NEW YORK--(BUSINESS WIRE)--Barnes & Noble, Inc. (NYSE: BKS) today reported sales and earnings for its fiscal 2013 second quarter ended October 27, 2012.
Second quarter consolidated revenues were $1.9 billion, a decrease of 0.4% as compared to the prior year. Second quarter consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) increased 16% as compared to a year ago to $65 million. Consolidated second quarter net earnings attributable to Barnes & Noble were $2 million, as compared to a loss of $7 million in the prior year. Second quarter net losses attributable to Barnes & Noble were $0.04 per share, which includes the impact of the dividend on redeemable preferred shares, as compared to a loss of $0.17 per share a year ago.
"In addition to growing our EBITDA 16% during the quarter, the company also completed the formation of our promising NOOK Media subsidiary and closed our investment from Microsoft," said William Lynch, Chief Executive Officer of Barnes & Noble. "We expect our two highly acclaimed new NOOK products, and our Microsoft partnership on Windows 8 to further fuel the growth of our digital business, and are encouraged by the promising start to the holidays in our retail and digital businesses."
Second Quarter 2013 Results from Operations
Segment results for the fiscal 2013 and fiscal 2012 second quarters are as follows:
| Revenues | EBITDA | |||||||||||||||||||||||||
| $ in millions | Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
| Q2 2013 | Q2 2012 | $ | % | Q2 2013 | Q2 2012 | $ | % | |||||||||||||||||||
| Retail | $996.0 | $1,025.8 | ($29.8) | -2.9% | $28.4 | $14.1 | $14.3 | 101.5% | ||||||||||||||||||
| College | $773.0 | $769.7 | $3.4 | 0.4% | $87.8 | $92.8 | ($5.0) | -5.4% | ||||||||||||||||||
| NOOK | $160.3 | $151.8 | $8.5 | 5.6% | ($51.4) | ($50.8) | ($0.6) | -1.1% | ||||||||||||||||||
| Elimination (1) | ($44.9) | ($55.3) | $10.5 | -19.0% | n/a | n/a | n/a | n/a | ||||||||||||||||||
| Total | $1,884.5 | $1,892.0 | ($7.4) | -0.4% | $64.8 | $56.0 | $8.7 | 15.6% | ||||||||||||||||||
(1) Represents the elimination of intercompany sales from NOOK to Barnes & Noble Retail and Barnes & Noble College on a sell through basis.
Retail
The Retail segment, which consists of the Barnes & Noble bookstores and BN.com businesses, had revenues of $996 million for the quarter, decreasing approximately 3% over the prior year due to flat comparable store sales, store closures and lower BN.com sales. During the quarter, the company began to cycle against the favorable impact of the Borders liquidation a year ago. Core comparable bookstore sales, which exclude sales of NOOK products, increased 1.8% for the quarter as compared to the prior year.
Retail earnings before interest, taxes, depreciation and amortization (EBITDA) increased from $14 million to $28 million during the second quarter, a 101% increase, led by a higher mix of higher margin core products. In addition, the quarter also included the reversal of $4.7 million of accrued legal costs recorded in fiscal 2012, resulting from the final settlement of the litigation related to the company’s 2009 acquisition of Barnes & Noble College.
College
The College segment, which consists of the Barnes & Noble College bookstores business, had revenues of $773 million, increasing 0.4% as compared to a year ago, led by new store growth. Comparable College store sales decreased 0.5% for the quarter, as compared to the prior year period. 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.
College EBITDA decreased $5 million during the quarter as compared to a year ago to $88 million, resulting from a higher revenue deferral on increased textbook rental volumes and continued investments in digital education.
NOOK
The NOOK segment, which consists of the company’s digital business (including Readers, digital content and accessories), had revenues of $160 million for the quarter, increasing 6% as compared to a year ago. Digital content sales increased 38% for the second quarter over the second quarter in the prior year. Digital content sales are defined to include digital books, digital newsstand, and the apps business. The two new NOOK devices, NOOK HD and NOOK HD+, began shipping after the close of the company’s fiscal second quarter, and sales from the launch of those products will be reflected in the current fiscal third quarter and subsequent quarters.
NOOK EBITDA losses were essentially flat, increasing by 1% over the prior year to $51.4 million, as margin improvements were offset by higher investments primarily in product development and international expansion.
Holiday Results to Date
NOOK unit sales doubled over the four-day Black Friday weekend, across all channels, based on information provided by our channel partners on a sell-through basis compared to the similar period last year. The growth was driven by increased promotional activity at channel partners, particularly Walmart and Target. Retail Core comparable sales, which exclude sales of NOOK products, slightly declined over the holiday weekend, in-line with company expectations.
Conference Call
A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 10:00 A.M. ET on Thursday, November 29, 2012, and is accessible at www.barnesandnobleinc.com/webcasts.
Barnes & Noble, Inc. will report holiday sales on or about January 3, 2013.
About Barnes & Noble, Inc.
Barnes & Noble, Inc. (NYSE:BKS) is a Fortune 500 company and the leading retailer of content, digital media and educational products. The company operates 689 Barnes & Noble bookstores in 50 states, and one of the Web’s largest e-commerce sites, BN.com (www.bn.com). Its NOOK Media LLC subsidiary is a leader in the emerging digital reading and digital education markets. The NOOK digital business offers award-winning NOOK® products and an expansive collection of digital reading and entertainment content through the NOOK Store™ (www.nook.com), while Barnes & Noble College Booksellers, LLC operates 674 bookstores serving over 4.6 million students and faculty members at colleges and universities across the United States. Barnes & Noble is proud to be named a J.D. Power and Associated 2012 Customer Service Champion and is only one of 50 U.S. companies so named. Barnes & Noble.com is ranked the number one online retailer in customer satisfaction in the book, music and video category and a Top 10 online retailer overall in customer satisfaction according to ForeSee E-Retail Satisfaction Index (Spring Top 100 Edition).
General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate website: www.barnesandnobleinc.com.
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 risk that the transactions with Microsoft do not achieve the expected benefits for the parties including the risk that NOOK Media LLC’s applications are not commercially successful or that the expected distribution of those applications is not achieved, the risk that any subsequent spin-off, split-off or other disposition by Barnes & Noble of its interest in NOOK Media LLC results in adverse impacts on Barnes & Noble or NOOK Media LLC (including as a result of termination of agreements and other adverse impacts), the potential impact on Barnes & Noble’s retail business of the separation, the potential tax consequences for Barnes & Noble and its shareholders of a subsequent spin-off, split-off or other disposition by Barnes & Noble of its interest in NOOK Media LLC, the risk that the international expansion contemplated by the relationship or otherwise is not successful or is delayed, the risk that NOOK Media LLC is not able to perform its obligations under the commercial agreement, including with respect to the development of applications and international expansion, and the consequences thereof, the costs and disruptions arising out of any such separation of the NOOK digital and College businesses, the risk that Barnes & Noble may not recoup its investments in the NOOK digital business as part of any separation transaction, the risks, difficulties, and uncertainties that may result from the separation of businesses that were previously co-mingled including necessary ongoing relationships, and potential for adverse customer impacts 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.
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BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) |
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| 13 weeks ended | 13 weeks ended | 26 weeks ended | 26 weeks ended | ||||||||||||
| October 27, 2012 | October 29, 2011 | October 27, 2012 | October 29, 2011 | ||||||||||||
| Sales | $ | 1,884,532 | 1,891,961 | $ | 3,338,039 | 3,310,365 | |||||||||
| Cost of sales and occupancy | 1,404,034 | 1,420,297 | 2,443,653 | 2,451,143 | |||||||||||
| Gross profit | 480,498 | 471,664 | 894,386 | 859,222 | |||||||||||
| Selling and administrative expenses | 415,747 | 415,632 | 825,802 | 826,750 | |||||||||||
| Depreciation and amortization | 57,613 | 57,755 | 115,648 | 113,427 | |||||||||||
| Operating income (loss) | 7,138 | (1,723) | (47,064) | (80,955) | |||||||||||
| Interest expense, net | 8,122 | 8,460 | 17,064 | 17,901 | |||||||||||
| Income (loss) before taxes | (984) | (10,183) | (64,128) | (98,856) | |||||||||||
| Income taxes | (409) | (3,620) | (22,573) | (35,687) | |||||||||||
| Net income (loss) | (575) | (6,563) | (41,555) | (63,169) | |||||||||||
| Net loss attributable to noncontrolling interests | 2,808 | - | 2,808 | - | |||||||||||
| Net income (loss) attributable to Barnes & Noble, Inc. | $ | 2,233 | (6,563) | $ | (38,747) | (63,169) | |||||||||
| Basic loss per common share: | |||||||||||||||
| Loss attributable to Barnes & Noble, Inc. available | |||||||||||||||
| for common shareholders | $ | (0.04) | (0.17) | $ | (0.82) | (1.16) | |||||||||
| Diluted loss per common share: | |||||||||||||||
| Loss attributable to Barnes & Noble, Inc. available | |||||||||||||||
| for common shareholders | $ | (0.04) | (0.17) | $ | (0.82) | (1.16) | |||||||||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic | 58,168 | 57,261 | 58,094 | 57,207 | |||||||||||
| Diluted | 58,168 | 57,261 | 58,094 | 57,207 | |||||||||||
| Percentage of sales: | |||||||||||||||
| Sales | 100.0% | 100.0% | 100.0% | 100.0% | |||||||||||
| Cost of sales and occupancy | 74.5% | 75.1% | 73.2% | 74.0% | |||||||||||
| Gross profit | 25.5% | 24.9% | 26.8% | 26.0% | |||||||||||
| Selling and administrative expenses | 22.1% | 22.0% | 24.7% | 25.0% | |||||||||||
| Depreciation and amortization | 3.1% | 3.1% | 3.5% | 3.4% | |||||||||||
| Operating income (loss) | 0.4% | -0.1% | -1.4% | -2.4% | |||||||||||
| Interest expense, net | 0.4% | 0.4% | 0.5% | 0.5% | |||||||||||
| Income (loss) before taxes | -0.1% | -0.5% | -1.9% | -3.0% | |||||||||||
| Income taxes | 0.0% | -0.2% | -0.7% | -1.1% | |||||||||||
| Net income (loss) | 0.0% | -0.3% | -1.2% | -1.9% | |||||||||||
| Net loss attributable to noncontrolling interests | 0.1% | 0.0% | 0.1% | 0.0% | |||||||||||
| Net income (loss) | 0.1% | -0.3% | -1.2% | -1.9% | |||||||||||
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BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) |
|||||||||
| October 27, 2012 | October 29, 2011 | ||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 470,994 | $ | 23,633 | |||||
| Receivables, net | 224,545 | 240,600 | |||||||
| Merchandise inventories | 1,796,208 | 1,836,740 | |||||||
| Prepaid expenses and other current assets | 223,325 | 180,352 | |||||||
| Total current assets | 2,715,072 | 2,281,325 | |||||||
| Property and equipment: | |||||||||
| Land and land improvements | 2,541 | 8,617 | |||||||
| Buildings and leasehold improvements | 1,211,156 | 1,220,869 | |||||||
| Fixtures and equipment | 1,833,667 | 1,725,135 | |||||||
| 3,047,364 | 2,954,621 | ||||||||
| Less accumulated depreciation and amortization | 2,462,310 | 2,280,551 | |||||||
| Net property and equipment | 585,054 | 674,070 | |||||||
| Goodwill | 515,524 | 521,899 | |||||||
| Intangible assets, net | 558,157 | 574,964 | |||||||
| Other noncurrent assets | 57,218 | 55,794 | |||||||
| Total assets | $ | 4,431,025 | $ | 4,108,052 | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 1,448,397 | $ | 1,461,981 | |||||
| Accrued liabilities | 470,975 | 436,868 | |||||||
| Gift card liabilities | 297,191 | 287,268 | |||||||
| Total current liabilities | 2,216,563 | 2,186,117 | |||||||
| Long-term debt | 338,400 | 274,900 | |||||||
| Long-term deferred taxes | 292,879 | 275,868 | |||||||
| Other long-term liabilities | 364,966 | 418,923 | |||||||
| Redeemable Preferred Shares; $.001 par value; 5,000 | |||||||||
| shares authorized; 204 and 204 shares issued, respectively | 192,904 | 191,681 | |||||||
| Preferred Member Interests in NOOK Media, LLC | 289,054 | - | |||||||
| Shareholders' equity: | |||||||||
| Common stock; $.001 par value; 300,000 shares | |||||||||
| authorized; 92,037 and 90,856 shares issued, respectively | 92 | 91 | |||||||
| Additional paid-in capital | 1,377,992 | 1,331,983 | |||||||
| Accumulated other comprehensive loss | (16,635) | (11,630) | |||||||
| Retained earnings | 434,174 | 495,830 | |||||||
| Treasury stock, at cost, 33,801 and 33,527 shares, respectively | (1,059,364) | (1,055,711) | |||||||
| Total shareholders' equity | 736,259 | 760,563 | |||||||
| Commitments and contingencies | - | - | |||||||
| Total liabilities and shareholders' equity | $ | 4,431,025 | $ | 4,108,052 | |||||
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BARNES & NOBLE, INC. AND SUBSIDIARIES Segment Information (In thousands) |
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| 13 weeks ended | 13 weeks ended | 26 weeks ended | 26 weeks ended | ||||||||||
| October 27, 2012 | October 29, 2011 | October 27, 2012 | October 29, 2011 | ||||||||||
| Sales | |||||||||||||
| Retail | $ | 996,028 | 1,025,802 | $ | 2,115,415 | 2,123,054 | |||||||
| College | 773,007 | 769,650 | 993,725 | 990,144 | |||||||||
| NOOK | 160,347 | 151,847 | 352,322 | 343,259 | |||||||||
| Elimination | (44,850) | (55,338) | (123,423) | (146,092) | |||||||||
| Total | $ | 1,884,532 | 1,891,961 | $ | 3,338,039 | 3,310,365 | |||||||
| Gross Profit | |||||||||||||
| Retail | $ | 293,362 | 290,490 | $ | 630,099 | 600,939 | |||||||
| College | 168,221 | 167,691 | 219,263 | 218,863 | |||||||||
| NOOK | 18,915 | 13,483 | 45,024 | 39,420 | |||||||||
| Total | $ | 480,498 | 471,664 | $ | 894,386 | 859,222 | |||||||
| Selling and Administrative Expenses | |||||||||||||
| Retail | $ | 264,974 | 276,401 | $ | 527,150 | 547,154 | |||||||
| College | 80,434 | 74,900 | 145,508 | 138,276 | |||||||||
| NOOK | 70,339 | 64,331 | 153,144 | 141,320 | |||||||||
| Total | $ | 415,747 | 415,632 | $ | 825,802 | 826,750 | |||||||
| EBITDA | |||||||||||||
| Retail | $ | 28,388 | 14,089 | $ | 102,949 | 53,785 | |||||||
| College | 87,787 | 92,791 | 73,755 | 80,587 | |||||||||
| NOOK | (51,424) | (50,848) | (108,120) | (101,900) | |||||||||
| Total | $ | 64,751 | 56,032 | $ | 68,584 | 32,472 | |||||||
| Net Loss | |||||||||||||
| EBITDA | $ | 64,751 | 56,032 | $ | 68,584 | 32,472 | |||||||
| Depreciation and Amortization | (57,613) | (57,755) | (115,648) | (113,427) | |||||||||
| Interest Expense, net | (8,122) | (8,460) | (17,064) | (17,901) | |||||||||
| Income Taxes | 409 | 3,620 | 22,573 | 35,687 | |||||||||
| Total | $ | (575) | (6,563) | $ | (41,555) | (63,169) | |||||||
| Percentage of sales: | |||||||||||||
| Gross Margin | |||||||||||||
| Retail | 29.5% | 28.3% | 29.8% | 28.3% | |||||||||
| College | 21.8% | 21.8% | 22.1% | 22.1% | |||||||||
| NOOK | 16.4% | 14.0% | 19.7% | 20.0% | |||||||||
| Total | 25.5% | 24.9% | 26.8% | 26.0% | |||||||||
| Selling and Administrative Expenses | |||||||||||||
| Retail | 26.6% | 26.9% | 24.9% | 25.8% | |||||||||
| College | 10.4% | 9.7% | 14.6% | 14.0% | |||||||||
| NOOK | 60.9% | 66.7% | 66.9% | 71.7% | |||||||||
| Total | 22.1% | 22.0% | 24.7% | 25.0% | |||||||||
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BARNES & NOBLE, INC. AND SUBSIDIARIES Loss Per Share (In thousands, except per share data) |
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| 13 weeks ended | 26 weeks ended | |||||||||||||||||||||||
| October 27, 2012 | October 29, 2011 | October 27, 2012 | October 29, 2011 | |||||||||||||||||||||
| Numerator for basic loss per share: | ||||||||||||||||||||||||
| Income (loss) attributable to Barnes & Noble, Inc. | $ | 2,233 | (6,563) | $ | (38,747) | (63,169) | ||||||||||||||||||
| Preferred stock dividends | (3,942) | (3,118) | (7,883) | (3,118) | ||||||||||||||||||||
| Accretion of dividends on preferred stock | (453) | (262) | (769) | (262) | ||||||||||||||||||||
| Net loss available to common shareholders | $ | (2,162) | (9,943) | $ | (47,399) | (66,549) | ||||||||||||||||||
| Numerator for diluted loss per share: | ||||||||||||||||||||||||
| Net loss available to common shareholders | $ | (2,162) | (9,943) | $ | (47,399) | (66,549) | ||||||||||||||||||
| Denominator for basic and diluted loss per share: | ||||||||||||||||||||||||
| Basic weighted average common shares | 58,168 | 57,261 | 58,094 | 57,207 | ||||||||||||||||||||
| Basic loss per common share | ||||||||||||||||||||||||
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Net loss attributable to Barnes & Noble, Inc. available for common shareholders |
$ | (0.04) | (0.17) | $ | (0.82) | (1.16) | ||||||||||||||||||
| Diluted loss per common share | ||||||||||||||||||||||||
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Net loss attributable to Barnes & Noble, Inc. available for common shareholders |
$ | (0.04) | (0.17) | $ | (0.82) | (1.16) | ||||||||||||||||||