Company's Conference Call for Investors Postponed until 11 a.m. Eastern
Thursday, March 20-Formerly Scheduled for 8 a.m.
ANN ARBOR, Mich., March 20 /PRNewswire-FirstCall/ -- Borders Group,
Inc. (NYSE: BGP) today announced the launch of a strategic alternative
review process. J.P. Morgan Securities Inc. and Merrill Lynch & Co. have
been retained as the company's financial advisors to assist the company as
it explores strategic alternatives. The review process will include the
investigation of a wide range of alternatives including the sale of the
company and/or certain divisions for the purpose of maximizing shareholder
value. The company can give no assurances that a transaction of any kind
will occur.
The company today also reported results for the fourth fiscal quarter
and full year 2007, ended Feb. 2, 2008. As detailed below, on an operating
basis, fourth quarter income from continuing operations was $84.7 million
or $1.44 per share compared to $87.7 million or $1.45 per share a year ago.
In addition, the company today announced that Borders Group has
received a financing commitment from Pershing Square Capital Management,
L.P. on behalf of certain of its affiliated investment funds. Under the
terms of the commitment, Pershing Square has made a commitment to lend
$42.5 million to the company and an offer to purchase, at the company's
discretion, certain of the company's international businesses pursuant to a
$125 million backstop purchase commitment, in each case subject to the
satisfaction of customary closing conditions.
"This will be a challenging year for retailers due to continued
uncertainty in the economic environment," said Borders Group Chief
Executive Officer George Jones. "Looking forward to 2008 and beyond, the
company determined that additional capital was required to execute our
operating plan, and as a result we began to explore various financing
options. The current credit environment has made many of these alternatives
prohibitively expensive or entirely unavailable. We are pleased to have the
confidence and backing of our largest shareholder, Pershing Square, which
has agreed to provide funding that gives us adequate opportunity to
implement our plans this year and pursue a range of longer term solutions
through the strategic alternatives review process. We believe that
consummation of the transactions under the commitment will make us fully
funded for 2008, where absent these measures, liquidity issues may
otherwise have arisen in the next few months. Furthermore, we believe that
resolving our 2008 funding needs and positioning Borders to perform the way
we believe it can, puts our company in a position to succeed in future
years."
Jones continued, "Overall, we believe that the 2009 financial targets
we set back in March of last year remain attainable, yet within the current
economic environment, we will be slowed in our progress and expect that
we'll reach them later than originally anticipated. Still, we believe our
strategic plan remains the right path toward achieving these goals."
Financing Commitment
The financing commitment from Pershing Square, which is expected to be
completed within the next two weeks, consists of three main components:
-- A $42.5 million senior secured term loan maturing January 15, 2009 with
an interest rate of 12.5% per annum.
-- A backstop purchase offer that will give the company the right but not
the obligation, until January 15, 2009, to require Pershing Square to
purchase its Paperchase, Australia, New Zealand and Singapore
subsidiaries, as well as its approximately 17% interest in Bookshop
Acquisitions, Inc. (Borders U.K.) after the company has pursued a sale
process to maximize the value of those assets. Pershing Square's
purchase obligation is at a price of $125 million (less any debt
attributable to those assets) and on customary terms to be negotiated.
Proceeds of any such purchase by Pershing Square are to be first
applied to repay amounts outstanding under the $42.5 million term loan.
Although the company believes that these businesses are worth
substantially more than the backstop purchase offer price, the relative
certainty of this arrangement provides the company with valuable
flexibility to pursue strategic alternatives. The company has retained
the right, in its sole discretion, to forego the sale of these assets
or to require Pershing Square to consummate the transaction. Pershing
Square has no right of first refusal or other preemptive right with
respect to the sale of these businesses by the company to other
parties.
-- The issuance to Pershing Square of 14.7 million warrants to purchase
company common stock at $7.00 per share for a term of 7.5 years. These
warrants represent 19.99 % of the fully-diluted shares of the company
on a pro forma basis giving effect to the issuance of the shares
underlying the warrants, excluding employee stock options. The
warrants will be cash-settled until the issuance of the underlying
shares is approved by the company's shareholders, and in certain other
circumstances. The warrants have full anti-dilution protection
including, among other things, adjustments in the event of future
equity issuances so as to ensure that the warrants will at all times be
exercisable for 19.99% of the fully-diluted shares of the company,
excluding the impact of dilution in connection with employee stock
options.
The Pershing Square financing commitment is subject to customary
conditions, including the approval of the terms of the transactions by the
lenders under the company's revolving credit facility and the execution of
definitive agreements.
The Pershing Square financing commitment is binding on Pershing Square
until April 4, 2008 and allows the company, in the meantime, to pursue
alternative financing arrangements on more advantageous terms (subject to
Pershing Square's right to match those terms). Should the company determine
that more favorable alternatives exist before April 4, 2008, it has the
ability to terminate the Pershing Square financing commitment with no
break-up fee. Pershing Square also will be entitled to receive
reimbursement of its reasonable expenses.
In conjunction with the consummation of these arrangements, the company
will agree not to issue any preferred stock or securities convertible into
preferred or common equity or implement a shareholder rights plan without
Pershing Square's consent, and Pershing Square will agree not to sell or
transfer any of its shares or warrants (or to cash settle any warrants)
until the end of 2008 unless a change of control or other extraordinary
transaction involving the company is announced. Pershing Square also agreed
that, through the 2009 annual shareholders' meeting, it will not seek to
prevent the board of the company from maintaining a majority of independent
directors. The full text of the Pershing Square commitment letter will be
filed by the company with the Securities and Exchange Commission in a
Current Report on Form 8-K.
The Pershing Square financing commitment was unanimously approved by
the disinterested members of the company's board of directors after a full
review by the company and its financial and legal advisors of the Pershing
Square commitment and other alternatives.
Dividend Program
The board of directors has suspended the company's quarterly dividend
program in order to preserve capital for operations and strategic
initiatives.
Q4 2007 Consolidated Results
Borders Group achieved total consolidated sales from continuing
operations of $1.3 billion in the fourth quarter. Excluding the impact of
the extra week during fiscal 2006, this represents a 2.8% increase over the
same period a year ago.
On an operating basis, Borders Group posted fourth quarter income from
continuing operations of $84.7 million, or $1.44 per share, compared to
$87.7 million, or $1.45 per share a year ago. The operating basis income
excludes non-operating charges and discontinued operations. On a GAAP
basis, the fourth quarter net income was $64.7 million or $1.10 per share.
It includes a $7.0 million after-tax loss related to the sale of the U.K.
and Ireland book store operations and $13.0 million of after-tax
non-operating charges.
Excluding non-operating charges, consolidated gross margin from
continuing operations as a percent of sales decreased by 0.9% from 32.2% to
31.3% in the fourth quarter primarily due to increased promotional
discounts as well as the impact of shrink in the DVD and cafe categories at
Borders superstores. On a GAAP basis, consolidated gross margin from
continuing operations as a percent of sales decreased by 0.7% from 31.5% to
30.8% in the fourth quarter.
Excluding non-operating charges, SG&A from continuing operations as a
percent of sales decreased by 0.4% from 20.6% to 20.2% in the fourth
quarter due to prudent cost management. On a GAAP basis, SG&A from
continuing operations as a percent of sales decreased by 0.5% from 20.9% to
20.4% in the fourth quarter.
Consolidated Results-Full Year 2007
Borders Group achieved total consolidated sales from continuing
operations of $3.8 billion for the full year 2007. Excluding the impact of
the extra week during fiscal 2006, this represents a 4.2% increase over the
prior year.
On an operating basis, Borders Group posted full-year consolidated
income from continuing operations of $9.2 million, or $0.16 per share,
compared to $33.0 million, or $0.53 per share a year ago. The operating
basis income excludes non-operating charges and discontinued operations. On
a GAAP basis, the full-year net loss was $157.4 million or $2.68 per share.
It includes a one-time $125.7 million after-tax loss related to the sale of
the U.K. and Ireland book store operations and $27.7 million of after-tax
non-operating charges.
Excluding non-operating charges, consolidated gross margin from
continuing operations as a percent of sales decreased by 0.8% from 27.2% to
26.4% for the full year. On a GAAP basis, consolidated gross margin from
continuing operations as a percent of sales decreased by 0.9% from 26.9% to
26.0% for the full year 2007.
Excluding non-operating charges, SG&A from continuing operations as a
percent of sales increased by 0.4% from 24.6% to 25.0% for the full year
due primarily to investments in strategic initiatives. On a GAAP basis,
SG&A from continuing operations as a percent of sales increased by 0.6%
from 24.7% to 25.3% for the year as compared to 2006.
Capital expenditures from continuing operations were $142.7 million for
the year compared to $175.4 million in 2006. Capital expenditures were
lower than management's target of $170.0 million for 2007 as management
took action to reduce capital spending and maximize cash flow. Debt totaled
$554.0 million at the end of the year compared to debt of $547.8 million in
2006. The company improved inventory productivity as total adjusted
consolidated sales growth of 4.2% compared to a decline in inventory of
1.5% for the year.
Domestic Borders Superstores
Total fourth quarter sales at domestic Borders superstores were $957.8
million, which, excluding the impact of the extra week during fiscal 2006
represents an increase of 5.1% over the prior year. On a comparable store
basis, transactions increased by 1.0% for the fourth quarter and same-store
sales in the segment increased for the period by 2.1%, representing the
third consecutive quarter of positive same-store sales at domestic Borders
superstores. The book category was solid, generating a 3.2% same-store
sales increase for the fourth quarter, while music continued its steep
sales decline with a 14.2% same-store sales decrease for the period.
Seattle's Best Coffee cafes and gifts and stationery -- driven by
Paperchase -- performed well in the fourth quarter with positive same-store
sales of 13.3% and 10.0%, respectively.
To address the decline in the music category, as well as free up space
for improved merchandise presentation and expansion of higher margin
categories, the company is reducing inventories and reallocating floor
space in its stores.
For the full year, total sales at Borders domestic superstores were
$2.8 billion, which, excluding the impact of the extra week during fiscal
2006, represents an increase of 5.3% over the prior year. Same-store sales
for 2007 were up 1.5% in the segment.
Operating income at Borders superstores declined $54.4 million from
$111.3 million in 2006 to $56.9 million in 2007 on an operating basis. The
decline is attributable to higher than expected DVD shrink/cafe waste
expenses of $19.9 million and increased promotional spending of $23.8
million in 2007. Additionally, there was an increased non-cash expense
related to reduced inventory levels. The non-cash expense was higher than
2006 by $10.4 million. Continued investment in the development of the
upcoming Borders.com e-commerce site and other strategic initiatives
totaled $11.6 million in 2007. There was also $9.8 million of expense in
2007 attributable to de-leveraging of expenses and other factors. Partially
offsetting these items was a gross margin benefit of approximately 70 basis
points, or $21.1 million, resulting from a continued improvement in mix
driven by expansion of higher margin categories such as bargain books,
gifts and stationery, and cafe.
Borders Group opened six new Borders superstores in the U.S. during the
fourth quarter and ended 2007 with a total of 509 domestic superstore
locations.
Waldenbooks Specialty Retail
Comparable store sales increased within the Waldenbooks Specialty
Retail segment by 1.2% in the fourth quarter and by 2.2% for the full year
2007. This compares to 2006's full year same-store sales decrease of 7.5%
in the segment.
Adjusted for the extra week in 2006, total sales within the Waldenbooks
Specialty Retail segment were down 17.0% in the fourth quarter to $228.3
million. For the full year, total sales in the segment were $562.8 million,
which when adjusted for the extra week in 2006, represents a decrease of
14.1% as the number of stores was reduced from 564 at the close of 2006 to
490 at the end of this year. The company closed 75 underperforming
Waldenbooks stores in 2007 and will continue to aggressively close
Waldenbooks locations that are not achieving targeted returns.
On an operating basis, fourth quarter operating income improved to
$26.5 million in 2007 compared to $24.3 million for the same period a year
ago. The improvement was driven primarily by better sales performance. On a
GAAP basis, the fourth quarter operating income for the Waldenbooks
Specialty Retail segment was $25.5 million compared to an operating loss of
$25.9 million the same period a year ago. For the full year, the operating
loss at Waldenbooks narrowed to $17.3 million compared to $26.9 million in
2006. On a GAAP basis, the full year 2007 operating loss in the segment was
$21.4 million compared to $78.0 million in 2006.
International
In the fourth quarter, total sales from continuing operations in the
International segment were $138.5 million, which is up by 34.6% compared to
the same period a year ago excluding the impact of the extra week during
fiscal 2006. Without the impact of foreign currency translation, total
International sales would have increased by 24.3% for the fourth quarter
adjusted for the extra week in 2006. For the full year, total sales from
continuing operations in the International segment were $364.8 million,
which is up by 37.2% compared to 2006 excluding that year's extra week.
Without the impact of foreign currency translation, total International
sales would have increased by 26.3% for the full year 2007 adjusted for the
extra week in 2006.
Comparable store sales in the International segment increased by 9.3%
in the fourth quarter as a result of strong performance in Asia Pacific
stores. For the full year, same-store sales in the segment increased by
7.9%.
On an operating basis, the fourth quarter operating income was $17.9
million compared to operating income of $16.6 million a year ago. On a GAAP
basis, fourth quarter operating income for the International segment was
$14.3 million compared to fourth quarter operating income of $16.4 million
in 2006. For the full year, on an operating basis, operating income was
$17.5 million compared to operating income of $10.3 million a year ago. On
a GAAP basis for the full year, operating income in the segment was $10.5
million compared to $9.4 million in 2006.
Non-Operating Adjustments
GAAP consolidated net income/loss and earnings per share figures
reported here include the impact of non-operating adjustments. In the
fourth quarter, excluding discontinued operations, non-operating
adjustments totaled an after- tax charge of $0.22 per share, which compares
to $0.71 per share a year ago. For the full year 2007, excluding
discontinued operations, non-operating adjustments totaled an after-tax
charge of $0.47 per share compared to $0.74 per share for 2006. The charge
in 2007 was primarily composed of domestic superstore asset impairments and
store closure and relocation costs, write- offs related to the company's
strategic initiative to reduce investment in and space allocated to the
music category, and professional fees related to the International
strategic alternatives process in Asia Pacific.
Discontinued Operations
Borders Group incurred a non-cash, after-tax loss for the sale of the
U.K. and Ireland book store operations of $7.0 million, or $0.12 per share
in the fourth quarter.
Conference Call for Today Rescheduled
The Borders Group conference call for investors to discuss the
information presented in this news release has been postponed to 11 a.m.
Eastern today, Thursday, March 20. The call formerly was scheduled for 8
a.m. Eastern today. Forward-looking statements will be included in the
call. The call is being Webcast by Thomson Financial and can be accessed at
the Borders Group corporate Web site at http://www.bordersgroupinc.com. A replay
will also be available on the Web site through Wed., April 30, 2008. In
addition, a replay phone service will be available toll-free at
866-481-9935, or for international calls, at 203-369-1583. The replay will
be available until March 31 at 11:59 p.m. Eastern.
Next Financial Release
Borders Group plans to issue a release regarding first quarter 2008
results May 27 with a conference call to follow May 28 at 8 a.m. Eastern.
About Borders Group
Headquartered in Ann Arbor, Mich., Borders Group, Inc. is a leading
global retailer of books, music and movies with more than 1,100 stores and
over 30,000 employees worldwide. More information on the company is
available at http://www.bordersgroupinc.com.
Safe Harbor Statement
This release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. One can identify
these forward-looking statements by the use of words such as "projects,"
"expect," "estimated," "look toward," "going forward," "continuing,"
"planning," "returning," "guidance," "goal," "will," "may," "intend,"
"anticipates," and other words of similar meaning. One can also identify
them by the fact that they do not relate strictly to historical or current
facts. These statements are likely to address matters such as the company's
future financial performance (including earnings per share growth, EBIT
margins and inventory turns, liquidity, same-store sales growth, and
anticipated capital expenditures and depreciation and amortization
amounts), its exploration of strategic alternatives, its financing
commitment from Pershing Square and the benefits thereof, strategic plans
and expected financing and benefits relating to such plans (including steps
to be taken to improve the performance of domestic superstores, the
downsizing of the Waldenbooks Specialty Retail Segment and the development
of a proprietary Web site). These statements are subject to risks and
uncertainties that could cause actual results and plans to differ
materially from those included in the company's forward-looking statements.
These risks and uncertainties include, but are not limited to, consumer
demand for the company's products, particularly during the holiday season,
which is believed to be related to general economic and geopolitical
conditions, competition and other factors; the availability of adequate
capital to fund the company's operations and to carry out its strategic
plans; a failure to complete the financing with Pershing Square; the
performance of the company's information technology systems and the
development of improvements to the systems necessary to implement the
company's strategic plan, and, with respect to the exploration of strategic
alternatives including the sale of certain parts of the company or the sale
of the entire company; the ability to attract interested third parties.
The company's periodic reports filed from time to time with the
Securities and Exchange Commission contain more detailed discussions of
these and other risk factors that could cause actual results and plans to
differ materially from those included in the forward-looking statements,
and those discussions are incorporated herein by reference. The company
does not undertake any obligation to update forward-looking statements.
Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Unaudited
Sales and Earnings Summary
Quarter Ended Quarter Ended
February 2, 2008 (1) February 3, 2007 (1)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis (2) (2) Basis Basis (3) (3) Basis
Domestic Borders
Superstores $957.8 $- $957.8 $960.3 $- $960.3
Waldenbooks
Specialty
Retail 228.3 - 228.3 286.4 - 286.4
International 138.5 - 138.5 107.9 - 107.9
Total sales 1,324.6 - 1,324.6 1,354.6 - 1,354.6
Other revenue 22.5 - 22.5 19.4 - 19.4
Total revenue 1,347.1 - 1,347.1 1,374.0 - 1,374.0
Cost of goods
sold, including
occupancy costs 932.3 6.5 938.8 938.3 9.2 947.5
Gross margin 414.8 (6.5) 408.3 435.7 (9.2) 426.5
Selling, general
and administrative
expenses 268.1 2.5 270.6 278.7 4.5 283.2
Pre-opening
expense 2.2 - 2.2 2.4 - 2.4
Asset impairments
and other
writedowns - 10.4 10.4 - 57.1 57.1
Operating
income (loss) 144.5 (19.4) 125.1 154.6 (70.8) 83.8
Interest expense 10.4 - 10.4 9.1 (0.4) 8.7
Income (loss)
before income
taxes 134.1 (19.4) 114.7 145.5 (70.4) 75.1
Income taxes 49.4 (6.4) 43.0 57.8 (27.5) 30.3
Income (loss)
from continuing
operations $84.7 $(13.0) $71.7 $87.7 $(42.9) $44.8
Loss on continuing
operations of
discontinued
operations
(net of tax) - - - 2.1 (120.5) (118.4)
Loss on disposal
of discontinued
operations
(net of tax) - (7.0) (7.0) - - -
Loss from
discontinued
operations
(net of tax) - (7.0) (7.0) 2.1 (120.5) (118.4)
Net income
(loss) $84.7 $(20.0) $64.7 $89.8 $(163.4) $(73.6)
Diluted EPS from
continuing
operations $1.44 $(0.22) $1.22 $1.45 $(0.71) $0.74
Diluted EPS from
discontinued
operations $- $(0.12) $(0.12) $0.04 $(2.00) $(1.96)
Diluted EPS
including
discontinued
operations $1.44 $(0.34) $1.10 $1.49 $(2.71) $(1.22)
Diluted weighted
avg. common
shares 58.8 58.8 58.8 60.4 60.4 60.4
Comparable Store
Sales
Domestic Borders
Superstores 2.1% (2.8%)
Waldenbooks Specialty
Retail 1.2% (6.2%)
International Borders
Superstores (4) 9.3% 1.1%
Sales and Earnings Summary (As Percentage of Total Sales)
Quarter Ended Quarter Ended
February 2, 2008 (1) February 3, 2007 (1)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis (2) (2) Basis Basis (3) (3) Basis
Domestic Borders
Superstores 72.3% -% 72.3% 70.9% -% 70.9%
Waldenbooks
Specialty
Retail 17.2 - 17.2 21.1 - 21.1
International 10.5 - 10.5 8.0 - 8.0
Total sales 100.0 - 100.0 100.0 - 100.0
Other revenue 1.7 - 1.7 1.4 - 1.4
Total revenue 101.7 - 101.7 101.4 - 101.4
Cost of goods sold,
including occupancy
costs 70.4 0.5 70.9 69.2 0.7 69.9
Gross margin 31.3 (0.5) 30.8 32.2 (0.7) 31.5
Selling, general
and administrative
expenses 20.2 0.2 20.4 20.6 0.3 20.9
Pre-opening expense 0.2 - 0.2 0.2 - 0.2
Asset impairments
and other
writedowns - 0.8 0.8 - 4.2 4.2
Operating income
(loss) 10.9 (1.5) 9.4 11.4 (5.2) 6.2
Interest expense 0.8 - 0.8 0.7 - 0.7
Income (loss)
before income
taxes 10.1 (1.5) 8.6 10.7 (5.2) 5.5
Income taxes 3.7 (0.5) 3.2 4.2 (2.0) 2.2
Income (loss) from
continuing
operations 6.4% (1.0)% 5.4% 6.5% (3.2)% 3.3%
The results of Borders Ireland Limited, Books etc., and UK Superstores are
reported as discontinued operations for all periods presented.
(1.) The fourth quarter of fiscal 2007 consisted of 13 weeks and the
fourth quarter of fiscal 2006 consisted of 14 weeks.
(2.) Results from 2007 were impacted by a number of non-operating items,
including asset impairments, store closure costs, write-offs related
to the Company's music reduction initiative and professional
fees related to international strategic alternatives in Asia Pacific.
Therefore, solely for analytical purposes and as an aid to better
understand underlying trends, operating basis data are presented
excluding these items.
(3.) Results from 2006 were impacted by a number of non-operating items
including asset and goodwill impairments, store closure costs and
accelerated depreciation and disposals of fixed assets resulting from
the remodel program, as well as other reserve adjustments. Therefore,
solely for analytical purposes and as an aid to better understand
underlying trends, operating basis data are presented excluding these
items.
(4.) Excludes the comparable store sales results of discontinued
operations (Borders Ireland Limited, Books etc., and UK Superstores).
International comparable store sales are presented in local currency.
Borders Group, Inc. Financial Statements
(dollars in millions, except per share amounts)
Unaudited
Sales and Earnings Summary
Year Ended Year Ended
February 2, 2008 (1) February 3, 2007 (1)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis (2) (2) Basis Basis (3) (3) Basis
Domestic Borders
Superstores $2,847.2 $- $2,847.2 $2,750.0 $- $2,750.0
Waldenbooks
Specialty
Retail 562.8 - 562.8 663.9 - 663.9
International 364.8 - 364.8 269.9 - 269.9
Total sales 3,774.8 - 3,774.8 3,683.8 - 3,683.8
Other revenue 46.1 - 46.1 39.8 - 39.8
Total revenue 3,820.9 - 3,820.9 3,723.6 - 3,723.6
Cost of goods
sold, including
occupancy
costs 2,825.2 13.1 2,838.3 2,722.9 10.1 2,733.0
Gross margin 995.7 (13.1) 982.6 1,000.7 (10.1) 990.6
Selling, general
and administrative
expenses 942.4 13.7 956.1 906.9 5.2 912.1
Pre-opening
expense 6.8 - 6.8 9.4 - 9.4
Asset impairments
and other
writedowns - 13.1 13.1 - 60.6 60.6
Operating income
(loss) 46.5 (39.9) 6.6 84.4 (75.9) 8.5
Interest
expense 42.9 - 42.9 30.1 (0.4) 29.7
Income (loss) before
income taxes 3.6 (39.9) (36.3) 54.3 (75.5) (21.2)
Income taxes (5.6) (12.2) (17.8) 21.3 (29.5) (8.2)
Income (loss)
from continuing
operations $9.2 $(27.7) $(18.5) $33.0 $(46.0) $(13.0)
Loss on continuing
operations of
discontinued
operations
(net of tax) (11.7) (1.5) (13.2) (13.7) (124.6) (138.3)
Loss from disposal
of discontinued
operations
(net of tax) - (125.7) (125.7) - - -
Loss from
discontinued
operations
(net of tax) (11.7) (127.2) (138.9) (13.7) (124.6) (138.3)
Net income
(loss) $(2.5)$(154.9) $(157.4) $19.3 $(170.6) $(151.3)
Basic EPS from
continuing
operations $0.16 $(0.47) $(0.31) $0.53 $(0.74) $(0.21)
Basic EPS from
discontinued
operations $(0.20) $(2.17) $(2.37) $(0.22) $(2.01) $(2.23)
Basic EPS
including
discontinued
operations $(0.04) $(2.64) $(2.68) $0.31 $(2.75) $(2.44)
Basic weighted
avg. common
shares 58.7 58.7 58.7 61.9 61.9 61.9
Comparable
Store Sales
Domestic Borders
Superstores 1.5% (2.2%)
Waldenbooks
Specialty
Retail 2.2% (7.5%)
International
Borders
Superstores(4) 7.9% 0.1%
Sales and Earnings Summary (As Percentage of Total Sales)
Year Ended Year Ended
February 2, 2008 (1) February 3, 2007 (1)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis (2) (2) Basis Basis (3) (3) Basis
Domestic Borders
Superstores 75.4% -% 75.4% 74.7% -% 74.7%
Waldenbooks
Specialty
Retail 14.9 - 14.9 18.0 - 18.0
International 9.7 - 9.7 7.3 - 7.3
Total sales 100.0 - 100.0 100.0 - 100.0
Other revenue 1.2 - 1.2 1.1 - 1.1
Total revenue 101.2 - 101.2 101.1 - 101.1
Cost of goods
sold, including
occupancy costs 74.8 0.4 75.2 73.9 0.3 74.2
Gross margin 26.4 (0.4) 26.0 27.2 (0.3) 26.9
Selling, general
and administrative
expenses 25.0 0.3 25.3 24.6 0.1 24.7
Pre-opening
expense 0.2 - 0.2 0.3 - 0.3
Asset impairments
and other
writedowns - 0.4 0.4 - 1.7 1.7
Operating income
(loss) 1.2 (1.1) 0.1 2.3 (2.1) 0.2
Interest expense 1.1 - 1.1 0.8 - 0.8
Income (loss)
before income
taxes 0.1 (1.1) (1.0) 1.5 (2.1) (0.6)
Income taxes (0.1) (0.4) (0.5) 0.6 (0.8) (0.2)
Income (loss)
from continuing
operations 0.2% (0.7)% (0.5)% 0.9% (1.3)% (0.4)%
The results of Borders Ireland Limited, Books etc., and UK Superstores are
reported as discontinued operations for all periods presented.
(1.) The fiscal year 2007 consisted of 52 weeks and the fiscal year 2006
consisted of 53 weeks.
(2.) Results from 2007 were impacted by a number of non-operating items,
including asset impairments, a legal settlement, store closure costs,
executive severance costs, write-offs related to the Company's music
reduction initiative and professional fees related to international
strategic alternatives in Asia Pacific. Therefore, solely for
analytical purposes and as an aid to better understand underlying
trends, operating basis data are presented excluding these items.
(3.) Results from 2006 were impacted by a number of non-operating items
including asset and goodwill impairments, store closure costs and
accelerated depreciation and disposals of fixed assets resulting from
the remodel program, as well as other reserve adjustments. Therefore,
solely for analytical purposes and as an aid to better understand
underlying trends, operating basis data are presented excluding these
items.
(4.) Excludes the comparable store sales results of discontinued
operations (Borders Ireland Limited, Books etc., and UK Superstores).
International comparable store sales are presented in local currency.
Borders Group, Inc. Financial Statements
(dollars in millions)
Unaudited
Condensed Consolidated Balance Sheets
February 2, February 3,
2008 2007
Assets
Cash and cash equivalents $61.0 $108.6
Inventory 1,327.2 1,347.3
Other current assets 117.8 128.7
Current assets of discontinued operations (1) - 139.0
Property and equipment, net 638.8 604.2
Other assets and deferred charges 117.4 118.8
Goodwill 40.5 40.3
Noncurrent assets of discontinued operations - 126.5
Total assets $2,302.7 $2,613.4
Liabilities and Stockholders' Equity
Short-term borrowings and current portion
of long-term debt $548.6 $502.0
Accounts payable 550.3 562.0
Other current liabilities 368.9 414.0
Current liabilities of discontinued
operations (2) - 117.9
Long-term debt 5.4 5.2
Other long-term liabilities 350.4 313.2
Noncurrent liabilities of discontinued operations - 55.1
Total liabilities 1,823.6 1,969.4
Minority interest 2.2 2.0
Total stockholders' equity 476.9 642.0
Total liabilities, minority interest
and stockholders' equity $2,302.7 $2,613.4
(1.) Includes $11.8 million of cash and cash equivalents as of February 3,
2007.
(2.) Includes $40.6 million of short-term borrowings as of February 3,
2007.
Certain reclassifications have been made to conform to current year
presentation.
Store Activity Summary
Quarter Ended Year Ended
February 2, February 3, February 2, February 3,
2008 2007 2008 2007
Domestic Borders Superstores
Beginning number of stores 510 487 499 473
Openings 6 13 18 31
Closings (7) (1) (8) (5)
Ending number of stores 509 499 509 499
Ending square footage
(in millions) 12.6 12.4 12.6 12.4
Waldenbooks Specialty Retail
Stores
Beginning number of stores 521 652 564 678
Openings - 3 1 10
Closings (31) (91) (75) (124)
Ending number of stores 490 564 490 564
Ending square footage
(in millions) 1.9 2.2 1.9 2.2
International Borders Stores
Beginning number of stores 28 61 68 55
Openings 4 7 6 13
Closings - - - -
Sold - - (42) -
Ending number of stores 32 68 32 68
Ending square footage
(in millions) 0.7 1.7 0.7 1.7
Books etc. International Stores
Beginning number of stores - 30 30 33
Openings - - - -
Closings - - (2) (3)
Sold - - (28) -
Ending number of stores - 30 - 30
Ending square footage
(in millions) - 0.1 - 0.1
Borders Group, Inc. Segment Financial Information
(dollars in millions, except per share amounts)
Unaudited
Quarter Ended Quarter Ended
February 2, 2008 (1) February 3, 2007 (1)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis (2) (2) Basis Basis (3) (3) Basis
Domestic Borders
Superstores
Sales $957.8 $- $957.8 $960.3 $- $960.3
Depreciation
expense 24.4 - 24.4 21.7 0.3 22.0
Operating income
(loss) 102.1 (14.7) 87.4 117.0 (18.6) 98.4
Waldenbooks
Specialty Retail
Sales $228.3 $- $228.3 $286.4 $- $286.4
Depreciation
expense 3.5 (0.6) 2.9 7.0 0.9 7.9
Operating income
(loss) 26.5 (1.0) 25.5 24.3 (50.2) (25.9)
International (4)
Sales $138.5 $- $138.5 $107.9 $- $107.9
Depreciation
expense 3.4 0.6 4.0 2.3 0.1 2.4
Operating income
(loss) 17.9 (3.6) 14.3 16.6 (0.2) 16.4
Corporate (5)
Operating income
(loss) $(2.0) $(0.1) $(2.1) $(3.3) $(1.8) $(5.1)
Consolidated (4)
Sales $1,324.6 $- $1,324.6 $1,354.6 $- $1,354.6
Depreciation
expense 31.3 - 31.3 31.0 1.3 32.3
Operating income
(loss) 144.5 (19.4) 125.1 154.6 (70.8) 83.8
Year Ended Year Ended
February 2, 2008 (1) February 3, 2007 (1)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis (2) (2) Basis Basis (3) (3) Basis
Domestic Borders
Superstores
Sales $2,874.2 $- $2,847.2 $2,750.0 $- $2,750.0
Depreciation
expense 90.0 0.2 90.2 84.8 1.9 86.7
Operating income
(loss) 56.9 (26.3) 30.6 111.3 (18.9) 92.4
Waldenbooks
Specialty Retail
Sales $562.8 $- $562.8 $663.9 $- $663.9
Depreciation
expense 8.3 (0.6) 7.7 20.0 0.9 20.9
Operating income
(loss) (17.3) (4.1) (21.4) (26.9) (51.1) (78.0)
International (4)
Sales $364.8 $- $364.8 $269.9 $- $269.9
Depreciation
expense 11.4 0.6 12.0 8.1 0.1 8.2
Operating income
(loss) 17.5 (7.0) 10.5 10.3 (0.9) 9.4
Corporate (5)
Operating income
(loss) $(10.6) $(2.5) $(13.1) $(10.3) $(5.0) $(15.3)
Consolidated (4)
Sales $3,774.8 $- $3,774.8 $3,683.8 $- $3,683.8
Depreciation
expense 109.7 0.2 109.9 112.9 2.9 115.8
Operating income
(loss) 46.5 (39.9) 6.6 84.4 (75.9) 8.5
(1.) The fourth quarter of fiscal 2007 consisted of 13 weeks and the
fourth quarter of fiscal 2006 consisted of 14 weeks. The fiscal year
2007 consisted of 52 weeks and the fiscal year 2006 consisted of 53
weeks.
(2.) Results from 2007 were impacted by a number of non-operating items,
including asset impairments, a legal settlement, store closure and
relocation costs, executive severance costs, write-offs related to
the Company's music reduction initiative and professional fees
related to international strategic alternatives. Therefore, solely
for analytical purposes and as an aid to better understand underlying
trends, operating basis data are presented excluding these items.
(3.) Results from 2006 were impacted by a number of non-operating items
including asset impairments, store closure costs and accelerated
depreciation and disposals of fixed assets resulting from the remodel
program as well as other reserve adjustments. Therefore, solely for
analytical purposes and as an aid to better understand underlying
trends, operating basis data are presented excluding these items.
(4.) Excludes the results of discontinued operations (Borders Ireland
Limited, Books etc., and UK Superstores).
(5.) The Corporate segment includes various corporate governance costs and
corporate incentive costs.
SOURCE Borders Group, Inc.
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Related links:
http://www.bordersgroupinc.com
Photo Notes:http://www.newscom.com/cgi-bin/prnh/20060208/BORDERSGRPLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
http://www.prnewswire.com/comp/106169.html /
CONTACT:
Investors, Ed Wilhelm, +1-734-477-4245;
Media, Anne Roman, +1-734-477-1392, both of Borders Group, Inc.
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