track for $120 million annual operating expense reduction
ANN ARBOR, Mich., Aug. 26 /-/ -- Borders Group, Inc. (NYSE: BGP) today reported results for the second quarter, ended Aug. 2, 2008. The company generated a second quarter loss from continuing operations of $11.3 million or $0.19 per share, which represents an improvement over the same period last year when Borders Group recorded a loss of $18.1 million or $0.31 per share. On an earnings per share basis, this represents an improvement of 38.7%.
In the first half of the year, operating cash flow from continuing operations improved by $195.7 million. The company generated operating cash of $50.7 million from continuing operations in the first half of the year compared to operating cash used of $145 million in the same period a year ago with the improvement due to tighter management of inventory and other working capital. Inventory from continuing operations decreased at cost by $181.7 million in the second quarter compared to the same period last year. Debt -- including the prior-year debt of discontinued operations -- was reduced by approximately 37% or $272.7 million at the end of the second quarter to $465.7 million, which compares to $738.4 million for the same period a year ago. The debt reduction was driven primarily by improved management of inventory and other working capital, lower capital expenditures, and proceeds from the previously announced sale of the company's Australia/New Zealand/Singapore businesses.
Total consolidated sales from continuing operations in the second quarter, at $749.2 million, were down 6.9% over a year ago. At Borders domestic superstores, comparable store sales for the second quarter decreased by 8.9%, a result significantly impacted by comparison to the same period last year when the final book in the Harry Potter series was released. Excluding prior-year sales of the Harry Potter book, comparable store sales at Borders domestic superstores would have declined by 5.1% in the second quarter. The music category continued to experience negative sales trends resulting from declines in overall demand, and as planned, a reduction in inventory and floor space devoted to the category. Factoring out music and the impact of Harry Potter, Borders domestic superstore same-store sales in the second quarter would have declined by 3.0%.
In the Waldenbooks Specialty Retail segment, comparable store sales in the second quarter decreased by 7.0% over the same period a year ago. Excluding Harry Potter, same-store sales in the Waldenbooks segment would have declined by 1.4% for the quarter.
All earnings and loss figures presented throughout this news release are provided on a GAAP basis unless otherwise stated.
"We have not only improved profitability, but also substantially reduced debt, improved cash flow and significantly strengthened our balance sheet," said Borders Group Chief Executive Officer George Jones. "Our focus on expense reduction, inventory management and improved gross margin is clearly working, and we have managed to show substantial improvement in a very difficult retail environment. We will maintain this discipline and continue to manage the company prudently while also addressing the need to improve the top line."
Consolidated Q2 Results
Borders Group achieved second quarter consolidated sales from continuing operations of $749.2 million, a decrease of 6.9% over 2007. As stated, the second quarter loss from continuing operations improved to $11.3 million or $0.19 per share compared to $18.1 million or $0.31 per share a year ago. The improvement was due primarily to expense reductions, lower interest expense and a tax benefit. Excluding non-operating adjustments, the second quarter loss from continuing operations improved to $10.5 million or $0.18 per share from $12.1 million or $0.21 per share a year ago.
Consolidated gross margin from continuing operations as a percent of sales decreased by 0.8% from 25.2% to 24.4% in the second quarter as the negative impact of de-leveraging occupancy costs more than offset the gross margin benefit of a favorable sales mix and lower promotional discounts. Excluding occupancy, second-quarter consolidated gross margin from continuing operations would have increased by 0.9% compared to the prior year.
As a percent of sales, SG&A from continuing operations improved by 0.2% from 27.5% to 27.3% in the second quarter due to expense reduction initiatives. SG&A dollar expenses declined by $16.7 million in the second quarter compared to the same period last year. The company remains on-track to deliver its goal of reducing annual expenses by $120 million beginning in 2009, with half of that reduction to be achieved this fiscal year.
At the end of the second quarter, year-to-date capital expenditures from continuing operations were $54.1 million compared to $66.6 million a year ago. Debt-including discontinued operations- was reduced by $272.7 million to $465.7 million at the end of the second quarter compared to $738.4 million for the same period a year ago. In the second quarter, inventory from continuing operations was reduced by 14.3% -- or $181.7 million at cost -- compared to last year.
Domestic Borders Superstores
Total second quarter sales at domestic Borders superstores were $614.5 million, a decrease of 6.7% over the same period in 2007. As stated, comparable store sales decreased by 8.9% for the period compared to last year. Excluding Harry Potter, same-store sales in the segment decreased by 5.1% in the second quarter. Excluding Harry Potter and the music category, same-store sales declined by 3.0% for the quarter compared to one year ago. The book category overall was down 2.5% in the second quarter excluding Harry Potter on a same-store sales basis. Bestselling titles included "Breaking Dawn," "The Last Lecture," "The Shack," "Audition" and "When You Are Engulfed in Flames." Categories that performed well included Bargain and Children's.
Borders superstores reported an operating loss of $7.7 million in the second quarter compared to an operating loss of $2.9 million for the same period a year ago. The loss was a result of negative same-store sales results, which were partially offset by expense reductions and improved gross margin (excluding occupancy).
The company opened four new Borders superstores in the U.S. during the period -- all of them new concept stores -- and ended the second quarter with a total of 518 domestic superstore locations.
Borders.com
On May 27, Borders Group introduced its new Borders.com e-commerce site, consistent with the company's strategic plan. A grand opening campaign was launched in mid-July to market the site with emphasis on the company's over 28 million Borders Rewards loyalty program members. In the second quarter, Borders.com generated sales of $7.4 million. Borders.com results are included in the Domestic Borders Superstore segment.
Waldenbooks Specialty Retail
Excluding Harry Potter, comparable store sales decreased within the Waldenbooks Specialty Retail segment by 1.4% in the second quarter and decreased by 7.0% with Harry Potter. Total sales in the segment were down by 17.0% in the second quarter to $96.9 million, as the number of stores was reduced from 532 at the close of the second quarter 2007 to 468 at the end of the second quarter this year.
The second quarter operating loss for the Waldenbooks Specialty Retail segment was $7.7 million compared to $12.4 million in 2007 with the improvement primarily due to expense reduction initiatives and better gross margin performance (excluding occupancy).
International
With the second quarter 2008 sale of the company's Australia/New Zealand/Singapore businesses and the 2007 sale of its U.K. and Ireland operations, Borders Group's International segment now consists primarily of its Paperchase business, headquartered in London. Also included in the segment are the three Borders superstores in Puerto Rico and the company's franchise operations in the U.A.E. and Malaysia.
The company has accounted for the sale of the Australia/New Zealand/Singapore businesses in the second quarter under discontinued operations.
In the second quarter, sales within the International segment (excluding franchise stores) totaled $30.4 million, which is up 3.8% compared to the same period a year ago. Excluding the impact of foreign currency translation, sales would have increased by 4.9%.
Non-Operating Adjustments
Consolidated net loss and earnings per share figures reported here include the impact of non-operating adjustments, which in the second quarter totaled a $0.8 million charge comprised of severance costs, store closure and relocation costs, professional fees related to the strategic alternatives process and amortization of debt issuance costs. These costs were offset by income related to the fair market value adjustment of the warrant liability and related tax benefit.
Discontinued Operations
As previously reported, Borders Group sold its Australia/New Zealand/Singapore businesses for $87.9 million (USD) plus a working capital payment expected to be received in the third quarter. Additional deferred payments of up to approximately $14 million (USD) will be paid to Borders Group on or about March 31, 2009 if certain performance targets are achieved. In the second quarter, the company recorded an after-tax gain of $2.6 million from the sale.
Strategic Alternatives Process
The previously announced strategic alternatives process relating to the company and to Paperchase continues as the company evaluates its alternatives.
Next Financial Release
Borders Group plans to issue third quarter financial results Nov. 25, 2008 after market close with a conference call for investors to follow at 8 a.m. Nov. 26, 2008.
About Borders Group
Headquartered in Ann Arbor, Mich., Borders Group, Inc. (NYSE: BGP), is a leading retailer of books, music and movies with more than 28,000 employees. Through its subsidiaries, the company operates more than 1,100 stores worldwide primarily under the Borders(R) and Waldenbooks(R) brand names and recently launched Borders.com for online shopping. For more information, visit http://www.borders.com/aboutus .
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," "continue," "maintain," "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, EBIT margins and inventory turns, liquidity, same-store sales, cost reduction initiatives, and anticipated capital expenditures and depreciation and amortization amounts), its exploration of strategic alternatives, and its cost reduction initiatives and the benefits thereof. 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 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
August 2, 2008(1) August 4, 2007(2)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis(3) (3) Basis Basis(4) (4) Basis
Domestic Borders
Superstores $614.5 $- $614.5 $658.6 $- $658.6
Borders.com 7.4 - 7.4 - - -
Waldenbooks
Specialty Retail 96.9 - 96.9 116.7 - 116.7
International 30.4 - 30.4 29.3 - 29.3
Total sales 749.2 - 749.2 804.6 - 804.6
Other revenue 9.3 - 9.3 7.8 - 7.8
Total revenue 758.5 - 758.5 812.4 - 812.4
Cost of goods
sold, including
occupancy costs 575.7 - 575.7 609.1 0.9 610.0
Gross margin 182.8 - 182.8 203.3 (0.9) 202.4
Selling, general
and administrative
expenses 194.6 10.2 204.8 214.4 7.1 221.5
Pre-opening expense 1.1 - 1.1 1.6 - 1.6
Asset impairments
and other
writedowns - - - - 0.3 0.3
Operating loss (12.9) (10.2) (23.1) (12.7) (8.3) (21.0)
Interest expense 6.6 (6.4) 0.2 10.3 - 10.3
Loss before
income taxes (19.5) (3.8) (23.3) (23.0) (8.3) (31.3)
Income taxes (9.0) (3.0) (12.0) (10.9) (2.3) (13.2)
Loss from
continuing
operations $(10.5) $(0.8) $(11.3) $(12.1) $(6.0) $(18.1)
Loss on operations
of discontinued
operations
(net of tax) (0.5) - (0.5) (3.2) (2.1) (5.3)
Gain (loss) on
disposal of
discontinued
operations
(net of tax) - 2.6 2.6 - (1.7) (1.7)
Gain (loss)
from
discontinued
operations
(net of tax) (0.5) 2.6 2.1 (3.2) (3.8) (7.0)
Net loss $(11.0) $1.8 $(9.2) $(15.3) $(9.8) $(25.1)
Basic EPS from
continuing
operations $(0.18) $(0.01) $(0.19) $(0.21) $(0.10) $(0.31)
Basic EPS
from
discontinued
operations $- $0.04 $0.04 $(0.05) $(0.07) $(0.12)
Basic EPS
including
discontinued
operations $(0.18) $0.03 $(0.15) $(0.26) $(0.17) $(0.43)
Basic weighted
avg. common
shares 60.5 60.5 60.5 58.8 58.8 58.8
Comparable Store
Sales
Domestic Borders
Superstores (8.9%) 4.6%
Waldenbooks
Specialty Retail (7.0%) 6.2%
Sales and Earnings Summary (As Percentage of Total Sales)
Quarter Ended Quarter Ended
August 2, 2008(1) August 4, 2007(2)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis(3) (3) Basis Basis(4) (4) Basis
Domestic Borders
Superstores 82.0% -% 82.0% 81.9% -% 81.9%
Borders.com 1.0 - 1.0 - - -
Waldenbooks
Specialty Retail 12.9 - 12.9 14.5 - 14.5
International 4.1 - 4.1 3.6 - 3.6
Total sales 100.0 - 100.0 100.0 - 100.0
Other revenue 1.2 - 1.2 1.0 - 1.0
Total revenue 101.2 - 101.2 101.0 - 101.0
Cost of goods
sold, including
occupancy costs 76.8 - 76.8 75.7 0.1 75.8
Gross margin 24.4 - 24.4 25.3 (0.1) 25.2
Selling, general
and administrative
expenses 25.9 1.4 27.3 26.6 0.9 27.5
Pre-opening expense 0.2 - 0.2 0.3 - 0.3
Asset impairments
and other
writedowns - - - - - -
Operating loss (1.7) (1.4) (3.1) (1.6) (1.0) (2.6)
Interest expense 0.9 (0.9) - 1.3 - 1.3
Loss before
income taxes (2.6) (0.5) (3.1) (2.9) (1.0) (3.9)
Income taxes (1.2) (0.4) (1.6) (1.4) (0.3) (1.7)
Loss from
continuing
operations (1.4)% (0.1)% (1.5)% (1.5)% (0.7)% (2.2)%
(1) The results of Borders Australia, Borders New Zealand and Borders
Singapore are reported as discontinued operations.
(2) The results of Borders Ireland, Books etc., UK Superstores, Borders
Australia, Borders New Zealand and Borders Singapore are reported as
discontinued operations.
(3) Results from 2008 were impacted by a number of non-operating items,
including store closure costs, severance costs, professional fees
related to strategic alternatives and amortization of the term loan
discount and debt issuance costs, offset by income related to the fair
market value adjustment of the warrant liability and related tax
benefit. Therefore, solely for analytical purposes and as an aid to
better understand underlying trends, operating basis data are
presented excluding these items.
(4) Results from 2007 were impacted by a number of non-operating items,
including store closure costs and severance costs. Therefore, solely
for analytical purposes and as an aid to better understand underlying
trends, operating basis data are presented excluding these items.
Sales and Earnings Summary
Six Months Ended Six Months Ended
August 2, 2008(1) August 4, 2007(2)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis(3) (3) Basis Basis(4) (4) Basis
Domestic Borders
Superstores $1,215.2 $- $1,215.2 $1,273.6 $- $1,273.6
Borders.com 7.4 - 7.4 - - -
Waldenbooks
Specialty Retail 192.9 - 192.9 224.8 - 224.8
International 63.2 - 63.2 57.6 - 57.6
Total sales 1,478.7 - 1,478.7 1,556.0 - 1,556.0
Other revenue 15.6 - 15.6 13.1 - 13.1
Total revenue 1,494.3 - 1,494.3 1,569.1 - 1,569.1
Cost of goods
sold, including
occupancy costs 1,141.3 1.5 1,142.8 1,186.6 5.2 1,191.8
Gross margin 353.0 (1.5) 351.5 382.5 (5.2) 377.3
Selling, general
and administrative
expenses 405.0 12.4 417.4 426.0 8.3 434.3
Pre-opening expense 2.1 - 2.1 2.5 - 2.5
Asset impairments
and other
writedowns - - - - 1.2 1.2
Operating loss (54.1) (13.9) (68.0) (46.0) (14.7) (60.7)
Interest expense 14.9 (8.8) 6.1 19.1 - 19.1
Loss before
income taxes (69.0) (5.1) (74.1) (65.1) (14.7) (79.8)
Income taxes (28.0) (4.7) (32.7) (29.4) (3.8) (33.2)
Loss from
continuing
operations $(41.0) $(0.4) $(41.4) $(35.7) $(10.9) $(46.6)
Loss on operations
of discontinued
operations
(net of tax) (1.7) - (1.7) (9.5) (1.6) (11.1)
Gain (loss) on
disposal of
discontinued
operations
(net of tax) - 2.2 2.2 - (3.3) (3.3)
Gain (loss) from
discontinued
operations
(net of tax) (1.7) 2.2 0.5 (9.5) (4.9) (14.4)
Net loss $(42.7) $1.8 $(40.9) $(45.2) $(15.8) $(61.0)
Basic EPS
from continuing
operations $(0.68)$(0.01) $(0.69) $(0.61) $(0.18) $(0.79)
Basic EPS from
discontinued
operations $(0.03) $0.04 $0.01 $(0.16) $(0.09) $(0.25)
Basic EPS
including
discontinued
operations $(0.71) $0.03 $(0.68) $(0.77) $(0.27) $(1.04)
Basic weighted
avg. common
shares 60.0 60.0 60.0 58.7 58.7 58.7
Comparable Store
Sales
Domestic Borders
Superstores (6.5%) 1.3%
Waldenbooks
Specialty Retail (4.0%) 2.6%
Sales and Earnings Summary (As Percentage of Total Sales)
Six Months Ended Six Months Ended
August 2, 2008(1) August 4, 2007(2)
Operating Adjustments GAAP Operating Adjustments GAAP
Basis(3) (3) Basis Basis(4) (4) Basis
Domestic Borders
Superstores 82.2% -% 82.2% 81.9% -% 81.9%
Borders.com 0.5 - 0.5 - - -
Waldenbooks
Specialty Retail 13.0 - 13.0 14.4 - 14.4
International 4.3 - 4.3 3.7 - 3.7
Total sales 100.0 - 100.0 100.0 - 100.0
Other revenue 1.1 - 1.1 0.8 - 0.8
Total revenue 101.1 - 101.1 100.8 - 100.8
Cost of goods
sold, including
occupancy costs 77.2 0.1 77.3 76.3 0.3 76.6
Gross margin 23.9 (0.1) 23.8 24.5 (0.3) 24.2
Selling, general
and administrative
expenses 27.4 0.8 28.2 27.4 0.5 27.9
Pre-opening expense 0.2 - 0.2 0.2 - 0.2
Asset impairments
and other writedowns - - - - 0.1 0.1
Operating loss (3.7) (0.9) (4.6) (3.1) (0.9) (4.0)
Interest expense 1.0 (0.6) 0.4 1.1 - 1.1
Loss before
income taxes (4.7) (0.3) (5.0) (4.2) (0.9) (5.1)
Income taxes (1.9) (0.3) (2.2) (1.9) (0.2) (2.1)
Loss from
continuing
operations (2.8)% -% (2.8)% (2.3)% (0.7)% (3.0)%
(1) The results of Borders Australia, Borders New Zealand and Borders
Singapore are reported as discontinued operations.
(2) The results of Borders Ireland Limited, Books etc., U.K. Superstores,
Borders Australia, Borders New Zealand and Borders Singapore are
reported as discontinued operations.
(3) Results from 2008 were impacted by a number of non-operating items,
including store closure costs, severance costs, professional fees
related to strategic alternatives and amortization of the term loan
discount and debt issuance costs, offset by income related to the fair
market value adjustment of the warrant liability and related tax
benefit. Therefore, solely for analytical purposes and as an aid to
better understand underlying trends, operating basis data are
presented excluding these items.
(4) Results from 2007 were impacted by a number of non-operating items,
including store closure costs and severance costs. 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
August 2, August 4, February 2,
2008 2007 2008
Assets
Cash and cash equivalents $43.9 $68.6 $58.5
Inventory 1,090.3 1,272.0 1,242.0
Other current assets 118.1 104.6 103.5
Current assets of discontinued
operations(1) - 215.8 102.0
Property and equipment, net 584.5 590.7 592.8
Other assets and deferred charges 114.6 112.6 109.8
Goodwill 40.5 40.3 40.5
Noncurrent assets of discontinued
operations - 177.3 53.6
Total assets $1,991.9 $2,581.9 $2,302.7
Liabilities, Minority Interest and
Stockholders' Equity
Short-term borrowings and current
portion of long-term debt $459.4 $691.0 $548.6
Accounts payable 469.2 433.7 511.9
Other current liabilities 268.4 311.4 349.8
Current liabilities of discontinued
operations(2) - 175.4 57.5
Long-term debt 6.3 5.1 5.4
Other long-term liabilities 363.9 312.4 325.0
Noncurrent liabilities of
discontinued operations - 76.5 25.4
Total liabilities 1,567.2 2,005.5 1,823.6
Minority interest 2.2 2.1 2.2
Total stockholders' equity 422.5 574.3 476.9
Total liabilities, minority
interest and stockholders'
equity $1,991.9 $2,581.9 $2,302.7
(1) Includes $6.9 and $2.5 million of cash and cash equivalents as of
August 4, 2007 and February 2, 2008, respectively.
(2) Includes $42.3 million of short-term borrowings as of August 4, 2007.
Certain reclassifications have been made to conform to current year
presentation.
Condensed Consolidated Statements of Cash Flows
Quarter Ended Six Months Ended
August 2, August 4, August 2, August 4,
2008 2007 2008 2007
CASH PROVIDED BY (USED FOR):
OPERATIONS
Loss from continuing operations (11.3) (18.1) (41.4) (46.6)
Adjustments to reconcile loss from
continuing operations to
operating cash flows:
Depreciation 27.8 24.3 54.7 48.5
Change in other long-term
assets, liabilities and
deferred charges 5.9 (0.7) (0.1) 2.1
Decrease in inventories 57.6 96.2 151.6 21.9
Increase (decrease) in accounts
payable 6.7 (75.9) (42.7) (137.5)
Cash used for other current assets
and other current liabilities (17.0) (10.3) (71.4) (33.4)
Net cash provided by (used for)
operating activities of
continuing operations 69.7 15.5 50.7 (145.0)
INVESTING
Capital expenditures (27.1) (32.1) (54.1) (66.6)
Proceeds from the sale of
discontinued operations 87.9 - 87.9 -
Net cash provided by (used for)
investing activities of
continuing operations 60.8 (32.1) 33.8 (66.6)
FINANCING
Net funding from (repayment of)
debt and financing obligations (128.8) 9.9 (83.6) 182.9
Issuance and repurchase of common
stock 1.5 3.0 3.6 5.9
Net funding from (repayment of)
long-term debt (0.4) - 0.7 (0.2)
Cash dividends paid - (6.5) (6.5) (13.0)
Net cash provided by (used for)
financing activities of
continuing operations (127.7) 6.4 (85.8) 175.6
Effect of exchange rates on cash
and equivalents 0.1 (4.5) 0.1 (3.0)
Net cash provided by (used for)
discontinued operations 6.0 10.8 (13.4) 10.0
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 8.9 (3.9) (14.6) (29.0)
Cash and equivalents at beginning
of period 35.0 72.5 58.5 97.6
Cash and equivalents at end of
period $43.9 $68.6 $43.9 $68.6
Store Activity Summary
Quarter Ended Six Months Ended Year Ended
August 2, August 4, August 2, August 4, February 2,
2008 2007 2008 2007 2008
Domestic Borders
Superstores
Beginning number of
stores 514 502 509 499 499
Openings 4 4 9 8 18
Closings - - - (1) (8)
Ending number of
stores 518 506 518 506 509
Ending square footage
(in millions) 12.7 12.5 12.7 12.5 12.6
Waldenbooks Specialty
Retail Stores (1)
Beginning number of
stores 476 553 490 564 564
Openings - - - - 1
Closings (8) (21) (22) (32) (75)
Ending number of
stores 468 532 468 532 490
Ending square footage
(in millions) 1.8 2.0 1.8 2.0 1.9
International Borders
Superstores
Beginning number of
stores 33 70 32 68 68
Openings - - 1 2 6
Closings - - - - -
Sold (30) - (30) - (42)
Ending number of stores 3 70 3 70 32
Ending square footage
(in millions) 0.1 1.7 0.1 1.7 0.7
(1) Includes all small format stores in malls, airports and outlet malls.
Borders Group, Inc. Segment Financial Information
(dollars in millions, except per share amounts)
Unaudited
Quarter Ended Quarter Ended
August 2, 2008 August 4, 2007
Operating Adjustments GAAP Operating Adjustments GAAP
Basis(1) (1) Basis Basis(2) (2) Basis
Domestic Borders
Superstores
Superstore
sales $614.5 $ - $614.5 $658.6 $ - $658.6
Borders.com
sales 7.4 - 7.4 - - -
Total sales $621.9 $ - $621.9 $658.6 $ - $658.6
Depreciation
expense 24.1 - 24.1 21.3 0.3 21.6
Operating loss (3.1) (4.6) (7.7) 2.4 (5.3) (2.9)
Waldenbooks
Specialty Retail
Sales $96.9 $ - $96.9 $116.7 $ - $116.7
Depreciation
expense 2.2 - 2.2 1.6 - 1.6
Operating loss (6.7) (1.0) (7.7) (11.1) (1.3) (12.4)
International (3)
Sales $30.4 $ - $30.4 $29.3 $ - $29.3
Depreciation
expense 1.5 - 1.5 1.1 - 1.1
Operating loss (1.3) (0.1) (1.4) (0.5) - (0.5)
Corporate (4)
Operating loss $(1.8) $(4.5) $(6.3) $(3.5) $(1.7) $(5.2)
Consolidated (3)
Sales $749.2 $ - $749.2 $804.6 $ - $804.6
Depreciation
expense 27.8 - 27.8 24.0 0.3 24.3
Operating loss (12.9) (10.2) (23.1) (12.7) (8.3) (21.0)
Six Months Ended Six Months Ended
August 2, 2008 August 4, 2007
Operating Adjustments GAAP Operating Adjustments GAAP
Basis(1) (1) Basis Basis(2) (2) Basis
Domestic Borders
Superstores
Superstore
sales $1,215.2 $ - $1,215.2 $1,273.6 $ - $1,273.6
Borders.com
sales 7.4 - 7.4 - - -
Total
sales $1,222.6 $ - $1,222.6 $1,273.6 $ - $1,273.6
Depreciation
expense 47.1 - 47.1 43.1 0.5 43.6
Operating loss (31.0) (6.7) (37.7) (14.4) (10.5) (24.9)
Waldenbooks
Specialty Retail
Sales $192.9 $ - $192.9 $224.8 $ - $224.8
Depreciation
expense 4.6 - 4.6 2.7 - 2.7
Operating loss (19.5) (1.8) (21.3) (24.4) (2.0) (26.4)
International(3)
Sales $63.2 $ - $63.2 $57.6 $ - $57.6
Depreciation
expense 3.0 - 3.0 2.2 - 2.2
Operating loss 0.1 (0.1) - (1.1) - (1.1)
Corporate(4)
Operating loss $(3.7) $(5.3) $(9.0) $(6.1) $(2.2) $(8.3)
Consolidated(3)
Sales $1,478.7 $ - $1,478.7 $1,556.0 $ - $1,556.0
Depreciation
expense 54.7 - 54.7 48.0 0.5 48.5
Operating loss (54.1) (13.9) (68.0) (46.0) (14.7) (60.7)
(1) Results from 2008 were impacted by a number of non-operating items,
including store closure costs, severance costs, professional fees
related to strategic alternatives and amortization of the term loan
discount and debt issuance costs, offset by income related to the fair
market value adjustment of the warrant liability and related tax
benefit. 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 2007 were impacted by a number of non-operating items,
including store closure costs and severance costs. Therefore, solely
for analytical purposes and as an aid to better understand underlying
trends, operating basis data are presented excluding these items.
(3) Excludes the results of discontinued operations (Borders Ireland,
Books etc., UK Superstores, Borders Australia, Borders New Zealand and
Borders Singapore).
(4) The Corporate segment includes various corporate governance costs and
corporate incentive costs.
