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