling, general and administrative expenses
     194.6       10.2       204.8  
Pre-opening expense
     1.1       —       1.1  
Asset impairments and other writedowns
     —       —       —  
 
                  
Operating income (loss)
     (12.9 )     (10.2 )     (23.1 )
Interest expense
     6.6       (6.4 )     0.2  
 
                  
Income (loss) before income taxes
     (19.5 )     (3.8 )     (23.3 )
Income taxes
     (9.0 )     (3.0 )     (12.0 )
 
                  
Income (loss) from continuing operations
   $ (10.5 )   $ (0.8 )   $ (11.3 )
 
                  
Income (loss) on continuing operations of discontinued operations (net of tax)
     (0.5 )     —       (0.5 )
Gain (loss) on disposal of discontinued operations (net of tax)
     —       2.6       2.6  
 
                  
Income (loss) from discontinued operations (net of tax)
     (0.5 )     2.6       2.1  
 
                  
Net Income (loss)
   $ (11.0 )   $ 1.8     $ (9.2 )
 
                  
 
                        
Basic EPS from continuing operations
   $ (0.18 )   $ (0.01 )   $ (0.19 )
Basic EPS from discontinued operations
   $ —     $ 0.04     $ 0.04  
Basic EPS including discontinued operations
   $ (0.18 )   $ 0.03     $ (0.15 )
Basic Weighted avg. common shares
     60.5       60.5       60.5  
 
(1)   Results from 2007 were impacted by a number of non-operating items, including asset impairments, a legal settlement, store closure costs, executive severance costs and write-offs related to the Company’s music reduction initiative. Therefore, solely for analytical purposes and as an aid to better understand underlying trends, operating basis data are presented excluding these items.
 
(2)   Results from 2008 were impacted by a number of non-operating items, including store closure costs, severance costs, professional fees related to strategic alternatives and amortization of the term loan discount and debt issuance costs, offset by income related to the fair market value adjustment of the warrant liability and related tax benefit. Therefore, solely for analytical purposes and as an aid to better understand underlying trends, operating basis data are presented excluding these items.
 
(3)   Depreciation expense from continuing operations on an operating basis was $24.0, $24.0, $26.0, $29.5, and $103.5 for the quarter ended May 5, 2007, the quarter ended August 4, 2007, the quarter ended November 3, 2007, the quarter ended February 2, 2008 and the year ended February 2, 2008, respectively. Depreciation expense from continuing operations on a GAAP basis was $24.2, $24.3, $25.7, $29.5, and $103.7 for the quarter ended May 5, 2007, the quarter ended August 4, 2007, the quarter ended November 3, 2007, the quarter ended February 2, 2008 and the year ended February 2, 2008, respectively.
 
(4)   Depreciation expense from continuing operations on an operating basis and on a GAAP basis was $26.9 and $27.8 for the quarter ended May 3, 2008 and the quarter ended August 2, 2008, respectively.

 

 

Borders Group, Inc. Financial Statements
(dollars in millions)
Condensed Consolidated Balance Sheets
                                 
    May 5,     August 4,     November 3,     February 2,  
    2007     2007     2007     2008  
Assets
                                
Cash and cash equivalents
   $ 72.5     $ 68.6     $ 61.1     $ 58.5  
Inventory
     1,367.8       1,272.0       1,560.7       1,242.0  
Other current assets
     97.0       104.6       109.7       103.5  
Current assets of discontinued operations(1)
     218.8       215.8       107.7       102.0  
Property and equipment, net
     575.2       590.7       608.6       592.8  
Other assets and deferred charges
     112.8       112.6       121.9       109.8  
Goodwill
     40.3       40.3       40.3       40.5  
Noncurrent assets of discontinued operations
     172.2       177.3       52.6       53.6  
 
                        
Total Assets
   $ 2,656.6     $ 2,581.9     $ 2,662.6     $ 2,302.7  
 
                        
 
                                
Liabilities and Stockholders’ Equity
                                
Short-term borrowings and current portion of long-term debt
   $ 677.0     $ 691.0     $ 789.5     $ 548.6  
Accounts payable
     509.5       433.7       744.3       511.9  
Other current liabilities
     317.6       311.4       306.3       349.8  
Current liabilities of discontinued operations(2)
     167.4       175.4       61.7       57.5  
Long-term debt
     5.2       5.1       5.3       5.4  
Other long-term liabilities
     303.3       312.4       317.4       325.0  
Noncurrent liabilities of discontinued operations
     73.3       76.5       22.9       25.4  
 
                        
Total liabilities
     2,053.3       2,005.5       2,247.4       1,823.6  
Minority interest
     1.9       2.1       2.2       2.2  
Total stockholders’ equity
     601.4       574.3       413.0       476.9  
 
                        
Total liabilities, minority interest and stockholders’ equity
   $ 2,656.6     $ 2,581.9     $ 2,662.6     $ 2,302.7  
 
                        
 
1.   Includes $11.4, $6.9, $4.4, and $2.5 million of cash and cash equivalents as of May 5, 2007, August 4, 2007, November 3, 2007, and February 2, 2008, respectively.
 
2.   Includes $40.6, $42.3, and $3.7 million of short-term borrowings as of May 5, 2007, August 4, 2007 and November 3, 2007, respectively. Certain reclassifications have been made to conform to current year presentation.
                 
    May 3,     August 2,  
    2008     2008  
Assets
                
Cash and cash equivalents
   $ 35.0     $ 43.9  
Inventory
     1,147.9       1,090.3  
Other current assets
     141.9       118.1  
Current assets of discontinued operations(3)
     108.3       —  
Property and equipment, net
     589.9       584.5  
Other assets and deferred charges
     110.1       114.6  
Goodwill
     40.5       40.5  
Noncurrent assets of discontinued operations
     54.0       —  
 
            
Total Assets
   $ 2,227.6     $ 1,991.9  
 
            
 
                
Liabilities and Stockholders’ Equity
                
Short-term borrowings and current portion of long-term debt
   $ 585.5     $ 459.4  
Accounts payable
     462.5       469.2  
Other current liabilities
     284.0       268.4  
Current liabilities of discontinued operations
     43.2       —  
Long-term debt
     6.4       6.3  
Other long-term liabilities
     368.1       363.9  
Noncurrent liabilities of discontinued operations
     26.7       —  
 
            
Total liabilities
     1,776.4       1,567.2  
Minority interest
     2.3       2.2  
Total stockholders’ equity
     448.9       422.5  
 
            
Total liabilities, minority interest and stockholders’ equity
   $ 2,227.6     $ 1,991.9  
 
            
 
3.   Includes $5.4 million of cash and cash equivalents as of May 3, 2008.
Certain reclassifications have been made to conform to current year presentation.

 

 

Borders Group, Inc. Financial Statements
(dollars in millions)
Condensed Consolidated Statements of Cash Flows
                                         
    Quarter Ended     Year Ended  
    May 5,     August 4,     November 3,     February 2,     February 2,  
    2007     2007     2007     2008     2008  
CASH PROVIDED BY (USED FOR):
                                        
OPERATIONS
                                        
Income (loss) from continuing operations
   $ (28.5 )   $ (18.1 )   $ (39.7 )   $ 66.6     $ (19.7 )
Adjustments to reconcile loss from continuing operations to operating cash flows:
                                        
Depreciation
     24.2       24.3       25.7       29.5       103.7  
Change in other long-term assets, liabilities and deferred charges
     2.8       (0.7 )     4.5       6.7       13.3  
(Increase) decrease in inventories
     (74.3 )     96.2       (288.1 )     318.4       52.2  
Increase (decrease) in accounts payable
     (61.6 )     (75.9 )     310.4       (232.1 )     (59.2 )
Cash provided by (used for) other current assets and other current liabilities
     (23.1 )     (10.3 )     33.3       8.3       8.2  
 
                              
Net cash used for operating activities of continuing operations
     (160.5 )     15.5       46.1       197.4       98.5  
INVESTING
                                        
Capital expenditures
     (34.5 )     (32.1 )     (38.1 )     (24.9 )     (129.6 )
Acquisition
     —       —       —       (0.8 )     (0.8 )
Proceeds from the sale of discontinued operations
     —       —       20.4       —       20.4  
 
                              
Net cash provided by (used for) investing activities of continuing operations
     (34.5 )     (32.1 )     (17.7 )     (25.7 )     (110.0 )
FINANCING
                                        
Net funding from (repayment of) debt and financing obligations
     173.0       9.9       102.1       (241.8 )     43.2  
Issuance and repurchase of common stock
     2.9       3.0       0.7       1.9       8.5  
Net funding from (repayment of) long-term debt
     (0.2 )     —       —       0.4       0.2  
Cash dividends paid
     (6.5 )     (6.5 )     (6.4 )     —       (19.4 )
 
                              
Net cash provided by (used for) financing activities of continuing operations
     169.2       6.4       96.4       (239.5 )     32.5  
 
                                        
Effect of exchange rates on cash and equivalents
     1.5       (4.5 )     3.1       0.7       0.8  
 
                                        
Net cash provided by (used for) discontinued operations
     (0.8 )     10.8       (135.4 )     64.5       (60.9 )
 
                                        
NET DECREASE IN CASH AND EQUIVALENTS
     (25.1 )     (3.9 )     (7.5 )     (2.6 )     (39.1 )
 
                                        
Cash and equivalents at beginning of period
     97.6       72.5       68.6       61.1       97.6  
Cash and equivalents at end of period
     72.5       68.6       61.1       58.5       58.5  
                 
    Quarter Ended
    May 3,   August 2,
    2008   2008
         
CASH PROVIDED BY (USED FOR):
                
OPERATIONS
                
Loss from continuing operations
   $ (30.1 )   $ (11.3 )
Adjustments to reconcile loss from continuing operations to operating cash flows:
                
Depreciation
     26.9       27.8  
Change in other long-term assets, liabilities and deferred charges
     (6.0 )     5.9  
Decrease in inventories
     94.0       57.6  
Increase (decrease) in accounts payable
     (49.4 )     6.7  
Cash used for other current assets and other current liabilities
     (54.4 )     (17.0 )
 
                
Net cash provided by (used for) operating activities of continuing operations
     (19.0 )     69.7  
INVESTING
                
Capital expenditures
     (27.0 )     (27.1 )
Proceeds from the sale of discontinued operations
     —       87.9  
 
                
Net cash provided by (used for) investing activities of continuing operations
     (27.0 )     60.8  
FINANCING
                
Net funding from (repayment of) debt and financing obligations
     45.2       (128.8 )
Issuance and repurchase of common stock
     2.1       1.5  
Net funding from (repayment of) long-term debt
     1.1       (0.4 )
Cash dividends paid
     (6.5 )     —  
 
                
Net cash provided by (used for) financing activities of continuing operations
     41.9       (127.7 )
 
                
Effect of exchange rates on cash and equivalents
     —       0.1  
 
                
Net cash provided by (used for) discontinued operations
     (19.4 )     6.0  
 
                
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
     (23.5 )     8.9  
 
                
Cash and equivalents at beginning of period
     58.5       35.0  
Cash and equivalents at end of period
     35.0       43.9