March 11, 1999
Barnes & Noble, Inc. Reports Record Retail EPS of $1.35, up 27% In Line
With Analysts' Forecasts
Retail Operating Profit up 16% to $189 million
New York, NY (March 11, 1999) - Barnes & Noble, Inc. (NYSE:BKS), the
world's largest bookseller, today announced record consolidated net
earnings of $92.4 million for the 52 weeks ended January 30, 1999. These
results include retail net earnings of $96.8 million (a 31.3 percent
increase over the prior year), which was in line with analysts' forecasts,
a $42.1 million net loss associated with the company's equity interest in
barnesandnoble.com, and a net gain of $37.6 million resulting from the
Bertelsmann investment in barnesandnoble.com.
Consolidated net earnings per share were $1.29, based on 71.7 million
diluted shares. This resulted from retail EPS of $1.35 (a 27 percent
increase over last year) plus a $0.53 per share gain from the Bertelsman
investment minus a $0.59 per share loss for barnesandnoble.com.
As previously announced, retail sales for the year ended January 30, 1999
were $3.0 billion, an increase of 8.0 percent over the same period last
year. Barnes & Noble store sales rose 12.0 percent to $2.5 billion and
contributed 84 percent of total retail sales in 1998. barnesandnoble.com
sales for the year were $70.2 million, a 381 percent increase over 1997.
Retail operating profit increased 16 percent to $189 million reflecting
strong sales growth and gross margin improvement. The retail business
operating margin improved to 6.3 percent of revenues, up from 5.8 percent
in the prior year.
Year-end inventories increased 11 percent to $945 million in line with the
company's 8.0 percent sales growth, the opening of 50 Barnes & Noble stores
over the last year, and the increase in its distribution center's standing
inventory. The accounts payable to inventory ratio declined from 54 percent
to 53 percent and debt declined 13 percent to $249 million. Retail earnings
before interest taxes depreciation and amortization (EBITDA) rose to $277
million, and total debt to EBITDA decreased from 1.20 to 0.90, reflecting
continued moderating financial leverage. Strong cash flows enabled the
company to fund store openings, store system enhancements and other
initiatives, including the company's investment in barnesandnoble.com.
"We are pleased with our 1998 results," said Leonard Riggio, chairman and
chief executive officer of Barnes & Noble, Inc. "The company achieved
industry leading results as measured by several indicators, including our
comparable store sales increases, record net earnings and cash flow,
inventory turns, and a return on average equity of 15.3 percent. We enter
1999 with a strong balance sheet, fueled by our considerable cash flow.
Because of the Bertelsmann investment, which has provided ample capital for
barnesandnoble.com, our retail cash flows are now fully available to
support strategic investment opportunities. And, we achieved these results
while building a leading e-commerce franchise."
At January 30, 1999, the company operated 521 Barnes & Noble stores and 484
B. Dalton bookstores. During 1998, 50 Barnes & Noble stores were opened and
13 were closed, of which 11 were relocated. B. Dalton opened 4 stores and
closed 43.
Barnes & Noble stores stock an authoritative selection of book titles and
provide access to more than one million titles from Barnes & Noble's
state-of-the-art distribution center. They offer books from more than
50,000 publisher imprints with an emphasis on small, independent publishers
and university presses. Barnes & Noble is the world's largest bookseller on
the World Wide Web (http://www.barnesandnoble.com) and the exclusive
bookseller on America Online (Keyword: bn). The company also publishes
books under the Barnes & Noble imprint for exclusive sale through its
retail stores, mail-order catalogs, and Web site.
barnesandnoble.com has the world's largest selection of book titles -- more
than eight million. In less than two years, it has become the fourth
largest e-commerce site and among the top 30 overall sites on the Web,
according to Media Metrix. The company maintains the largest standing
inventory of any online bookseller with more than 750,000 titles ready for
immediate delivery. The site's database features more than six and a one
half million out-of-print and rare books, as well as the largest online
selection of bargain books discounted up to 90 percent. A powerful search
engine, one-click ordering, and extensive book reviews and expert
commentary provide a fast, convenient and informed shopping experience.
Author chats and readers create a growing and personal literary community.
barnesandnoble.com is the exclusive bookseller to America Online (AOL)'s
more than 16 million subscribers. The company's affiliate network pays the
highest commissions with the best linking and best reporting tools,
including daily updated sales information , and is the leader in
business-to-business e-commerce with its unique Business Solutions program.
This release may contain forward-looking statements regarding expectations
of the company. These statements are based on currently available
information and represent the beliefs of the management of the company. The
future events which are the subject of such statements are subject to
certain risks, including those set forth in the company's annual and
quarterly reports on file with the Securities and Exchange Commission.
(SEE ATTACHED TABLES)
General financial information on Barnes & Noble, Inc. can be obtained via
the Internet by visiting the company's investor relations web site:
shareholder.com.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(thousands of dollars, except per share data)
----------------------------------------------------------------------
13 Weeks Ended 52 Weeks Ended
----------------------- ----------------------
January 30, January 31, January 30, January 31,
1999 1998 1999 1998
----------- ----------- ----------- ------------
Sales $ 1,029,288 968,542 3,005,608 2,796,852
Cost of sales
and occupancy 701,595 661,822 2,142,717 2,019,291
----------- ----------- ----------- ------------
Gross profit 327,693 306,720 862,891 777,561
Selling and
administrative expenses 166,323 156,842 577,195 540,423
Depreciation and
amortization 23,857 20,532 88,345 76,951
Pre-opening expenses 1,898 2,621 8,795 12,918
----------- ---------- ----------- ------------
Operating profit 135,615 126,725 188,556 147,269
Interest expense, net (5,430) (8,373) (24,412) (37,666)
Equity in net loss of LLC (14,256) (71,334)
Gain on formation of LLC 63,759 63,759
----------- ---------- ----------- ------------
Earnings before provision
for income taxes
and extraordinary
charge 179,688 118,352 156,569 109,603
Provision for
income taxes 73,672 48,522 64,193 44,935
----------- ---------- ----------- ------------
Earnings before
extraordinary
charge 106,016 69,830 92,376 64,668
Extraordinary charge
due to early
extinguishment of
debt, net of taxes 11,499 11,499
----------- ---------- ----------- ------------
Net earnings $ 106,016 58,331 92,376 53,169
=========== ========== =========== ============
Net earnings per common share:
Basic
Earnings before
extraordinary charge $ 1.54 1.03 1.35 0.96
Extraordinary net
charge due to early
extinguishment
of debt $ - 0.17 - 0.17
Net earnings $ 1.54 0.86 1.35 0.79
Diluted
Earnings before
extraordinary charge $ 1.47 0.98 1.29 0.93
Extraordinary net
charge due to early
extinguishment $ - 0.17 - 0.17
Net earnings $ 1.47 0.81 1.29 0.76
Weighted average common
shares outstanding:
Basic 68,690,000 67,899,000 68,435,000 67,237,000
Diluted 71,950,000 71,009,000 71,677,000 69,836,000
Percentage of sales:
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales and occupancy 68.2 68.3 71.3 72.2
----------- --------- ----------- -----------
Gross margin 31.8 31.7 28.7 27.8
----------- --------- ----------- -----------
Selling and administrative
expenses 16.2 16.2 19.2 19.3
Depreciation and amortization 2.2 2.1 2.9 2.7
Pre-opening expenses 0.2 0.3 0.3 0.5
----------- --------- ----------- -----------
Operating margin 13.2 13.1 6.3 5.3
Interest expense, net (0.5) (0.9) (0.8) (1.4)
Equity in net loss of LLC (1.4) 0.0 (2.4) 0.0
Gain on formation of LLC 6.2 0.0 2.1 0.0
----------- --------- ----------- -----------
Earnings before provision
for income taxes and
extraordinary charge 17.5 12.2 5.2 3.9
Provision for income taxes 7.2 5.0 2.1 1.6
----------- --------- ----------- -----------
Earnings before
extraordinary charge 10.3 7.2 3.1 2.3
Extraordinary net charge
due to early
extinguishment of
debt 1.2 0.4
=========== ========= =========== ===========
Net earnings 10.3% 6.0% 3.1% 1.9%
=========== ========= =========== ===========
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars, per share data)
----------------------------------------------------------------------
January 30, January 31,
1999 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 31,081 12,697
Receivables, net 57,523 43,858
Merchandise inventories 945,073 852,107
Prepaid expenses and other
current assets 54,634 68,902
---------- ----------
Total current assets 1,088,311 977,564
---------- ----------
Property and equipment:
Land and land improvements 3,197 681
Buildings and leasehold
improvements 383,292 347,598
Fixtures and equipment 440,488 378,058
---------- ----------
826,977 726,337
Less accumulated depreciation and
amortization 316,631 244,207
---------- ----------
Net property and equipment 510,346 482,130
---------- ----------
Intangible assets, net 86,980 90,237
Investment in barnesandnoble.com LLC 82,307 -
Other noncurrent assets 39,653 41,240
========== ==========
Total assets $ 1,807,597 1,591,171
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 498,237 459,795
Accrued liabilities 274,085 253,050
---------- ----------
Total current liabilities 772,322 712,845
---------- ----------
Long-term debt 249,100 284,800
Deferred income taxes 32,449 -
Other long-term liabilities 74,937 61,771
Shareholders' equity
Common stock; $.001 par value;
300,000,000 shares authorized;
68,759,111 and 67,921,830
shares issued and
outstanding, respectively 69 68
Additional paid-in capital 523,517 468,860
Retained earnings 155,203 62,827
---------- ----------
Total shareholders' equity 678,789 531,755
---------- ----------
Commitments and contingencies - -
========== ==========
Total liabilities and
shareholders' equity $ 1,807,597 1,591,171
========== ==========
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