Borders Group Reports Q1 2009 Results
By Press Release - May 27 , 2009
ANN ARBOR, Mich.,
· Adjusted EBITDA in the first quarter was $3.0 million compared to an adjusted EBITDA loss of $14.3 million a year ago.
· First quarter cash flow from operations improved by $19.5 million over last year.
· Operating SG&A expenses and inventory were reduced from the prior year by $48.1 million and $254.9 million, respectively.
· Debt at the end of the first quarter was reduced by $266.0 million to $325.9 million—a 44.9% reduction over a year ago and $10.3 million—or 3.1%—less than the end of fiscal 2008.
· Total consolidated first quarter sales were $641.5 million, down 12.1% from the prior year.
· Comparable store sales for the first quarter declined by 13.5% and 5.5% at Borders superstores and Waldenbooks Specialty Retail stores, respectively.
· On an operating basis, the company generated a first quarter loss from continuing operations of $15.9 million or $0.27 per share compared to a loss of $30.5 million or $0.51 cents per share for the same period a year ago. On a GAAP basis, the first quarter loss from continuing operations was $86.0 million or $1.44 per share compared to a loss of $30.1 million or $0.50 per share a year ago. The $1.44 per share loss includes $1.17 per share of non-operating charges that were primarily non-cash.
“We continued to strengthen the financial structure of the company by making further improvements to cash flow, debt and adjusted EBITDA,” said Borders Group Chief Executive Officer Ron Marshall. “Make no mistake about it, we have much more work to do and will continue to maintain our financial discipline. At the same time, we know that we cannot save our way to prosperity. Our long-term success will come from doing a much better job of driving sales and that’s where our focus is right now.”
Consolidated Results
All sales and earnings/loss figures reported throughout this news release are on a continuing operations basis unless otherwise noted.
First quarter consolidated sales were $641.5 million, down 12.1% from a year ago. On an operating basis, Borders Group generated a first quarter loss of $15.9 million or $0.27 per share compared to a loss of $30.5 million or $0.51 per share for the same period last year. On a GAAP basis, the first quarter loss was $86.0 million or $1.44 per share compared to a GAAP loss of $30.1 million or $0.50 per share a year ago. The first quarter GAAP loss includes non-operating, after-tax charges—primarily non-cash—totaling $70.1 million.
Excluding non-operating charges, SG&A as a percent of sales improved over last year by 3.6% from 28.9% to 25.3% due to the company’s aggressive expense reduction initiatives, which were partially offset by de-leveraging due to negative sales trends. Expense reduction initiatives helped reduce SG&A dollar expenses by $48.1 million compared to the prior year. On a GAAP basis, SG&A as a percent of sales decreased in the first quarter by 2.4% from 29.3% to 26.9%.
Operating cash flow improved in the first quarter by $19.5 million to cash generated of $2.4 million compared to cash used of $17.1 million for the period in the prior year.
First quarter capital expenditures were $2.4 million compared to $27.0 million in 2008 as management took aggressive action to reduce capital expenditures. Debt at the end of the first quarter totaled $325.9 million compared to debt at the end of the first quarter a year ago of $591.9 million, a decrease of 44.9%. Inventory productivity improved as the company reduced its first quarter inventory investment to $893.0 million compared to year-ago inventory of $1.1 billion, a 22.2% reduction.
Non-Operating Adjustments
The following table details the non-operating adjustments for the first quarter 2009
Non-Operating Adjustments— Q1 2009
Consulting, professional and other fees— $4.3 million— Cash item
Store closure and related items— ($0.2) million— Cash item
Severance and other compensation costs— $0.4 million— Cash item
Accelerated depreciation— multimedia space reduction— $4.3 million— Non-cash item
Term loan cost/discount amortization— $1.6 million— Non-cash item
International “put” expiration— $16.2 million— Non-cash item
Warrant liability fair value adjustment— $32.9 million— Non-cash item
Total pre-tax non-operating adjustments— $59.5 million-
Income taxes— $10.6 million— Non-cash item
Total after-tax non-operating adjustments— $70.1 million— $1.17 EPS
Borders Superstores
Total sales at Borders superstores, including Borders.com, in the first quarter were $536.7 million, down 10.7% from a year ago. Comparable store sales decreased by 13.5% at Borders superstores in the first quarter.
On an operating basis, the segment generated a first quarter loss of $12.7 million compared to a loss of $27.9 million for the same period a year ago. On a GAAP basis, the segment generated an operating loss in the first quarter of $16.5 million compared to a loss of $30.0 million the prior year.
No store openings or closings took place in the first quarter; therefore, the total number of Borders superstores remains unchanged from the close of fiscal 2008 at 515 locations.
Waldenbooks Specialty Retail
Total sales in the first quarter within the Waldenbooks Specialty Retail segment were $76.9 million, a 19.9% decline compared to the same period in 2008 as the number of stores was decreased to 376 at the end of the first quarter this year compared to 476 stores that were open at the close of the same period a year ago. The company closed 11 Waldenbooks locations in the first quarter of this year. Comparable store sales in the first quarter at Waldenbooks decreased by 5.5%.
On an operating basis, the segment generated an operating loss of $5.6 million compared to an operating loss of $12.8 million for the same period in 2008. On a GAAP basis, the segment generated an operating loss of $6.8 million compared to a loss of $13.6 million for the same period in 2008.
International
Total sales within the International segment (which consists primarily of Paperchase) totaled $27.9 million in the first quarter, which is down by 14.9% compared to a year ago. Excluding the impact of foreign currency translation, segment sales increased by 9.5% for the period.
On both an operating basis and GAAP basis, operating income in the International segment for the first quarter was $0.1 million compared to operating income of $1.4 million a year ago.
Next Financial Release-Q2 2009
Borders Group plans to issue fiscal second quarter 2009 results August 25.
About Borders Group
Headquartered in
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 condition and performance (including earnings per share, gross margins and inventory turns, liquidity, sales, including same-store sales, cost reduction initiatives, and anticipated capital expenditures and depreciation and amortization amounts) 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—including vendor credit—to fund the company’s operations and to carry out its strategic plans and 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.
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.
Being A Nerd Easier Than You Think
