SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| (Mark One) | ||
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended August 3, 2002 | ||
| OR | ||
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
Commission File Number: 1-12302
BARNES & NOBLE, INC.
| Delaware | 06-1196501 | |
|
|
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| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 122 Fifth Avenue, New York, NY | 10011 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(212) 633-3300
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of $.001 par value common stock outstanding as of August 31, 2002: 67,460,733.
BARNES & NOBLE, INC. AND SUBSIDIARIES
August 3, 2002
Index to Form 10-Q
| Page No. | ||||||||
| PART I - | FINANCIAL INFORMATION |
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| Item 1. | Financial Statements |
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Consolidated Statements of Operations — For the
13 weeks and 26 weeks ended August 3, 2002 and
August 4, 2001 |
3 | |||||||
Consolidated Balance Sheets – August 3, 2002,
August 4, 2001 and February 2, 2002 |
4 | |||||||
Consolidated Statement of Changes in
Shareholders’ Equity – August 3, 2002 |
6 | |||||||
Consolidated Statements of Cash Flows — For the
26 weeks ended August 3, 2002 and August 4, 2001 |
7 | |||||||
Notes to Consolidated Financial Statements |
8 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
16 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About
Market Risk |
24 | ||||||
| PART II - | OTHER INFORMATION |
|||||||
| Item 1. | Legal Proceedings |
25 | ||||||
| Item 4. | Submission
of Matters to a Vote of Security Holders |
25 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K |
25 | ||||||
SIGNATURES |
26 | |||||||
Certification of Chief Executive Officer,
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
27 | |||||||
Certification of Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
28 | |||||||
PART I — FINANCIAL INFORMATION
Item 1: Financial Statements
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(thousands of dollars, except per share data)
(unaudited)
| 13 weeks ended | 26 weeks ended | ||||||||||||||||||
| August 3, | August 4, | August 3, | August 4, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||||
Sales |
$ | 1,159,214 | 1,050,018 | 2,292,340 | 2,059,655 | ||||||||||||||
Cost of sales and occupancy |
857,159 | 774,696 | 1,706,652 | 1,525,282 | |||||||||||||||
Gross profit |
302,055 | 275,322 | 585,688 | 534,373 | |||||||||||||||
Selling and administrative expenses |
229,582 | 214,691 | 460,623 | 424,861 | |||||||||||||||
Legal settlement expense |
— | — | — | 4,500 | |||||||||||||||
Depreciation and amortization |
36,620 | 36,560 | 72,370 | 73,283 | |||||||||||||||
Pre-opening expenses |
2,250 | 896 | 4,000 | 1,721 | |||||||||||||||
Impairment charge |
— | — | 25,328 | — | |||||||||||||||
Operating profit |
33,603 | 23,175 | 23,367 | 30,008 | |||||||||||||||
Interest (net of interest income
of $941, $31, $1,959 and $499,
respectively) and amortization of
deferred financing fees |
(4,960 | ) | (9,830 | ) | (10,366 | ) | (21,107 | ) | |||||||||||
Equity in net loss of Barnes &
Noble.com |
(7,469 | ) | (13,906 | ) | (14,904 | ) | (28,221 | ) | |||||||||||
Other expense, primarily losses
attributable to equity-method
investments |
(14,685 | ) | (2,328 | ) | (16,498 | ) | (3,213 | ) | |||||||||||
Income (loss) before taxes
and minority interest |
6,489 | (2,889 | ) | (18,401 | ) | (22,533 | ) | ||||||||||||
Income taxes |
2,821 | (1,199 | ) | (7,406 | ) | (9,351 | ) | ||||||||||||
Income (loss) before
minority interest |
3,668 | (1,690 | ) | (10,995 | ) | (13,182 | ) | ||||||||||||
Minority interest |
(2,239 | ) | — | (3,897 | ) | — | |||||||||||||
Net income (loss) |
$ | 1,429 | (1,690 | ) | (14,892 | ) | (13,182 | ) | |||||||||||
Income (loss) per common share |
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Basic |
$ | 0.02 | (0.03 | ) | (0.22 | ) | (0.20 | ) | |||||||||||
Diluted |
$ | 0.02 | (0.03 | ) | (0.22 | ) | (0.20 | ) | |||||||||||
Weighted average common shares
outstanding |
|||||||||||||||||||
Basic |
67,413,000 | 66,172,000 | 67,332,000 | 65,689,000 | |||||||||||||||
Diluted |
69,739,000 | 66,172,000 | 67,332,000 | 65,689,000 | |||||||||||||||
See accompanying notes to consolidated financial statements.
3
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars, except per share data)
| August 3, | August 4, | February 2, | ||||||||||||||
| 2002 | 2001 | 2002 | ||||||||||||||
| (unaudited) | ||||||||||||||||
ASSETS |
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Current assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 205,000 | 26,107 | 108,218 | ||||||||||||
Receivables, net |
100,322 | 83,466 | 98,570 | |||||||||||||
Merchandise inventories |
1,395,971 | 1,267,082 | 1,285,005 | |||||||||||||
Prepaid expenses and other current assets |
112,637 | 103,686 | 99,201 | |||||||||||||
Total current assets |
1,813,930 | 1,480,341 | 1,590,994 | |||||||||||||
Property and equipment: |
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Land and land improvements |
3,247 | 3,247 | 3,247 | |||||||||||||
Buildings and leasehold improvements |
471,734 | 446,545 | 468,954 | |||||||||||||
Fixtures and equipment |
881,015 | 725,998 | 798,505 | |||||||||||||
| 1,355,996 | 1,175,790 | 1,270,706 | ||||||||||||||
Less accumulated depreciation and
amortization |
754,720 | 626,937 | 674,937 | |||||||||||||
Net property and equipment |
601,276 | 548,853 | 595,769 | |||||||||||||
Intangible assets, net |
341,081 | 351,606 | 352,897 | |||||||||||||
Investment in Barnes & Noble.com |
33,313 | 108,374 | 48,217 | |||||||||||||
Other noncurrent assets |
25,504 | 46,688 | 35,343 | |||||||||||||
Total assets |
$ | 2,815,104 | 2,535,862 | 2,623,220 | ||||||||||||
(Continued)
4
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars, except per share data)
| August 3, | August 4, | February 2, | ||||||||||||||
| 2002 | 2001 | 2002 | ||||||||||||||
| (unaudited) | ||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
||||||||||||||||
Accounts payable |
$ | 726,020 | 626,409 | 695,284 | ||||||||||||
Accrued liabilities |
344,504 | 255,563 | 444,944 | |||||||||||||
Total current liabilities |
1,070,524 | 881,972 | 1,140,228 | |||||||||||||
Long-term debt |
355,000 | 676,300 | 449,000 | |||||||||||||
Deferred income taxes |
115,207 | 72,622 | 36,178 | |||||||||||||
Other long-term liabilities |
106,880 | 100,485 | 109,704 | |||||||||||||
Minority interest |
184,719 | — | — | |||||||||||||
Shareholders’ equity: |
||||||||||||||||
Common stock; $.001 par value; 300,000,000
shares authorized; 72,959,598,
72,326,161 and 72,713,069 shares
issued, respectively |
73 | 72 | 73 | |||||||||||||
Additional paid-in capital |
823,896 | 715,459 | 728,015 | |||||||||||||
Accumulated other comprehensive loss |
(628 | ) | (8,224 | ) | (14,303 | ) | ||||||||||
Retained earnings |
276,810 | 214,553 | 291,702 | |||||||||||||
Treasury stock, at cost, 5,504,700 shares |
(117,377 | ) | (117,377 | ) | (117,377 | ) | ||||||||||
Total shareholders’ equity |
982,774 | 804,483 | 888,110 | |||||||||||||
Commitments and contingencies |
— | — | — | |||||||||||||
Total liabilities and shareholders’ equity |
$ | 2,815,104 | 2,535,862 | 2,623,220 | ||||||||||||
See accompanying notes to consolidated financial statements.
5
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders’ Equity
(thousands of dollars, except per share data)
(unaudited)
| Accumulated | ||||||||||||||||||||||||||
| Additional | Other | Treasury | ||||||||||||||||||||||||
| Common | Paid-In | Comprehensive | Retained | Stock at | ||||||||||||||||||||||
| Stock | Capital | Losses | Earnings | Cost | Total | |||||||||||||||||||||
Balance at February 2, 2002 |
$ | 73 | $ | 728,015 | $ | (14,303 | ) | $ | 291,702 | $ | (117,377 | ) | $ | 888,110 | ||||||||||||
Comprehensive loss: |
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Net loss |
— | — | — | (14,892 | ) | — | ||||||||||||||||||||
Other comprehensive loss: |
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Unrealized loss on
available-for-sale
securities (net of
deferred tax benefit
of $1,267) |
— | — | (1,823 | ) | — | — | ||||||||||||||||||||
Less: reclassification
adjustment, net of
deferred income tax
of $10,462 |
— | — | 14,806 | — | — | |||||||||||||||||||||
Unrealized gain on
derivative
instrument (net of
deferred tax of
$475) |
— | — | 692 | — | — | |||||||||||||||||||||
Total comprehensive loss |
(1,217 | ) | ||||||||||||||||||||||||
GameStop Corp. IPO (net of
deferred income tax of
$65,306) |
— | 90,184 | — | — | — | 90,184 | ||||||||||||||||||||
Exercise of 246,529 common
stock options (including
tax benefit of $1,154) |
— | 5,534 | — | — | — | 5,534 | ||||||||||||||||||||
Exercise of common stock
options of subsidiary |
— | 163 | — | — | — | 163 | ||||||||||||||||||||
Balance at August 3, 2002 |
$ | 73 | $ | 823,896 | $ | (628 | ) | $ | 276,810 | $ | (117,377 | ) | $ | 982,774 | ||||||||||||