NEW YORK--(BUSINESS WIRE)--Barnes & Noble, Inc. (NYSE: BKS) today reported sales and earnings for its third quarter ended January 28, 2012.
THIRD QUARTER SALES
Total sales increased 5% as compared to the prior year, from $2.3 billion to $2.4 billion. Barnes & Noble store (“Retail”) sales increased 2% from $1.46 billion to $1.49 billion. Comparable store sales increased 2.8%, on top of a 7.3% increase a year ago. Retail core comparable store sales, which exclude sales of devices, accessories and warranties, increased 4.2% over last year.
Barnes & Noble College (“College”) sales declined 3% from $540 million to $525 million, due to a shift from selling new and used textbooks to lower priced textbook rentals. Comparable store sales were flat as compared to a year ago. College comparable store sales reflect the retail selling price of a new or used textbook when rented, rather than solely the rental fee received and amortized over the rental period.
BN.com sales increased 32% over the prior year, from $319 million to $420 million. Comparable sales increased 42%, on top of a 64% increase a year ago. This increase was driven by continued growth of NOOK device and digital content sales, offset by a decline in online physical product sales.
The consolidated NOOK business across all of the company’s segments, including sales of digital content, device hardware and related accessories, increased 38% during the third quarter to $542 million, on a comparable sales basis. NOOK unit sales, including NOOK Simple Touch™, NOOK Color™ and the new NOOK Tablet, increased 64% during the third quarter as compared to the same period last year. Digital content sales increased 85% on a comparable basis. Content sales are defined to include digital books, digital newsstand, and the apps business.
BN.com and NOOK comparable sales reflect the actual selling price for eBooks sold under the agency model rather than solely the commission received. Additionally, it includes all deferred eReader device revenues, and includes device sales to channel partners on a “sell-in” basis net of estimated returns.
INTRODUCES NOOK TABLET - 8GB
In a separate press release today, the company announced an expansion of its portfolio of bestselling NOOK® devices with the introduction of NOOK Tablet - 8GB, a tremendous value for the company’s fastest and lightest tablet at just $199. NOOK Tablet - 8GB offers reading and mobile entertainment enthusiasts another great option in the NOOK family of devices. In addition, the company’s highly popular NOOK Color just became an even greater value at $169, its lowest price ever.
“In the third quarter, our traffic and sales in stores were the highest we’ve seen in five years,” said William Lynch, chief executive officer of Barnes & Noble. “Our physical book sales at our stores increased more than 4% over last year, and our merchandising changes in our juvenile business and our Toys & Games department experienced double-digit revenue growth in the third quarter. Importantly, our NOOK digital content business continues to grow rapidly, and according to some of the largest U.S. publishers, we maintained or slightly gained share in the eBook market during the third quarter. We’re excited about the launch of the NOOK Tablet with 8GB, an incredible value at only $199, and we look forward to welcoming millions of customers into our stores to try our entire award-winning line of NOOK products.”
THIRD QUARTER EARNINGS
Earnings before interest, taxes, depreciation and amortization (EBITDA) declined 12% as compared to the prior year, from $170 million to $150 million. Retail EBITDA grew from $178 million to $207 million, driven by comparable sales growth, higher product margins and store expense leverage. College EBITDA declined from $43 million to $37 million, impacted by the increased adoption of textbook rentals, where earnings are deferred over the term of the rental, rather than recognized at the point of sale. In the third quarter, an incremental $12 million of EBITDA from textbook rentals was deferred as compared to last year, the majority of which will be realized in the fourth quarter. BN.com EBITDA losses increased from $50 million to $94 million, as the company continued to invest in its rapidly growing NOOK business, including advertising costs and personnel.
Total company net income was $52.0 million for the quarter. Excluding the impact of the textbook rental deferral, net income was approximately flat with last year. Third quarter earnings per share was $0.71. Fiscal 2012 third quarter earnings per share was impacted by the dilutive effect of the convertible preferred shares held by Liberty Media, which diluted earnings by 15 cents per share. Excluding the dilutive effect of the preferred shares and the impact of the textbook deferral, earnings per share would have been $0.99 for the quarter.
FULL YEAR GUIDANCE
The company is reiterating its guidance announced on January 5, 2012. The company expects full fiscal year 2012 consolidated sales between $7.0 billion and $7.2 billion. Comparable sales at Barnes & Noble stores are expected to increase 1%, Barnes & Noble College sales are expected to be flat, and sales are expected to increase 40% to 50% at BN.com. The consolidated NOOK business is expected to generate approximately $1.5 billion in comparable sales this fiscal year.
The company expects full year earnings before interest, taxes, depreciation and amortization (EBITDA) to be in a range of $150 to $180 million and full year losses per share to be in a range of $1.40 to $1.10.
CONFERENCE CALL
A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 10:00 A.M. ET on Tuesday, February 21, 2012, and is accessible at www.barnesandnobleinc.com/webcasts.
Barnes & Noble, Inc. will report fiscal 2012 year-end earnings on or about June 19, 2012.
ABOUT BARNES & NOBLE, INC.
Barnes & Noble, Inc. (NYSE:BKS), the world's largest bookseller and a Fortune 500 company, operates 691 bookstores in 50 states. Barnes & Noble College Booksellers, LLC, a wholly-owned subsidiary of Barnes & Noble, also operates 641 college bookstores serving over 4.6 million students and faculty members at colleges and universities across the United States. Barnes & Noble conducts its online business through BN.com (www.bn.com), one of the Web's largest e-commerce sites, which also features more than two million titles in its NOOK Bookstore™ (www.bn.com/ebooks). Through Barnes & Noble’s NOOK™ eReading product offering, customers can buy and read digital books and content on the widest range of platforms, including NOOK devices, partner company products, and the most popular mobile and computing devices using free NOOK software.
General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate website: www.barnesandnobleinc.com.
NOOK®, NOOK Tablet™, NOOK Simple Touch ™, NOOK 1st Edition™, NOOK 1st Edition Wi-Fi™, NOOK Color™, Reader’s Tablet™, PagePerfect™, Best-Text™, Fast Page™, NOOK Books™, NOOK Store™, NOOK Bookstore™, NOOK Newsstand™, NOOK Magazines™, VividView™, ArticleView™, NOOK Newspapers™, NOOK Comics™, NOOK Cloud™, NOOK Apps™, FREE NOOK Reading Apps™, PubIt!™, NOOK Discover™, NOOK Kids™, Read and Play™, Read to Me™, Read and Record™, NOOK Digital Shop™, Read In Store™, More In Store™, NOOK Friends™, LendMe®, NOOK Library™, NOOK Boutiques™, The Barnes & Noble Promise™, NOOK Books en español™, NOOK Study™, Free Friday™, Lifetime Library™ and Read What You Love. Anywhere You Like™ are trademarks of Barnes & Noble, Inc. Other trademarks referenced in this release are the property of their respective owners.
Follow Barnes & Noble on Twitter (www.bn.com/twitter), Facebook (www.facebook.com/barnesandnoble) and YouTube (www.youtube.com/user/bnstudio).
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. When used in this communication, the words "anticipate," "believe," "estimate," "expect," "intend," "plan," "will" and similar expressions, as they relate to Barnes & Noble or the management of Barnes & Noble, identify forward-looking statements.
Such statements reflect the current views of Barnes & Noble with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for Barnes & Noble's products, low growth or declining sales and net income due to various factors, risk that international expansion will not be successfully achieved or may be achieved later than expected, possible disruptions in Barnes & Noble's computer systems, telephone systems or supply chain, possible risks associated with data privacy, information security and intellectual property, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible risks that inventory in channels of distribution may be larger than able to be sold, possible risk that returns from consumers or channels of distribution may be greater than estimated, the risk that the expected sales lift from Borders’ store closures is not achieved in whole or part, the risk that digital sales growth is less than expectations and the risk that it does not exceed the rate of investment spend, higher-than-anticipated store closing or relocation costs, higher interest rates, the performance of Barnes & Noble's online, digital and other initiatives, the performance and successful integration of acquired businesses, the success of Barnes & Noble's strategic investments, unanticipated increases in merchandise, component or occupancy costs, unanticipated adverse litigation results or effects, product and component shortages, the potential adverse impact on the business resulting from the review of a potential separation of the NOOK digital business, the possibility that no NOOK digital business separation transaction may occur or the form or nature of any such separation or any other transaction which may arise out of such review, the impact on the retail business of any separation of the NOOK digital business, the costs and disruptions arising out of a separation of the NOOK digital business, the risk that Barnes & Noble may not recoup its investments in the NOOK digital business as part of any separation of the NOOK digital business and other factors which may be outside of Barnes & Noble's control, including those factors discussed in detail in Item 1A, "Risk Factors," in Barnes & Noble's Annual Report on Form 10-K and Form 10-K/A, and in Barnes & Noble's other filings made hereafter from time to time with the SEC. Our forward looking statements relating to international expansion are also subject to the following risks, among others that may affect the introduction, success and timing of the NOOK e-reader and content in countries outside the United States: we may not be successful in reaching agreements with international companies, the terms of agreements that we reach may not be advantageous to us, our NOOK device may require technological changes to comply with applicable laws, and marketplace acceptance and other companies have already entered the marketplace with products that have achieved some customer acceptance.
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 as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to Barnes & Noble or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Barnes & Noble undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this communication.
| BARNES & NOBLE, INC. AND SUBSIDIARIES | |||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| 13 weeks ended | 13 weeks ended | 39 weeks ended | 39 weeks ended | ||||||||||||
| January 28, 2012 | January 29, 2011 | January 28, 2012 | January 29, 2011 | ||||||||||||
| Sales | $ | 2,439,124 | 2,323,780 | $ | 5,749,490 | 5,623,768 | |||||||||
| Cost of sales and occupancy | 1,786,308 | 1,710,108 | 4,237,451 | 4,208,276 | |||||||||||
| Gross profit | 652,816 | 613,672 | 1,512,039 | 1,415,492 | |||||||||||
| Selling and administrative expenses | 502,870 | 443,531 | 1,329,619 | 1,229,762 | |||||||||||
| Depreciation and amortization | 60,273 | 57,010 | 173,701 | 170,691 | |||||||||||
| Operating income | 89,673 | 113,131 | 8,719 | 15,039 | |||||||||||
| Interest expense, net | 8,773 | 13,639 | 26,675 | 39,693 | |||||||||||
| Income (loss) before taxes | 80,900 | 99,492 | (17,956 | ) | (24,654 | ) | |||||||||
| Income taxes | 28,869 | 38,909 | (6,818 | ) | (10,114 | ) | |||||||||
| Net income (loss) | 52,031 | 60,583 | (11,138 | ) | (14,540 | ) | |||||||||
| Net loss attributable to noncontrolling interests | - | - | - | 37 | |||||||||||
| Net income (loss) attributable to Barnes & Noble, Inc. | $ | 52,031 | 60,583 | $ | (11,138 | ) | (14,503 | ) | |||||||
| Basic income (loss) per common share: | |||||||||||||||
| Income (Loss) attributable to Barnes & Noble, Inc. available | |||||||||||||||
| for common shareholders | $ | 0.78 | 1.01 | $ | (0.33 | ) | (0.26 | ) | |||||||
| Diluted income (loss) per common share: | |||||||||||||||
| Income (Loss) attributable to Barnes & Noble, Inc. available | |||||||||||||||
| for common shareholders | $ | 0.71 | 1.00 | $ | (0.33 | ) | (0.26 | ) | |||||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 57,371 | 56,894 | 57,261 | 56,457 | |||||||||||
| Diluted | 69,447 | 57,036 | 57,261 | 56,457 | |||||||||||
| Dividends declared per common share | $ | - | 0.25 | $ | - | 0.75 | |||||||||
| Percentage of sales: | |||||||||||||||
| Sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
| Cost of sales and occupancy | 73.2 | % | 73.6 | % | 73.7 | % | 74.8 | % | |||||||
| Gross profit | 26.8 | % | 26.4 | % | 26.3 | % | 25.2 | % | |||||||
| Selling and administrative expenses | 20.6 | % | 19.1 | % | 23.1 | % | 21.9 | % | |||||||
| Depreciation and amortization | 2.5 | % | 2.5 | % | 3.0 | % | 3.0 | % | |||||||
| Operating income | 3.7 | % | 4.9 | % | 0.2 | % | 0.3 | % | |||||||
| Interest expense, net | 0.4 | % | 0.6 | % | 0.5 | % | 0.7 | % | |||||||
| Income (loss) before taxes | 3.3 | % | 4.3 | % | -0.3 | % | -0.4 | % | |||||||
| Income taxes | 1.2 | % | 1.7 | % | -0.1 | % | -0.2 | % | |||||||
| Net income (loss) | 2.1 | % | 2.6 | % | -0.2 | % | -0.3 | % | |||||||
| BARNES & NOBLE, INC. AND SUBSIDIARIES | |||||||
| Consolidated Balance Sheets | |||||||
| (In thousands) | |||||||
| (Unaudited) | |||||||
| January 28, 2012 | January 29, 2011 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 27,397 | 26,477 | ||||
| Receivables, net | 396,854 | 356,546 | |||||
| Merchandise inventories | 1,814,898 | 1,615,874 | |||||
| Prepaid expenses and other current assets | 169,535 | 118,486 | |||||
| Total current assets | 2,408,684 | 2,117,383 | |||||
| Property and equipment: | |||||||
| Land and land improvements | 2,541 | 8,617 | |||||
| Buildings and leasehold improvements | 1,191,224 | 1,206,172 | |||||
| Fixtures and equipment | 1,752,333 | 1,648,244 | |||||
| 2,946,098 | 2,863,033 | ||||||
| Less accumulated depreciation and amortization | 2,309,607 | 2,130,662 | |||||
| Net property and equipment | 636,491 | 732,371 | |||||
| Goodwill | 520,792 | 525,220 | |||||
| Intangible assets, net | 569,488 | 570,110 | |||||
| Other noncurrent assets | 54,418 | 51,536 | |||||
| Total assets | $ | 4,189,873 | 3,996,620 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 1,488,552 | 1,244,363 | ||||
| Accrued liabilities | 910,058 | 790,215 | |||||
| Short-term note payable | - | - | |||||
| Total current liabilities | 2,398,610 | 2,034,578 | |||||
| Long-term debt | 101,600 | 304,400 | |||||
| Long-term deferred taxes | 275,436 | 310,268 | |||||
| Other long-term liabilities | 408,291 | 473,378 | |||||
| Redeemable Preferred Shares; $.001 par value; 5,000 | 191,958 | - | |||||
| shares authorized; 204 and zero shares issued, respectively | |||||||
| Shareholders' equity: | |||||||
| Common stock; $.001 par value; 300,000 shares | |||||||
| authorized; 90,928 and 90,274 shares issued, respectively | 91 | 90 | |||||
| Additional paid-in capital | 1,337,777 | 1,319,004 | |||||
| Accumulated other comprehensive loss | (11,630 | ) | (13,212 | ) | |||
| Retained earnings | 543,582 | 621,796 | |||||
| Treasury stock, at cost, 33,537 and 33,363 shares, respectively | (1,055,842 | ) | (1,053,682 | ) | |||
| Total shareholders' equity | 813,978 | 873,996 | |||||
| Commitments and contingencies | - | - | |||||
| Total liabilities and shareholders' equity | $ | 4,189,873 | 3,996,620 | ||||
| BARNES & NOBLE, INC. AND SUBSIDIARIES | |||||||||||||||
| Segment Information | |||||||||||||||
| (In thousands) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| 13 weeks ended | 13 weeks ended | 39 weeks ended | 39 weeks ended | ||||||||||||
| January 28, 2012 | January 29, 2011 | January 28, 2012 | January 29, 2011 | ||||||||||||
| Sales | |||||||||||||||
| Barnes & Noble Retail | $ | 1,494,050 | 1,464,457 | $ | 3,412,191 | 3,421,519 | |||||||||
| Barnes & Noble College | 524,604 | 539,893 | 1,512,859 | 1,561,404 | |||||||||||
| Barnes & Noble.com | 420,470 | 319,430 | 824,440 | 640,845 | |||||||||||
| Total | $ | 2,439,124 | 2,323,780 | $ | 5,749,490 | 5,623,768 | |||||||||
| Gross Profit | |||||||||||||||
| Barnes & Noble Retail | $ | 496,606 | 471,351 | $ | 1,064,542 | 1,036,735 | |||||||||
| Barnes & Noble College | 106,541 | 112,111 | 325,285 | 331,958 | |||||||||||
| Barnes & Noble.com | 49,669 | 30,210 | 122,212 | 46,799 | |||||||||||
| Total | $ | 652,816 | 613,672 | $ | 1,512,039 | 1,415,492 | |||||||||
| Selling and Administrative Expenses | |||||||||||||||
| Barnes & Noble Retail | $ | 289,685 | 293,759 | $ | 791,084 | 832,357 | |||||||||
| Barnes & Noble College | 69,843 | 69,098 | 205,485 | 203,197 | |||||||||||
| Barnes & Noble.com | 143,342 | 80,674 | 333,050 | 194,208 | |||||||||||
| Total | $ | 502,870 | 443,531 | $ | 1,329,619 | 1,229,762 | |||||||||
| EBITDA | |||||||||||||||
| Barnes & Noble Retail |
$ |
206,921 | 177,592 |
$ |
273,458 | 204,378 | |||||||||
| Barnes & Noble College | 36,698 | 43,013 | 119,800 | 128,761 | |||||||||||
| Barnes & Noble.com | (93,673 | ) | (50,464 | ) | (210,838 | ) | (147,409 | ) | |||||||
| Total | $ | 149,946 | 170,141 | $ | 182,420 | 185,730 | |||||||||
| Net Income (Loss) | |||||||||||||||
| EBITDA | $ | 149,946 | 170,141 | $ | 182,420 | 185,730 | |||||||||
| Depreciation and Amortization | (60,273 | ) | (57,010 | ) | (173,701 | ) | (170,691 | ) | |||||||
| Interest Expense, net | (8,773 | ) | (13,639 | ) | (26,675 | ) | (39,693 | ) | |||||||
| Income Taxes | (28,869 | ) | (38,909 | ) | 6,818 | 10,114 | |||||||||
| Total | $ | 52,031 | 60,583 | $ | (11,138 | ) | (14,540 | ) | |||||||
| Percentage of sales: | |||||||||||||||
| Gross Margin | |||||||||||||||
| Barnes & Noble Retail | 33.2 | % | 32.2 | % | 31.2 | % | 30.3 | % | |||||||
| Barnes & Noble College | 20.3 | % | 20.8 | % | 21.5 | % | 21.3 | % | |||||||
| Barnes & Noble.com | 11.8 | % | 9.5 | % | 14.8 | % | 7.3 | % | |||||||
| Total | 26.8 | % | 26.4 | % | 26.3 | % | 25.2 | % | |||||||
| Selling and Administrative Expenses | |||||||||||||||
| Barnes & Noble Retail | 19.4 | % | 20.1 | % | 23.2 | % | 24.3 | % | |||||||
| Barnes & Noble College | 13.3 | % | 12.8 | % | 13.6 | % | 13.0 | % | |||||||
| Barnes & Noble.com | 34.1 | % | 25.3 | % | 40.4 | % | 30.3 | % | |||||||
| Total | 20.6 | % | 19.1 | % | 23.1 | % | 21.9 | % | |||||||
| BARNES & NOBLE, INC. AND SUBSIDIARIES | |||||||||||||||
| Earnings (Loss) Per Share | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| 13 weeks ended | 39 weeks ended | ||||||||||||||
| January 28, 2012 | January 29, 2011 | January 28, 2012 | January 29, 2011 | ||||||||||||
| Numerator for basic income (loss) per share: | |||||||||||||||
| Net income (loss) attributable to Barnes & Noble, Inc. | $ | 52,031 | 60,583 | $ | (11,138 | ) | (14,503 | ) | |||||||
| Accrual of preferred stock dividends | (3,963 | ) | - | (7,081 | ) | - | |||||||||
| Accretion of dividends on preferred stock | (316 | ) | - | (578 | ) | - | |||||||||
|
Less allocation of earnings and dividends to participating securities |
(2,735 | ) | (3,329 | ) | - | - | |||||||||
| Net income (loss) available to common shareholders | $ | 45,017 | 57,254 | $ | (18,797 | ) | (14,503 | ) | |||||||
| Numerator for diluted income (loss) per share: | |||||||||||||||
| Net income (loss) available to common shareholders | $ | 45,017 | 57,254 | $ | (18,797 | ) | (14,503 | ) | |||||||
| Accrual of preferred stock dividends | 3,963 | - | - | - | |||||||||||
| Accretion of dividends on preferred stock | 316 | - | - | - | |||||||||||
| Effect of dilutive options | 3 | 6 | - | - | |||||||||||
| Net income (loss) available to common shareholders | $ | 49,299 | 57,260 | $ | (18,797 | ) | (14,503 | ) | |||||||
| Denominator for basic income (loss) per share: | |||||||||||||||
| Basic weighted average common shares | 57,371 | 56,894 | 57,261 | 56,457 | |||||||||||
| Denominator for diluted income (loss) per share: | |||||||||||||||
| Basic weighted average common shares | 57,371 | 56,894 | 57,261 | 56,457 | |||||||||||
| Preferred shares | 12,000 | - | - | - | |||||||||||
| Average dilutive options | 76 | 142 | - | - | |||||||||||
| Diluted weighted average common shares | 69,447 | 57,036 | 57,261 | 56,457 | |||||||||||
| Basic income (loss) per common share | |||||||||||||||
|
Net income (loss) attributable to Barnes & Noble, Inc. available for common shareholders |
$ | 0.78 | 1.01 | $ | (0.33 | ) | (0.26 | ) | |||||||
| Diluted income (loss) per common share | |||||||||||||||
|
Net income (loss) attributable to Barnes & Noble, Inc. available for common shareholders |
$ | 0.71 | 1.00 | $ | (0.33 | ) | (0.26 | ) | |||||||