-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NMltb7nZkyqVCjzbhlj4qy6btYkGCQM9qBEk5toppfm/WlY9NIoYhoon7ZXxhFUe x2tSnOsEzlYF24sr/CQ+lg== 0001157523-05-002613.txt : 20050317 0001157523-05-002613.hdr.sgml : 20050317 20050317095709 ACCESSION NUMBER: 0001157523-05-002613 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050317 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050317 DATE AS OF CHANGE: 20050317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARNES & NOBLE INC CENTRAL INDEX KEY: 0000890491 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 061196501 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12302 FILM NUMBER: 05687586 BUSINESS ADDRESS: STREET 1: 122 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10011 BUSINESS PHONE: 2126333300 MAIL ADDRESS: STREET 1: 122 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10011 8-K 1 a4845482.txt BARNES & NOBLE 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) March 17, 2005 ------------------------------- BARNES & NOBLE, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-12302 06-1196501 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 122 Fifth Avenue, New York, NY 10011 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (212) 633-3300 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition On March 17, 2005, Barnes & Noble, Inc. (the "Company") issued a press release announcing its financial results for the fourth quarter and full year ended January 29, 2005. A copy of this press release is attached hereto as Exhibit 99.1. The information in this Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. Use of Non-GAAP Financial Information To supplement the Company's consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), in the press release attached hereto as Exhibit 99.1 the Company uses the non-GAAP financial measure of EBITDA (defined by the Company as operating profit before depreciation and amortization) for the 13 and 52 weeks ended January 29, 2005 and January 31, 2004. Additionally, following the Company's acquisition of Bertelsmann AG's interest in barnesandnoble.com inc. ("B&N.com") on September 15, 2003, the Company consolidated the results of B&N.com. Accordingly, the Company is disclosing in the press release attached hereto as Exhibit 99.1 pro forma results as if the Company consolidated B&N.com for all of fiscal 2003. Furthermore, in the press release attached hereto as Exhibit 99.1, the Company provides certain financial results which exclude the one-time charge relating to the redemption of its convertible subordinated notes. This one-time charge was to write-off the unamortized portion of the deferred financing fees from the issuance of the notes and for payment of the redemption premium. The Company's management reviews these non-GAAP measures internally to evaluate the Company's performance and manage its operations. In addition, since the Company has historically provided EBITDA results to the investment community, the Company believes that the inclusion of EBITDA results provides a consistent and comparable measure to help investors understand the Company's operating results. Furthermore, since the Company will consolidate B&N.com on a going forward basis, the Company believes that pro forma results (as if the Company consolidated B&N.com) provide investors a better understanding of the Company's current operating results and provide a comparable measure to help investors understand the Company's future operating results. The Company has also provided certain financial results which exclude a one-time charge relating to the redemption of its convertible subordinated notes because the Company believes that such information also provides investors a better understanding of the Company's current operating results and provides a comparable measure to help investors understand the Company's future operating results. The non-GAAP measures included in the press release attached hereto as Exhibit 99.1 have been reconciled to the comparable GAAP measure as required under SEC rules regarding the use of non-GAAP financial measures. The Company urges investors to carefully review the GAAP financial information included as part of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and quarterly earnings releases. Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review (a) As disclosed in the press release attached hereto as Exhibit 99.1, in light of the recent SEC clarification on lease accounting and after discussions with the Company's independent registered public accounting firm, BDO Seidman, LLP, the Company has re-evaluated its lease accounting practices. Although amounts involved in correcting the Company's method of accounting for lease transactions are not material to any one year, the Company has decided to restate prior year financial statements to correct errors resulting from its prior method of accounting for lease transactions. Like many other public companies, the Company will correct the way it accounts for its leases, specifically the accounting for tenant allowances and rent holidays (store build-out period). Management and the Board of Directors of the Company concluded on March 10, 2005 that the Company's financial statements for the fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002 (fiscal years 2003, 2002 and 2001) and for the first three interim quarters of the fiscal year ended January 29, 2005 (fiscal 2004) should be restated to correct its accounting for leases, and that such previously filed financial statements should no longer be relied upon. Management discussed these matters with BDO Seidman, LLP. Consistent with common retail industry practice, the Company had previously classified tenant allowances received as a result of store openings as a reduction in capital expenditures. The Company has reclassified tenant allowances received from a reduction of depreciation expense to a reduction of rent expense. As a result, the Company has increased gross margins and increased depreciation expense by $32.1 million, $28.7 million and $24.5 million, respectively, in fiscal years 2003, 2002 and 2001. On the balance sheet, the Company has increased net property and equipment, and increased other long-term liabilities by $225.0 million and $227.4 million to reflect the aggregate amount of all unamortized tenant allowances received as of January 31, 2004 and February 1, 2003, respectively. There is no earnings impact due to this reclassification. In addition, the Company had recognized the straight line expense for leases beginning on the commencement date of the lease, which had the effect of excluding the construction period of its stores from the calculation of the period over which it expenses rent. In order to correct the straight line rent expense to include the store build-out period, the Company has decreased net income for prior fiscal years by an aggregate amount of approximately $18.6 million, $0.7 million relating to fiscal years 2003, 2002 and 2001, and $17.9 million which represents the cumulative effect relating to periods prior to fiscal year 2001. Earnings per share for fiscal years 2003, 2002 and 2001 decreased by approximately $0.00, $0.01 and $0.00, respectively and prior interim results for the nine months ended October 30, 2004, decreased by approximately $0.00. The impact on future years' earnings is not expected to be material. The related balance sheet impact of this restatement was to increase other long-term liabilities by $31.7 million and $31.6 million, and increase long-term deferred income tax assets by $13.2 million and $13.1 million, as of January 31, 2004 and February 1, 2003, respectively. Item 9.01 Financial Statements and Exhibits (c) Exhibits 99.1 Press Release of Barnes & Noble, Inc., dated March 17, 2005. SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BARNES & NOBLE, INC. (Registrant) By: /s/ Joseph J. Lombardi ------------------------------- Joseph J. Lombardi Chief Financial Officer Date: March 17, 2005 Barnes & Noble, Inc. EXHIBIT INDEX Exhibit Number Description - -------------- ----------- 99.1 Press Release of Barnes & Noble, Inc., dated March 17, 2005. EX-99.1 2 a4845482ex991.txt PRESS RELEASE Exhibit 99.1 Barnes & Noble Reports 2004 Results: Full-Year Comparable Store Sales Increased 3.1%; EPS In-Line with Guidance; Issues 2005 Guidance NEW YORK--(BUSINESS WIRE)--March 17, 2005--Barnes & Noble, Inc. (NYSE:BKS), the world's largest bookseller, today reported sales and earnings for the fourth quarter and for the full-year ended January 29, 2005. 2004 RESULTS Barnes & Noble store sales were $1.4 billion for the quarter and $4.1 billion for the year, increasing 5% and 7%, respectively, over the prior year periods. Comparable store sales increased 1.7% for the fourth quarter and 3.1% for the year. The company opened 32 new Barnes & Noble stores for the year and closed 13 locations ending the year with 666 stores. B. Dalton sales, which comprise approximately 4% of total bookstore sales, were $60.9 million for the quarter, a decrease of (24%) over the prior year, and $176.5 million for the year, a decrease of (20%) over 2003, due primarily to the closing of 41 stores. The company operated 154 B. Dalton stores at year-end. Comparable store sales decreased (3.2%) for the fourth quarter and decreased (2.2%) for the year. Fourth quarter earnings per share for retail bookstores were $1.51, an increase of 8% over the prior year. Full-year 2004 earnings per share for retail bookstores increased 18% to $2.07, against a 15% increase in 2003. Barnes & Noble.com's sales were $151.5 million and $419.8 million for the fourth quarter and full year, respectively. Barnes & Noble.com's fourth-quarter earnings were $0.01 per share. Full year losses of ($0.28) per share were an 18% improvement over the prior year, against a 39% improvement in 2003. On November 12, 2004, Barnes & Noble, Inc. completed its tax-free spin-off of GameStop Corp. to Barnes & Noble, Inc. stockholders. Due to the spin-off, Barnes & Noble, Inc. is no longer consolidating GameStop's financial results and has reflected GameStop's results on a discontinued operations line on the company's financial statements. Barnes & Noble, Inc.'s share of GameStop's net earnings, for the periods prior to the spin-off, was $0.04 per share during the fourth quarter and $0.25 per share for the full-year. Consolidated net earnings from continuing operations for the fourth quarter increased 7% to $112.3 million or $1.52 per share. Consolidated net earnings for the year from continuing operations, excluding the debt redemption charge of $14.6 million, increased 18% to $131.7 million. Earnings per share for the year from continuing operations, excluding the debt redemption charge of ($0.11), was $1.79 per share, compared to pro-forma earnings per share of $1.41, an increase of 27% over the prior year. "Barnes & Noble generated a significant amount of value for its shareholders in 2004," said Steve Riggio, chief executive officer of Barnes & Noble, Inc. "Using its strong free cash flow, the company completed the Barnes & Noble.com merger and began construction on its new 1.1 million square foot distribution center. The company redeemed its $300 million convertible notes resulting in a reduction of approximately 9 million dilutive shares. Barnes & Noble distributed over $500 million of GameStop stock directly to its shareholders through a tax-free spin-off. And most importantly, shareholder value was enhanced by another year of double-digit earnings growth of the core book business." LEASE RELATED ACCOUNTING ADJUSTMENTS In light of a recent SEC clarification, the company has re-evaluated its lease accounting practices. Like many other companies within the retail industry that are correcting commonly accepted lease accounting practices, the company has changed the way it accounts for its leases, including the accounting for tenant allowances and rent holidays (store build-out period). Consistent with common retail industry practice, the company had classified tenant allowances received as a result of store openings as a reduction in capital expenditures. The company has reclassified tenant allowances received from a reduction of depreciation expense to a reduction of rent expense. As a result, the company has increased gross margins and increased depreciation expense by $34 million in fiscal year 2004. On the balance sheet the company has increased net property and equipment, and increased other long-term liabilities by $223 million to reflect the aggregate amount of all unamortized tenant allowances received. There is no earnings impact due to this reclassification. In addition, consistent with common industry practice, the company had recognized the straight line expense for leases beginning on the commencement date of the lease, which had the effect of excluding the construction period of its stores from the calculation of the period over which it expenses rent. In order to correct the straight line rent expense to include the store build-out period, the company has decreased net income on an after-tax basis for fiscal year 2004 by $472,000, or $0.01 per share. The company has reduced net income for prior fiscal years by an aggregate amount of $18.6 million, $17.9 million of which relates to periods prior to fiscal year 2001. This change is expected to be immaterial to fiscal year 2005 annual earnings. These adjustments will have no impact on cash flows, revenues and comparable store sales. GUIDANCE FOR 2005 For the first quarter, the company expects comparable store sales at Barnes & Noble stores to be in the low single digits, and for the full year comparable store sales are expected to increase approximately 3%. Sales at Barnes & Noble.com are expected to increase at similar levels. Barnes & Noble, Inc.'s first quarter earnings per share are expected to be in a range of $0.11 to $0.13, and for the full year earnings per share are expected to be in a range of $1.94 to $1.98. Included in the company's guidance are expense redundancies related to the conversion and transition plan for the company's new distribution center. The company has forecast a $0.08 per share impact for the costs associated with these redundancies. Excluding these costs, the company's 2005 earnings per share guidance reflects an increase of 13% to 15%. The company has decided to adopt Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based Payment," and begin expensing stock options as of the beginning of fiscal year 2005. As a result of this accounting change, the company expects to realize additional expenses of approximately $0.04 per share in the first quarter and $0.14 per share for the full year. For comparative purposes, the charge for adopting SFAS 123R has not been incorporated into guidance. A conference call with Barnes & Noble, Inc.'s senior management will be webcast beginning at 11 A.M. ET on Thursday, March 17, 2005, and is accessible at www.barnesandnobleinc.com/webcasts. The call will be archived at www.fulldisclosure.com for one year. Barnes & Noble, Inc. will report first-quarter earnings on or about May 19, 2005. ABOUT BARNES & NOBLE, INC. Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller and a Fortune 500 company, operates 820 bookstores in 50 states. For the third 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 brand among e-commerce companies, according to the latest EquiTrend survey. In addition to its retail operations, Barnes & Noble is one of the largest book publishers in the world. Its subsidiary, Sterling Publishing, publishes over 1,100 new titles a year and has an active list of over 5,000 titles. 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 Fourth Quarter Summary ($ in millions, except per share amounts) 13 weeks ended 52 weeks ended --------------- --------------- January January January January 29, 31, 29, 31, 2005 2004 2005 2004 --------------- --------------- Sales Barnes & Noble Bookstores $1,521 1,454 4,454 4,221 Barnes & Noble.com (a) 152 133 420 151 ------- ------- ------- ------- Total Book operating segment 1,673 1,587 4,874 4,372 Operating profit (loss) Barnes & Noble Bookstores 204 194 279 233 Barnes & Noble.com (a) - (5) (35) (7) ------- ------- ------- ------- Total Book operating segment 204 189 244 226 Depreciation and amortization Barnes & Noble Bookstores 40 39 158 160 Barnes & Noble.com (a) 5 6 24 7 ------- ------- ------- ------- Total Book operating segment 45 45 182 167 EBITDA (Operating profit (loss) + depreciation and amortization) Barnes & Noble Bookstores 244 233 437 393 Barnes & Noble.com (a) 5 1 (11) - ------- ------- ------- ------- Total Book operating segment 249 234 426 393 EPS Barnes & Noble Bookstores 1.51 1.40 2.07 1.75 Barnes & Noble.com (a) 0.01 (0.05) (0.28) (0.18) ------- ------- ------- ------- Total Book operating segment 1.52 1.35 1.79 1.57 Debt redemption charge (b) - - (0.11) - ------- ------- ------- ------- EPS from continuing operations 1.52 1.35 1.68 1.57 Discontinued operations - GameStop 0.04 0.30 0.25 0.50 ------- ------- ------- ------- Consolidated GAAP EPS $1.56 1.65 1.93 2.07 ------- ------- ------- ------- Weighted average shares outstanding 73,960 79,514 75,696 77,105 (a) Results for Barnes & Noble.com have been accounted for under the equity method through September 15, 2003, and consolidated thereafter. (b) One-time charge of $14.6 million associated with the redemption of the convertible notes on June 28, 2004. BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Operations (thousands of dollars, except per share data) - ---------------------------------------------------------------------- 13 weeks ended 52 weeks ended ----------------------- ----------------------- January 29, January 31, January 29, January 31, 2005 2004 2005 2004 ----------------------- ----------------------- Sales $1,672,772 1,586,715 4,873,595 4,372,177 Cost of sales and occupancy(a)(b) 1,126,963 1,076,559 3,386,619 3,060,462 ----------- ----------- ----------- ----------- Gross profit 545,809 510,156 1,486,976 1,311,715 ----------- ----------- ----------- ----------- Selling and administrative expenses 295,630 275,096 1,052,345 910,448 Depreciation and amortization(a) 44,601 45,040 181,553 166,825 Pre-opening expenses(b) 1,868 1,460 8,862 8,668 ----------- ----------- ----------- ----------- Operating profit 203,710 188,560 244,216 225,774 Interest expense, net (670) (5,513) (11,028) (20,944) Debt redemption charge - - (14,582) - Equity in net loss of Barnes & Noble.com - - - (14,311) ----------- ----------- ----------- ----------- Income before taxes and minority interest 203,040 183,047 218,606 190,519 Income taxes 87,667 75,810 94,001 78,779 ----------- ----------- ----------- ----------- Income before minority interest 115,373 107,237 124,605 111,740 Minority interest (3,076) (2,390) (1,230) (536) ----------- ----------- ----------- ----------- Income from continuing operations 112,297 104,847 123,375 111,204 Income from discontinued operations (net of income tax) 3,331 25,343 20,001 40,571 ----------- ----------- ----------- ----------- Net income $115,628 130,190 143,376 151,775 =========== =========== =========== =========== Basic income per common share: Income from continuing operations $1.60 1.55 1.79 1.69 Income from discontinued operations $0.05 0.38 0.29 0.61 ----------- ----------- ----------- ----------- Net income $1.65 1.93 2.08 2.30 =========== =========== =========== =========== Diluted income per common share: Income from continuing operations $1.52 1.35 1.68 1.57 Income from discontinued operations 0.04 0.30 0.25 0.50 ----------- ----------- ----------- ----------- Net income $1.56 1.65 1.93 2.07 =========== =========== =========== =========== Weighted average common shares outstanding Basic 69,894,000 67,575,000 69,018,000 65,989,000 Diluted 73,960,000 79,514,000 75,696,000 77,105,000 Percentage of sales: Sales 100.0% 100.0% 100.0% 100.0% Cost of sales and occupancy 67.4% 67.8% 69.5% 70.0% ----------- ----------- ----------- ----------- Gross profit 32.6% 32.2% 30.5% 30.0% ----------- ----------- ----------- ----------- Selling and administrative expenses 17.7% 17.3% 21.6% 20.8% Depreciation and amortization 2.7% 2.8% 3.7% 3.8% Pre-opening expenses 0.1% 0.1% 0.2% 0.2% ----------- ----------- ----------- ----------- Operating profit 12.2% 11.9% 5.0% 5.2% Interest expense, net 0.0% -0.3% -0.2% -0.5% Debt redemption charge 0.0% 0.0% -0.3% 0.0% Equity in net loss of Barnes & Noble.com 0.0% 0.0% 0.0% -0.3% ----------- ----------- ----------- ----------- Income before taxes and minority interest 12.1% 11.5% 4.5% 4.4% Income taxes 5.2% 4.8% 1.9% 1.8% ----------- ----------- ----------- ----------- Income before minority interest 6.9% 6.8% 2.6% 2.6% Minority interest -0.2% -0.2% 0.0% 0.0% ----------- ----------- ----------- ----------- Income from continuing operations 6.7% 6.6% 2.5% 2.5% =========== =========== =========== =========== (a) Reflects the reclassification of tenant allowances from a reduction in depreciation expense to a reduction in occupancy expense for all periods. (b) Reflects the reclassification and restatement of rent holiday (store build-out period) to reduce occupancy expense and increase pre-opening expense for all periods. BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (thousands of dollars, except per share data) - ---------------------------------------------------------------------- January January 29, 2005 31, 2004 ----------- ---------- ASSETS Current assets: Cash and cash equivalents $535,652 282,295 Receivables, net 74,640 50,966 Barnes & Noble.com receivable - - Merchandise inventories 1,274,578 1,289,807 Prepaid expenses and other current assets 88,379 103,929 Current assets of discontinued operations - 459,996 ----------- ---------- Total current assets 1,973,249 2,186,993 ----------- ---------- Property and equipment: Land and land improvements 3,247 3,247 Buildings and leasehold improvements(a) 940,616 873,706 Fixtures and equipment 1,081,966 1,001,557 ----------- ---------- 2,025,829 1,878,510 Less accumulated depreciation and amortization 1,221,169 1,070,934 ----------- ---------- Net property and equipment 804,660 807,576 ----------- ---------- Goodwill 268,379 175,776 Intangible assets, net 97,538 94,574 Deferred taxes 169,585 126,230 Other noncurrent assets 37,710 22,023 Noncurrent assets of discontinued operations - 438,815 ----------- ---------- Total assets $3,351,121 3,851,987 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $745,073 639,939 Accrued liabilities 584,493 524,116 Current liabilities of discontinued operations - 271,292 ----------- ---------- Total current liabilities 1,329,566 1,435,347 ----------- ---------- Long-term debt 245,000 300,000 Deferred income taxes 239,352 265,402 Other long-term liabilities(a) 362,319 361,931 Noncurrent liabilities of discontinued operations - 228,418 Minority interest 8,942 19,815 Shareholders' equity: Common stock; $.001 par value; 300,000,000 shares authorized; 79,276,057 and 76,854,856 shares issued, respectively 79 77 Additional paid-in capital 983,837 914,319 Accumulated other comprehensive loss (9,857) (8,579) Retained earnings 387,906 524,918 Treasury stock, at cost, 9,007,700 and 8,807,700 shares, respectively (196,023) (189,661) ----------- ---------- Total shareholders' equity 1,165,942 1,241,074 ----------- ---------- Commitments and contingencies - - ----------- ---------- Total liabilities and shareholders' equity $3,351,121 3,851,987 =========== ========== (a) Reflects the reclassification of tenant allowances for all periods. BARNES & NOBLE, INC. AND SUBSIDIARIES Fourth Quarter Summary Pro Forma as if the Company Owned 100% of Barnes & Noble.com at the Beginning of Fiscal 2003 ($ in millions, except per share amounts) 13 weeks ended 52 weeks ended --------------- --------------- January January January January 29, 31, 29, 31, 2005 2004 2005 2004 --------------- --------------- Sales Barnes & Noble Bookstores $1,521 1,454 4,454 4,221 Barnes & Noble.com (a) 152 152 420 428 ------- ------- ------- ------- Total Book operating segment 1,673 1,606 4,874 4,649 Operating profit (loss) Barnes & Noble Bookstores 204 194 279 233 Barnes & Noble.com (a) - (3) (35) (44) ------- ------- ------- ------- Total Book operating segment 204 191 244 189 Depreciation and amortization Barnes & Noble Bookstores 40 39 158 160 Barnes & Noble.com (a) 5 6 24 25 ------- ------- ------- ------- Total Book operating segment 45 45 182 185 EBITDA (Operating profit (loss) + depreciation and amortization) Barnes & Noble Bookstores 244 233 437 393 Barnes & Noble.com (a) 5 3 (11) (19) ------- ------- ------- ------- Total Book operating segment 249 236 426 374 EPS Barnes & Noble Bookstores 1.51 1.40 2.07 1.75 Barnes & Noble.com (a) 0.01 (0.02) (0.28) (0.34) ------- ------- ------- ------- Total Book operating segment 1.52 1.38 1.79 1.41 Debt redemption charge (b) - - (0.11) - ------- ------- ------- ------- EPS from continuing operations 1.52 1.38 1.68 1.41 Discontinued operations - GameStop 0.04 0.30 0.25 0.50 ------- ------- ------- ------- Consolidated GAAP EPS $1.56 1.68 1.93 1.91 ------- ------- ------- ------- Weighted average shares outstanding 73,960 79,514 75,696 77,105 (a) For pro forma purposes only, the company has included 100% of the results of Barnes & Noble.com for all periods. (b) One-time charge of $14.6 million associated with the redemption of the convertible notes on June 28, 2004. BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Operations Pro Forma as if the Company Owned 100% of Barnes & Noble.com at the Beginning of Fiscal 2003 (thousands of dollars, except per share data) - ---------------------------------------------------------------------- 13 weeks ended 52 weeks ended ----------------------- ----------------------- January 29, January 31, January 29, January 31, 2005 2004 2005 2004 ----------------------- ----------------------- Sales $1,672,772 1,606,011 4,873,595 4,649,000 Cost of sales and occupancy(a)(b) 1,126,963 1,091,404 3,386,619 3,276,713 ----------- ----------- ----------- ----------- Gross profit 545,809 514,607 1,486,976 1,372,287 ----------- ----------- ----------- ----------- Selling and administrative expenses 295,630 277,269 1,052,345 989,155 Depreciation and amortization(a) 44,601 44,806 181,553 185,293 Pre-opening expenses(b) 1,868 1,460 8,862 8,668 ----------- ----------- ----------- ----------- Operating profit 203,710 191,072 244,216 189,171 Interest expense, net (670) (5,486) (11,028) (20,817) Debt redemption charge - - (14,582) - ----------- ----------- ----------- ----------- Income before taxes and minority interest 203,040 185,586 218,606 168,354 Income taxes 87,667 76,359 94,001 69,001 ----------- ----------- ----------- ----------- Income before minority interest 115,373 109,227 124,605 99,353 Minority interest (3,076) (2,391) (1,230) (537) ----------- ----------- ----------- ----------- Income from continuing operations 112,297 106,836 123,375 98,816 Income from discontinued operations (net of income tax) 3,331 25,343 20,001 40,571 ----------- ----------- ----------- ----------- Net income $115,628 132,179 143,376 139,387 =========== =========== =========== =========== Basic income per common share: Income from continuing operations $1.60 1.58 1.79 1.50 Income from discontinued operations 0.05 0.38 0.29 0.61 ----------- ----------- ----------- ----------- Net income $1.65 1.96 2.08 2.11 =========== =========== =========== =========== Diluted income per common share: Income from continuing operations $1.52 1.38 1.68 1.41 Income from discontinued operations 0.04 0.30 0.25 0.50 ----------- ----------- ----------- ----------- Net income $1.56 1.68 1.93 1.91 =========== =========== =========== =========== Weighted average common shares outstanding Basic 69,894,000 67,575,000 69,018,000 65,989,000 Diluted 73,960,000 79,514,000 75,696,000 77,105,000 Percentage of sales: Sales 100.0% 100.0% 100.0% 100.0% Cost of sales and occupancy 67.4% 68.0% 69.5% 70.5% ----------- ----------- ----------- ----------- Gross profit 32.6% 32.0% 30.5% 29.5% ----------- ----------- ----------- ----------- Selling and administrative expenses 17.7% 17.3% 21.6% 21.3% Depreciation and amortization 2.7% 2.8% 3.7% 4.0% Pre-opening expenses 0.1% 0.1% 0.2% 0.2% ----------- ----------- ----------- ----------- Operating profit 12.2% 11.9% 5.0% 4.1% Interest expense, net 0.0% -0.3% -0.2% -0.4% Debt redemption charge 0.0% 0.0% -0.3% 0.0% ----------- ----------- ----------- ----------- Income before taxes and minority interest 12.1% 11.6% 4.5% 3.6% Income taxes 5.2% 4.8% 1.9% 1.5% ----------- ----------- ----------- ----------- Income before minority interest 6.9% 6.8% 2.6% 2.1% Minority interest -0.2% -0.1% 0.0% 0.0% ----------- ----------- ----------- ----------- Income from continuing operations 6.7% 6.7% 2.5% 2.1% =========== =========== =========== =========== (a) Reflects the reclassification of tenant allowances from a reduction in depreciation expense to a reduction in occupancy expense for all periods. (b) Reflects the reclassification and restatement of rent holiday (store build-out period) to reduce occupancy expense and increase pre-opening expense for all periods. CONTACT: Barnes & Noble, Inc. Media: Mary Ellen Keating, 212-633-3323 Senior Vice President Corporate Communications or Investors: Joseph J. Lombardi, 212-633-3215 Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----