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| Borders Group Reports Q1 2007 Results |
ANN ARBOR, Mich., May 29, /PRNewswire-FirstCall/ -- Borders Group, Inc. (NYSE: BGP) today reported results for the first fiscal quarter, ended May 5, 2007. At $876.8 million, first quarter consolidated sales were up by 2.0% over the same period in 2006. The company recorded a first-quarter consolidated loss of $0.61 per share, which compares to a consolidated loss of $0.31 per share in the first quarter of 2006. "Previously, we reported that 2007 would be a year of transition as we execute our long-term strategic plan for the turnaround of the company," said Borders Group Chief Executive Officer George Jones. "Our first quarter results were generally in-line with our internal expectations, although the current sales environment was more challenging than we anticipated and that trend has continued. We are focused on executing our strategic plan and improving results, including returning the company to earnings per share growth beginning in 2008." Consolidated Results Borders Group achieved first quarter consolidated sales of $876.8 million, an increase of 2.0% over 2006. On a GAAP basis, the company recorded a consolidated first quarter net loss of $35.9 million, or $0.61 per share, which compares to a net loss of $20.2 million, or $0.31 per share, for the same period in 2006. On an operating basis, the first quarter consolidated net loss was $29.9 million, compared to $19.2 million a year ago. Gross margin as a percent of sales declined by 0.9% from 23.3% to 22.4% in the first quarter, due primarily to increased promotional discounts, de-leveraging of occupancy costs, and non-operating charges. SG&A as a percent of sales increased by 1.6% from 26.2% to 27.8% in the first quarter, due primarily to investment in strategic initiatives, de-leveraging of expenses, and non-operating charges. Interest expense increased by $4.5 million as a result of increased debt levels. Capital expenditures were $37.6 million in the first quarter compared to $40.4 million for the same period in 2006. Debt, net of cash, totaled $638.9 million at the end of the first quarter compared to debt, net of cash, of $395.8 million at the end of first quarter 2006. As previously stated, to provide the flexibility to fund the execution of the company's strategic plan, Borders Group will pursue additional financing beyond its existing bank revolver. Management expects to proceed with a term loan financing in the range of $150 million to $200 million, to be completed in the second quarter of this year. Domestic Borders Superstores First quarter total sales at domestic Borders superstores were $615.0 million, an increase of 1.4% over the same period in 2006. Comparable store sales in the segment decreased by 1.9% in the first quarter. On a category basis, book sales were slightly negative, while DVD sales were relatively flat and music sales continued to decline. The gifts and stationery category, driven by Paperchase, performed well with positive comparable store sales in the first quarter. On a GAAP basis, Borders superstores reported an operating loss of $22.0 million in the first quarter compared to operating income of $1.5 million for the same period a year ago. The loss was driven primarily by declines in comparable store sales and gross margin, as well as increased expenses and non-operating charges. The company opened four new Borders superstores in the U.S. during the period, ending the quarter with a total of 502 domestic superstore locations. International For the first quarter, total sales in the International segment were $153.7 million, which is up by 22% compared to the same period a year ago. Excluding the impact of foreign currency translation, total International sales would have increased by 11% for the first quarter. Comparable superstore sales in the International segment decreased by 2.5% in the first quarter. On a GAAP basis, the first quarter operating loss for the International segment narrowed to $9.8 million compared to a first quarter operating loss of $10.3 million in 2006. Borders Group is proceeding with the strategic alternatives process for the majority of its International segment as disclosed in March. Waldenbooks Specialty Retail Total sales within the Waldenbooks Specialty Retail segment were down 15% in the first quarter to $108.1 million. Comparable store sales in the segment decreased by 1.0% for the period. On a GAAP basis, the first quarter operating loss for the Waldenbooks Specialty Retail segment improved to $14.0 million compared to a first quarter operating loss of $16.0 million in 2006. Borders Group closed 11 under-performing Waldenbooks Specialty Retail segment stores in the first quarter, consistent with the company's long-range plan to right-size the segment. Non-Operating Adjustments Consolidated net income and earnings per share figures reported here include the impact of non-operating adjustments. In the first quarter, the adjustments totaled an after-tax charge of $0.10 per share, which compares to $0.01 a year ago. The after-tax charge is primarily comprised of store closure and relocation costs and professional fees related to the International strategic alternatives process. Next Financial Release Borders Group will issue second quarter 2007 results August 28 after market close with a conference call to follow August 29 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 1,200 stores and over 32,000 employees worldwide. More information on the company is available at 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," "expected," "estimated," "look toward," "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, same-store sales growth, and anticipated capital expenditures and depreciation and amortization amounts), its strategic plans and expected benefits relating to such plans (including steps to be taken to improve the performance of domestic superstores, the exploration of strategic alternatives with respect to certain international operations, the downsizing of the Specialty Retail Segment and the development of a proprietary website) and its intentions with respect to dividend payments and share repurchases. 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; 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 for certain international operations, 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 May 5, 2007
Operating Adjustments GAAP
Basis (1) (1) Basis
Domestic Borders Superstores $615.0 $ - $615.0
Waldenbooks Specialty Retail 108.1 - 108.1
International 153.7 - 153.7
Total sales 876.8 - 876.8
Other revenue 9.0 - 9.0
Total revenue 885.8 - 885.8
Cost of goods sold, including
occupancy costs 684.7 4.3 689.0
Gross margin 201.1 (4.3) 196.8
Selling, general and administrative
expenses 240.7 2.9 243.6
Pre-opening expense 1.3 - 1.3
Asset impairments and other writedowns - 0.8 0.8
Operating loss (40.9) (8.0) (48.9)
Interest expense 9.9 - 9.9
Loss before income taxes (50.8) (8.0) (58.8)
Income taxes (20.9) (2.0) (22.9)
Net loss $(29.9) $(6.0) $(35.9)
Basic EPS $(0.51) (0.10) (0.61)
Basic weighted avg. common shares 58.6 58.6 58.6
Comparable Store Sales
Domestic Borders Superstores (1.9%)
Waldenbooks Specialty Retail (1.0%)
International Borders Superstores (2.5%)
(In local currency)
Quarter Ended April 29, 2006
Operating Adjustments GAAP
Basis (2) (2) Basis
Domestic Borders Superstores $606.4 $ - $606.4
Waldenbooks Specialty Retail 127.2 - 127.2
International 126.4 - 126.4
Total sales 860.0 - 860.0
Other revenue 7.8 - 7.8
Total revenue 867.8 - 867.8
Cost of goods sold, including
occupancy costs 664.5 2.6 667.1
Gross margin 203.3 (2.6) 200.7
Selling, general and administrative
expenses 227.2 (1.8) 225.4
Pre-opening expense 1.9 - 1.9
Asset impairments and other writedowns - 0.6 0.6
Operating loss (25.8) (1.4) (27.2)
Interest expense 5.4 - 5.4
Loss before income taxes (31.2) (1.4) (32.6)
Income taxes (12.0) (0.4) (12.4)
Net loss $(19.2) $(1.0) $(20.2)
Basic EPS $(0.30) (0.01) (0.31)
Basic weighted avg. common shares 64.4 64.4 64.4
Comparable Store Sales
Domestic Borders Superstores 0.7%
Waldenbooks Specialty Retail (7.3%)
International Borders Superstores 0.4%
(In local currency)
Sales and Earnings Summary (As Percentage of Total Sales)
Quarter Ended May 5, 2007 Quarter Ended April 29, 2006
Operat- Adjust- GAAP Operat- Adjust- GAAP
ing ments Basis ing ments Basis
Basis(1) (1) Basis(2) (2)
Domestic Borders
Superstores 70.2% - % 70.2% 70.5% - % 70.5%
Waldenbooks
Specialty Retail 12.3 - 12.3 14.8 - 14.8
International 17.5 - 17.5 14.7 - 14.7
Total sales 100.0 - 100.0 100.0 - 100.0
Other revenue 1.0 - 1.0 0.9 - 0.9
Total revenue 101.0 - 101.0 100.9 - 100.9
Cost of goods sold,
including occupancy
costs 78.1 0.5 78.6 77.3 0.3 77.6
Gross margin 22.9 (0.5) 22.4 23.6 (0.3) 23.3
Selling, general
and administrative
expenses 27.5 0.3 27.8 26.4 (0.2) 26.2
Pre-opening expense 0.1 - 0.1 0.2 - 0.2
Asset impairments
and other writedowns - 0.1 0.1 - 0.1 0.1
Operating loss (4.7) (0.9) (5.6) (3.0) (0.2) (3.2)
Interest expense 1.1 - 1.1 0.6 - 0.6
Loss before income
taxes (5.8) (0.9) (6.7) (3.6) (0.2) (3.8)
Income taxes (2.4) (0.2) (2.6) (1.4) - (1.4)
Net loss (3.4)% (0.7)% (4.1)% (2.2)% (0.2)% (2.4)%
(1) Results from 2007 were impacted by a number of non-operating items,
including store closure costs 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.
(2) Results from 2006 were impacted by a number of non-operating items,
including accelerated depreciation, store closure costs and disposals
of fixed assets resulting from the remodel program. Partially
offsetting these expenses was income from a legal settlement.
Therefore, solely for analytical purposes and as an aid to better
understand underlying trends, operating basis data are presented
excluding these items.
Borders Group, Inc. Financial Statements
(dollars in millions)
Unaudited
Condensed Consolidated Balance Sheets
May 5, April 29, February 3,
2007 2006 2007
Assets
Cash and cash equivalents $83.9 $47.0 $120.4
Inventory 1,522.3 1,457.9 1,452.0
Other current assets 149.9 159.5 151.2
Property and equipment, net 714.5 717.8 707.7
Other assets and deferred charges 145.7 119.4 141.8
Goodwill 40.3 125.6 40.3
Total assets $2,656.6 $2,627.2 $2,613.4
Liabilities, Minority Interest and
Stockholders' Equity
Short-term borrowings and current
portion of long-term debt $717.6 $437.5 $542.6
Accounts payable 593.2 616.6 631.4
Other current liabilities 360.7 325.4 421.9
Long-term debt 5.2 5.3 5.2
Other long-term liabilities 376.6 338.0 368.3
Total liabilities 2,053.3 1,722.8 1,969.4
Minority interest 1.9 1.4 2.0
Total stockholders' equity 601.4 903.0 642.0
Total liabilities, minority
interest and stockholders'
equity $2,656.6 $2,627.2 $2,613.4
Store Activity Summary
Quarter Ended Year Ended
May 5, April 29, February 3,
2007 2006 2007
Domestic Borders Superstores
Beginning number of stores 499 473 473
Openings 4 5 31
Closings (1) - (5)
Ending number of stores 502 478 499
Ending square footage (in millions) 12.4 11.9 12.4
Waldenbooks Specialty Retail Stores (1)
Beginning number of stores 564 678 678
Openings - 3 10
Closings (11) (16) (124)
Ending number of stores 553 665 564
Ending square footage (in millions) 2.1 2.6 2.2
International Borders Superstores
Beginning number of stores 68 55 55
Openings 2 1 13
Closings - - -
Ending number of stores 70 56 68
Ending square footage (in millions) 1.7 1.4 1.7
Books, etc. International Stores
Beginning number of stores 30 33 33
Openings - - -
Closings - (2) (3)
Ending number of stores 30 31 30
Ending square footage (in millions) 0.1 0.1 0.1
(1) Includes all small format stores in malls, airports and outlet malls.
Quarter Ended Quarter Ended
May 5, 2007 April 29, 2006
Operat- Adjust- GAAP Operat- Adjust- GAAP
ing ments Basis ing ments Basis
Basis(2) (2) Basis(3) (3)
Domestic Borders
Superstores
Sales $615.0 $ - $615.0 $606.4 $ - $606.4
Depreciation expense 21.8 0.2 22.0 20.1 0.7 20.8
Operating income (loss) (16.8) (5.2) (22.0) 0.6 0.9 1.5
Waldenbooks Specialty
Retail
Sales $108.1 $ - $108.1 $127.2 $ - $127.2
Depreciation expense 1.1 - 1.1 4.2 - 4.2
Operating income (loss) (13.3) (0.7) (14.0) (16.1) 0.1 (16.0)
International
Sales $153.7 $ - $153.7 $126.4 $ - $126.4
Depreciation expense 4.9 - 4.9 5.0 - 5.0
Operating income (loss (8.2) (1.6) (9.8) (7.9) (2.4) (10.3)
Corporate (1)
Operating income (loss) (2.6) (0.5) (3.1) (2.4) - (2.4)
Consolidated
Sales $876.8 $ - $876.8 $860.0 $ - $860.0
Depreciation expense 27.8 0.2 28.0 29.3 0.7 30.0
Operating income (loss) (40.9) (8.0) (48.9) (25.8) (1.4) (27.2)
(1) The Corporate segment includes interest expense and various corporate
governance costs and corporate incentive costs.
(2) Results from 2007 were impacted by a number of non-operating items,
including store closure costs 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 accelerated depreciation, store closure costs and disposals
of fixed assets resulting from the remodel program. Partially
offsetting these expenses was income from a legal settlement.
Therefore, solely for analytical purposes and as an aid to better
understand underlying trends, operating basis data are presented
excluding these items.
SOURCE Borders Group, Inc. CONTACT: Investors, Ed Wilhelm, +1-734-477-4245, or Media, Anne Roman, +1-734-477-1392, both of Borders Group, Inc. |
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