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Barnes & Noble Reports Fiscal 2013 Third Quarter Financial Results



  Barnes & Noble Reports Fiscal 2013 Third Quarter Financial Results

           Strategic Committee to Evaluate Sale of Retail Business

Business Wire

NEW YORK -- February 28, 2013

Barnes & Noble, Inc. (NYSE: BKS) today reported sales and earnings for its
fiscal 2013 third quarter ended January 26, 2013.

Third quarter consolidated revenues were $2.2 billion, a decrease of 8.8% as
compared to the prior year. Third quarter consolidated earnings before
interest, taxes, depreciation and amortization (EBITDA) were $55 million, as
compared to $150 million a year ago. Third quarter consolidated net losses
were $6.1 million, as compared to net earnings of $52 million a year ago.
Third quarter results were adversely impacted by NOOK inventory charges and
promotional allowances discussed below in the NOOK section. Third quarter net
losses were $0.18 per share, which includes the impact of the dividend on
redeemable preferred shares, as compared to net earnings of $0.71 per share a
year ago.

On January 23, 2013, the company announced the completion of its strategic
partnership with Pearson, which invested $89.5 million in NOOK Media LLC for
preferred membership interests representing a 5% equity stake. Following the
closing of the transaction, Barnes & Noble now owns approximately 78.2% of the
NOOK Media subsidiary and Microsoft, which also holds preferred membership
interests, owns approximately 16.8%.

The company ended the third quarter with cash of $214 million and no
borrowings under its $1 billion Revolving Credit facility, as compared to a
net debt position of $74 million a year ago.

Third Quarter 2013 Results from Operations

Segment results for the fiscal 2013 and fiscal 2012 third quarters are as
follows:

                                                                                                                                           
                        Revenues                                                          EBITDA
$ in                                                        Increase/(Decrease)                                            Increase/(Decrease)
millions
                        Q3 2013           Q3 2012           $               %             Q3 2013          Q3 2012         $                %
Retail                  $ 1,505.2         $ 1,677.3         ($172.2 )       -10.3 %       $ 212.0          $ 197.6         $ 14.4           7.3    %
College                   517.2             525.6           (8.4    )       -1.6  %         33.9             35.2            (1.3   )       -3.6   %
NOOK                      316.0             426.6           (110.6  )       -25.9 %         (190.4 )         (82.8 )         (107.6 )       -129.9 %
Elimination               (114.4  )         (190.4  )       76.0            -39.9 %         n/a              n/a             n/a            n/a     
^(1)
Total                   $ 2,223.9         $ 2,439.1         ($215.2 )       -8.8  %       $ 55.5           $ 149.9           ($94.5 )       -63.0  %
                                                                                                                                             

(1) Represents the elimination of intercompany sales from NOOK to Barnes &
Noble Retail and Barnes & Noble College on a sell through basis.

Retail

The Retail segment, which consists of the Barnes & Noble bookstores and BN.com
businesses, had revenues of $1.5 billion for the quarter, decreasing 10.3%
over the prior year. This decrease was attributable to a 7.3% decline in
comparable store sales, store closures and lower online sales. Core comparable
store sales, which exclude sales of NOOK products, decreased 2.2% as compared
to the prior year. Sales of NOOK products in the Retail segment declined
during the quarter due to lower unit volume.

Despite the sales decline, Retail EBITDA increased 7.3%, from $198 million to
$212 million during the third quarter, resulting from a higher sales mix of
higher margin core products and expense management.

College

The College segment, which consists of the Barnes & Noble College bookstores
business, had revenues of $517 million, decreasing 1.6% as compared to a year
ago. Comparable College store sales decreased 5.2% for the third quarter as
compared to the prior year period, as the back-to-school rush season extended
past the close of the company’s third fiscal quarter. Factoring in the two
additional weeks in February that contributed to this year’s rush season,
comparable store sales decreased 2.1% for the quarter. College comparable
store sales reflect the retail selling price of a new or used textbook when
rented, rather than solely the rental fee received and amortized over the
rental period.

College EBITDA decreased $1.3 million during the quarter as compared to a year
ago to $34 million. College’s product margins improved during the quarter on a
higher mix of higher margin textbook rentals, while expenses increased due to
new store growth and continued investments in digital education.

NOOK

The NOOK segment, which consists of the company's digital business (including
devices, digital content and accessories), had revenues of $316 million for
the quarter. This represents a decline of 26% as compared to the same period a
year ago, primarily as a result of lower device unit volume. In addition, the
company recorded $21 million of incremental channel partner returns given the
holiday sales shortfall, as well as $15 million of promotional allowances to
optimize future sales opportunities. Digital content sales increased 6.8% for
the third quarter over the prior year.

NOOK EBITDA losses were $190 million for the third quarter, as compared to $83
million a year ago, primarily resulting from the previously noted sales
shortfall, inventory charges, and higher operating expenses. The company
recorded $59 million of additional inventory charges during the third quarter,
as the holiday sales shortfall resulted in higher than anticipated levels of
finished and unfinished goods. Operating expenses increased over the prior
year on higher advertising costs.

In response to the device sales shortfall over the holiday season, NOOK is
calibrating its business model and has implemented a cost reduction program
that the company projects will significantly reduce NOOK’s expenses.

“In terms of the NOOK Media business, we’ve taken significant actions to begin
to right size our cost structure in the NOOK segment, while also taking a
large markdown on NOOK devices in order to enhance our ability to achieve our
estimated sales plans in subsequent quarters,” said William Lynch, Chief
Executive Officer of Barnes & Noble. “NOOK Media has been financing itself
since October of 2012 due to the strong investment partners we've been able to
attract in Microsoft and Pearson. Coming off the holiday shortfall, we're in
the process of making some adjustments to our strategy as we continue to
pursue the exciting growth opportunities ahead for us in the consumer and
digital education content markets.” Mr. Lynch also said that going forward
NOOK Media still remains committed to its Tablet and e-Reader business. And,
he reiterated that NOOK and Barnes & Noble bookstores will continue to have a
close relationship. “Without question, our bookstores have made a significant
contribution to NOOK’s success over the past three years. And, in turn, our
award-winning line of NOOK products have proven to be a strong driver of
traffic to our stores.”

Guidance

For fiscal year 2013, the company continues to expect Retail comparable
bookstore sales to decline on a percentage basis in the low- to mid-single
digits. College comparable store sales are now expected to decline on a
percentage basis in the low single digits. NOOK Media revenues, which includes
the NOOK and College businesses, are expected to be approximately $2.5
billion. The company expects fourth quarter NOOK segment EBITDA losses to be
comparable to last year's fourth quarter loss.

Strategic Committee to Evaluate Sale of Retail Business

On February 25, 2013, the company announced that its Board of Directors has
received notice from Mr. Leonard Riggio, the Company’s founder, largest
stockholder and Chairman of the Board, that Mr. Riggio plans to propose to
purchase all of the assets of the retail business of Barnes & Noble.

The process of evaluating a proposal and negotiation of any transaction will
be overseen by a Strategic Committee of three independent directors: David G.
Golden, David A. Wilson and Patricia L. Higgins, who is Chair of the Strategic
Committee.

There can be no assurance that the review of Mr. Riggio’s proposal or the
consideration of any transaction will result in a sale of the retail business
or in any other transaction. There is no timetable for the Strategic
Committee’s review. The Company does not intend to comment further regarding
the evaluation of Mr. Riggio’s proposal, unless and until definitive
agreements for a transaction are entered into or the Strategic Committee
determines to conclude the process.

Conference Call

A conference call with Barnes & Noble, Inc.’s senior management will be
webcast beginning at 10:00 A.M. ET on Thursday, February 28, 2013, and is
accessible at www.barnesandnobleinc.com/webcasts.

Barnes & Noble, Inc. will report fiscal 2013 year-end results on or about June
18, 2013.

About Barnes & Noble, Inc.

Barnes & Noble, Inc. (NYSE:BKS) is a Fortune 500 company and the leading
retailer of content, digital media and educational products. The company
operates 677 Barnes & Noble bookstores in 50 states, and one of the Web’s
largest e-commerce sites, BN.com (www.bn.com). Its NOOK Media LLC subsidiary
is a leader in the emerging digital reading and digital education markets. The
NOOK digital business offers award-winning NOOK® products and an expansive
collection of digital reading and entertainment content through the NOOK
Store™ (www.nook.com), while Barnes & Noble College Booksellers, LLC operates
678 bookstores serving over 4.6 million students and faculty members at
colleges and universities across the United States. Barnes & Noble is proud to
be named a J.D. Power and Associated 2012 Customer Service Champion and is
only one of 50 U.S. companies so named. Barnes & Noble.com is ranked the
number one online retailer in customer satisfaction in the book, music and
video category and a Top 10 online retailer overall in customer satisfaction
according to ForeSee E-Retail Satisfaction Index (Spring Top 100 Edition).

General information on Barnes & Noble, Inc. can be obtained via the Internet
by visiting the company's corporate website: www.barnesandnobleinc.com.

Forward-Looking Statements

This press release contains certain forward-looking statements (within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended) and information
relating to Barnes & Noble that are based on the beliefs of the management of
Barnes & Noble as well as assumptions made by and information currently
available to the management of Barnes & Noble. When used in this
communication, the words "anticipate," "believe," "estimate," "expect,"
"intend," "plan," "will,” “forecasts,” “projections,” and similar expressions,
as they relate to Barnes & Noble or the management of Barnes & Noble, identify
forward-looking statements.

Such statements reflect the current views of Barnes & Noble with respect to
future events, the outcome of which is subject to certain risks, including,
among others, the general economic environment and consumer spending patterns,
decreased consumer demand for Barnes & Noble's products, low growth or
declining sales and net income due to various factors, risk that international
expansion will not be successfully achieved or may be achieved later than
expected, possible disruptions in Barnes & Noble's computer systems, telephone
systems or supply chain, possible risks associated with data privacy,
information security and intellectual property, possible work stoppages or
increases in labor costs, possible increases in shipping rates or
interruptions in shipping service, effects of competition, possible risks that
inventory in channels of distribution may be larger than able to be sold,
possible risk that component parts will be rendered obsolete or otherwise not
be able to be effectively utilized in devices to be sold, possible risk that
financial and operational forecasts and projections are not achieved, possible
risk that returns from consumers or channels of distribution may be greater
than estimated, the risk that the expected sales lift from Borders’ store
closures is not achieved in whole or part, the risk that digital sales growth
is less than expectations and the risk that it does not exceed the rate of
investment spend, higher-than-anticipated store closing or relocation costs,
higher interest rates, the performance of Barnes & Noble's online, digital and
other initiatives, the performance and successful integration of acquired
businesses, the success of Barnes & Noble's strategic investments,
unanticipated increases in merchandise, component or occupancy costs,
unanticipated adverse litigation results or effects, product and component
shortages, the potential adverse impact on the business resulting from the
review of a potential separation of the NOOK digital business, the risk that
the transactions with Microsoft and Pearson do not achieve the expected
benefits for the parties including the risk that NOOK Media’s applications are
not commercially successful or that the expected distribution of those
applications is not achieved, the risk that any subsequent spin-off, split-off
or other disposition by Barnes & Noble of its interest in NOOK Media or other
separation of Barnes & Noble’s businesses results in adverse impacts on Barnes
& Noble or NOOK Media (including as a result of termination of agreements and
other adverse impacts), the potential impact on Barnes & Noble’s retail
business of any separation, the potential tax consequences for Barnes & Noble
and its shareholders of a subsequent spin-off, split-off or other disposition
by Barnes & Noble of its interest in NOOK Media or other separation of Barnes
& Noble’s businesses, the risk that the international expansion contemplated
by the relationship with Microsoft or otherwise is not successful or is
delayed, the risk that NOOK Media is not able to perform its obligations under
the Microsoft commercial agreement, including with respect to the development
of applications and international expansion, and the consequences thereof, the
costs and disruptions arising out of any such separation of the NOOK digital
and College businesses or other separation of Barnes & Noble’s businesses, the
risk that Barnes & Noble may not recoup its investments in the NOOK digital
business as part of any separation transaction, the risks, difficulties, and
uncertainties that may result from the separation of businesses that were
previously co-mingled including necessary ongoing relationships, and potential
for adverse customer impacts and other factors which may be outside of Barnes
& Noble’s control, including those factors discussed in detail in Item 1A,
"Risk Factors," in Barnes & Noble's Annual Report on Form 10-K and Form
10-K/A, and in Barnes & Noble's other filings made hereafter from time to time
with the SEC. Our forward looking statements relating to international
expansion are also subject to the following risks, among others that may
affect the introduction, success and timing of the NOOK e-reader and content
in countries outside the United States: we may not be successful in reaching
agreements with international companies, the terms of agreements that we reach
may not be advantageous to us, our NOOK device may require technological
changes to comply with applicable laws, and marketplace acceptance and other
companies have already entered the marketplace with products that have
achieved some customer acceptance.

Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described as anticipated, believed, estimated, expected,
intended or planned. Subsequent written and oral forward-looking statements
attributable to Barnes & Noble or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this paragraph.
Barnes & Noble undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise after the date of this communication.

                                                                                  
                                                                                    
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
                                                                                    
                                                                                    
                                                                                    
                       13 weeks            13 weeks            39 weeks            39 weeks
                       ended               ended               ended               ended
                       January 26,         January 28,         January 26,         January 28,
                       2013                2012                2013                2012
                                                                                    
Sales                  $ 2,223,945           2,439,124         $ 5,561,984           5,749,489
Cost of sales            1,674,384           1,786,308           4,118,037           4,237,451  
and occupancy
Gross profit             549,561             652,816             1,443,947           1,512,038  
Selling and
administrative           494,094             502,870             1,319,896           1,329,620
expenses
Depreciation
and                      55,761              60,273              171,409             173,699    
amortization
Operating                (294      )         89,673              (47,358   )         8,719
income (loss)
Interest                 8,772               8,773               25,835              26,675     
expense, net
Income (loss)            (9,066    )         80,900              (73,193   )         (17,956   )
before taxes
Income taxes             (3,008    )         28,869              (25,580   )         (6,818    )
Net income             $ (6,058    )         52,031            $ (47,613   )         (11,138   )
(loss)
                                                                                    
                                                                                    
                                                                                    
Income (loss)
per common
share:
Basic                  $ (0.18     )         0.78              $ (1.05     )         (0.33     )
Diluted                $ (0.18     )         0.71              $ (1.05     )         (0.33     )
                                                                                    
Weighted
average common
shares
outstanding:
Basic                    58,316              57,371              58,168              57,261
Diluted                  58,316              69,447              58,168              57,261
                                                                                    
Percentage of
sales:
Sales                    100.0     %         100.0     %         100.0     %         100.0     %
Cost of sales            75.3      %         73.2      %         74.0      %         73.7      %
and occupancy
Gross profit             24.7      %         26.8      %         26.0      %         26.3      %
Selling and
administrative           22.2      %         20.6      %         23.7      %         23.1      %
expenses
Depreciation
and                      2.5       %         2.5       %         3.1       %         3.0       %
amortization
Operating                0.0       %         3.7       %         -0.9      %         0.2       %
income (loss)
Interest                 0.4       %         0.4       %         0.5       %         0.5       %
expense, net
Income (loss)            -0.4      %         3.3       %         -1.3      %         -0.3      %
before taxes
Income taxes             -0.1      %         1.2       %         -0.5      %         -0.1      %
Net income               -0.3      %         2.1       %         -0.9      %         -0.2      %
(loss)
                                                                                    
                                                                                    

                                                             
                                                               
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
                                                               
                                                               
                                                               
                                       January 26, 2013       January 28, 2012
ASSETS
Current assets:
Cash and cash equivalents              $  213,643             $  27,397
Receivables, net                          387,459                396,854
Merchandise inventories                   1,784,949              1,814,898
Prepaid expenses and other                186,324                169,535      
current assets
Total current assets                      2,572,375              2,408,684    
                                                               
Property and equipment:
Land and land improvements                2,541                  2,541
Buildings and leasehold                   1,208,770              1,191,224
improvements
Fixtures and equipment                    1,845,100              1,752,333    
                                          3,056,411              2,946,098
Less accumulated
depreciation and                          2,483,042              2,309,607    
amortization
Net property and equipment                573,369                636,491      
                                                               
Goodwill                                  514,417                520,792
Intangible assets, net                    553,099                569,488
Other noncurrent assets                   63,001                 54,418       
Total assets                           $  4,276,261           $  4,189,873    
                                                               
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                       $  1,360,613           $  1,488,552
Accrued liabilities                       563,028                542,503
Gift card liabilities                     386,704                367,555      
Total current liabilities                 2,310,345              2,398,610    
                                                               
Long-term debt                            -                      101,600
Long-term deferred taxes                  273,475                275,436
Other long-term                           390,025                408,291
liabilities
                                                               
Redeemable Preferred
Shares; $.001 par value;
5,000
shares authorized; 204 and
204 shares issued,                        193,220                191,958
respectively
Preferred Member Interests                381,184                -
in NOOK Media, LLC
                                                               
Shareholders' equity:
Common stock; $.001 par
value; 300,000 shares
authorized; 92,135 and
90,928 shares issued,                     92                     91
respectively
Additional paid-in capital                1,383,430              1,337,777
Accumulated other                         (16,635     )          (11,630     )
comprehensive loss
Retained earnings                         420,627                543,582
Treasury stock, at cost,
33,810 and 33,537 shares,                 (1,059,502  )          (1,055,842  )
respectively
Total shareholders' equity                728,012                813,978      
Commitments and                           -                      -            
contingencies
Total liabilities and                  $  4,276,261           $  4,189,873    
shareholders' equity
                                                                              
                                                                              

                                                                                      
                                                                                        
BARNES & NOBLE, INC. AND SUBSIDIARIES
Segment Information
(In thousands)
                            
                                                                                        
                                                                                        
                             13 weeks            13 weeks          39 weeks            39 weeks
                             ended               ended             ended               ended
                             January 26,         January 28,       January 26,         January 28,
                             2013                2012              2013                2012
                                                                                        
Sales  
      Retail                 $ 1,505,151         1,677,326         $ 3,620,566         3,800,380
      College                  517,228           525,627             1,510,953         1,515,771
      NOOK                     315,965           426,595             668,287           769,854
      Elimination              (114,399  )       (190,424  )         (237,822  )       (336,516  )
Total                        $ 2,223,945         2,439,124         $ 5,561,984         5,749,489  
                                                                                        
Gross Profit
      Retail                 $ 500,197           518,503           $ 1,130,295         1,119,442
      College                  109,681           106,667             328,945           325,530
      NOOK                     (60,317   )       27,646              (15,293   )       67,066     
Total                        $ 549,561           652,816           $ 1,443,947         1,512,038  
                                                                                        
Selling and
Administrative
Expenses
      Retail                 $ 288,240           320,913           $ 815,389           868,067
      College                  75,768            71,488              221,277           209,764
      NOOK                     130,086           110,469             283,230           251,789    
Total                        $ 494,094           502,870           $ 1,319,896         1,329,620  
                                                                                        
EBITDA
      Retail                 $ 211,957           197,590           $ 314,906           251,375
      College                  33,913            35,179              107,668           115,766
      NOOK                     (190,403  )       (82,823   )         (298,523  )       (184,723  )
Total                        $ 55,467            149,946           $ 124,051           182,418    
                                                                                        
Net Income (Loss)
      EBITDA                 $ 55,467            149,946           $ 124,051           182,418
      Depreciation
      and                      (55,761   )       (60,273   )         (171,409  )       (173,699  )
      Amortization
      Interest                 (8,772    )       (8,773    )         (25,835   )       (26,675   )
      Expense, net
      Income Taxes             3,008             (28,869   )         25,580            6,818      
Total                        $ (6,058    )       52,031            $ (47,613   )       (11,138   )
                                                                                        
                                                                                        
                                                                                        
Percentage of
sales:
                                                                                        
Gross Margin
      Retail                   33.2      %       30.9      %         31.2      %       29.5      %
      College                  21.2      %       20.3      %         21.8      %       21.5      %
      NOOK                     -29.9     %       11.7      %         -3.6      %       15.5      %
Total                          24.7      %       26.8      %         26.0      %       26.3      %
                                                                                        
Selling and
Administrative
Expenses
      Retail                   19.2      %       19.1      %         22.5      %       22.8      %
      College                  14.6      %       13.6      %         14.6      %       13.8      %
      NOOK                     64.5      %       46.8      %         65.8      %       58.1      %
Total                          22.2      %       20.6      %         23.7      %       23.1      %
                                                                                                  
                                                                                                  

                                                                                
                                                                                          
BARNES & NOBLE, INC. AND SUBSIDIARIES
Earnings (Loss) Per Share
(In thousands, except per share data)
                                                                                          
                                                                                          
                                                                                          
                        13 weeks ended                       39 weeks ended
                        January 26,         January          January 26,         January
                        2013                28, 2012         2013                28,      
                                                                                 2012
Numerator
for basic
income
(loss) per
share:
Income                  $ (6,058  )         52,031           $ (47,613 )         (11,138 )
(loss)
Preferred
stock                     (3,942  )         (3,963 )           (11,825 )         (7,081  )
dividends
Accretion
of
dividends                 (739    )         (316   )           (1,508  )         (578    )
on
preferred
stock
Less
allocation of
earnings and              -                 (2,735 )           -                 -        
dividends to
participating
securities
Net income
(loss)
available to            $ (10,739 )         45,017           $ (60,946 )         (18,797 )
common
shareholders
                                                                                          
Numerator
for diluted
income
(loss) per
share:
Net income
(loss)
available to            $ (10,739 )         45,017           $ (60,946 )         (18,797 )
common
shareholders
Accrual of
preferred                 -                 3,963              -                 -
stock
dividends
Accretion
of
dividends                 -                 316                -                 -
on
preferred
stock
Effect of
dilutive                  -                 3                  -                 -        
options
Net income
(loss)
available to              (10,739 )         49,299             (60,946 )         (18,797 )
common
shareholders
                                                                                          
Denominator for basic and diluted
income (loss) per share:
Basic
weighted
average                   58,316            57,371             58,168            57,261   
common
shares
                                                                                          
Denominator
for diluted
income (loss)
per share:
Basic
weighted
average                   58,316            57,371             58,168            57,261
common
shares
Preferred                 -                 12,000             -                 -
shares
Average
dilutive                  -                 76                 -                 -        
options
Diluted
weighted
average                   58,316            69,447             58,168            57,261   
common
shares
                                                                                          
                                                                                          
Income
(loss) per
common
share
Basic                   $ (0.18   )         0.78             $ (1.05   )         (0.33   )
Diluted                 $ (0.18   )         0.71             $ (1.05   )         (0.33   )
                                                                                          
                                                                                          

Contact:

Media:
Mary Ellen Keating
Senior Vice President
Corporate Communications
Barnes & Noble, Inc.
(212) 633-3323
mkeating@bn.com
or
Investor:
Andy Milevoj
Vice President, Investor Relations
Barnes & Noble, Inc.
(212) 633-3489
amilevoj@bn.com
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