Barnes & Noble Reports Fiscal 2014 First Quarter Financial Results

  Barnes & Noble Reports Fiscal 2014 First Quarter Financial Results

          Confirms Commitment to NOOK^® Device and Content Business

                          New NOOK Products Planned

                   Company Financial Position Remains Solid

Company Receives Withdrawal Notice from Chairman Regarding Schedule 13D filing

Business Wire

NEW YORK -- August 20, 2013

Barnes & Noble, Inc. (NYSE:BKS) today reported sales and earnings for its
fiscal 2014 first quarter ended July 27, 2013.

First quarter consolidated revenues decreased 8.5%, to $1.3 billion, compared
to the prior year. The first quarter consolidated earnings before interest,
taxes, depreciation and amortization (EBITDA) loss was $8.9 million, compared
to positive EBITDA of $5.8 million a year ago.

First Quarter 2014 Results from Operations

Segment results for the fiscal 2014 and fiscal 2013 first quarters are as
follows:

                                                                                                  
                    Revenues (unaudited)                                    EBITDA (unaudited)
$ in                                         Increase/(Decrease)                            Increase/(Decrease)
millions
                    Q1           Q1             $            %              Q1         Q1         $            %
                    2014         2013                                       2014       2013
Retail              $1,008       $1,119         ($111)       -9.9%          $65        $76        ($12)        -15.3%
College             226          221            5            2.4%           (19)       (14)       (5)          -36.1%
NOOK                153          192            (39)         -20.2%         (55)       (57)       2            3.7%
Elimination         (58)         (79)           21           -26.4%         n/a        n/a        n/a          n/a
^(1)
Total               $1,330       $1,454         ($124)       -8.5%          ($9)       $6         ($15)        n/m
                                                                                                                          

^(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 $1.0 billion for the quarter, a decrease of 9.9%
from the prior year. The sales decrease was attributable to a comparable store
sales decrease of 9.1% for the quarter, store closures and lower online sales,
in line with company expectations. First quarter comparable bookstore sales
decreased, reflecting lower NOOK device unit volume and a title lineup last
year that included unusually strong sales from The Hunger Games and Fifty
Shades of Grey trilogies. “Core” comparable bookstore sales, which exclude
sales of NOOK products, decreased 7.2% for the quarter. Excluding the impact
of the two mentioned trilogies, Core comparable bookstore sales decreased
2.9%.

Retail generated EBITDA of $65 million in the quarter, a decline of $12
million compared to a year ago, as a result of the sales decline noted above.

College

The College segment had revenues of $226 million during a period that did not
include a back-to-school rush season, increasing 2.4% compared to a year ago,
as a result of new store growth. Comparable College store sales decreased 1.2%
for the quarter, reflecting the retail selling price of new or used textbooks
when rented, rather than solely the rental fees received and amortized over
the rental period.

College EBITDA losses were $19 million, compared to losses of $14 million last
year. The difference reflected new store expenses and investments in digital
education, primarily additional product development costs in accordance with
the company’s plans to introduce additional digital products to the higher
education market under its partnership with Pearson.

NOOK

The NOOK segment, which consists of the company’s digital business (including
devices, digital content and accessories), reported revenues of $153 million
for the quarter, a decrease of 20.2% from a year ago. Device and accessories
sales were $84 million for the quarter, a decrease of 23.1% from a year ago,
due to lower unit selling volume. Digital content sales were $69 million for
the quarter, a decline of 15.8% compared to a year ago, due in part to lower
device unit sales as well as the comparison to The Hunger Games and Fifty
Shades of Grey trilogies. Excluding the impact of these two titles, digital
content sales decreased 6.9%.

Despite the sales decline, NOOK EBITDA losses of $55 million were comparable
to the prior year, as lower gross margins were offset by expense reductions.

Consolidated Results

The consolidated first quarter net loss was $87.0 million, or $1.56 per share,
compared to a loss of $39.8 million, or $0.76 per share, in the prior year.

The wider loss was driven by the EBITDA decline, as well as higher income tax
expense. Under applicable accounting guidance, given the significance of
cumulative losses in recent years, the company recorded a non-cash valuation
allowance against certain deferred tax assets. The impact of this item on
first quarter results was $41 million, or $0.70 per share. Excluding this tax
item, first quarter losses would have been $0.86 per share.

Guidance

The company reaffirms its previously issued full-year guidance, in which it
expects Retail comparable store sales to decline in the high single digits and
College comparable store sales to decline in the low single digits. The
company also expects full-year Core Retail comparable bookstore sales to
decline in the low- to mid-single digits.

Balance Sheet

The company ended the first quarter with a net cash position of $73 million,
reducing bank borrowings by $295 million compared to a year ago. In fiscal
2013, despite the NOOK segment losses, the company improved the strength of
its balance sheet as a result of the cash flow generated by the Retail and
College businesses, as well as funds received from strategic investments in
NOOK Media.

Board Chairman Files Schedule 13D Amendment

The company said its Chairman, Leonard Riggio, has advised the Board of
Directors that he has suspended his efforts to make an offer for the company’s
Retail business. Mr. Riggio expressed a plan to make such an offer when he
amended his Schedule 13D on file with the Securities and Exchange Commission
in February.

In an amended SEC filing today, Mr. Riggio said, “While I reserve the right to
pursue an offer in the future, I believe it is in the company’s best interests
to focus on the business at hand. Right now our priority should be to serve
the more than 10 million customers who own NOOK devices, to concentrate on
building our Retail business, and to accelerate the sale of NOOK products in
our stores, and in the marketplace.”

Company Update

“Our top priority in our operating strategy is to increase all categories of
our content revenue. We are working on innovative ways to sell content to our
existing customers and are exploring new markets we can serve successfully,”
said Michael P. Huseby, President of Barnes & Noble, Inc. and Chief Executive
Officer of NOOK Media. “The company intends to continue to design and develop
cutting-edge NOOK black and white and color devices. We will continue to offer
our award-winning line of NOOK products including NOOK Simple Touch^®, NOOK
Simple Touch^® with Glow Light^®, ^ NOOK^® HD and NOOK^® HD+ at the best
values in the marketplace. At least one new NOOK device will be released for
the coming holiday season and further products are in development. All NOOK
devices will continue to be backed by world-class pre- and post-sales support
in Barnes & Noble stores, as well as ongoing software upgrades and
improvements to the digital bookstore service.”

Conference Call

A conference call with Barnes & Noble, Inc.’s senior management will be
webcast beginning at 10:00 A.M. ET on Tuesday, August 20, 2013, and is
accessible at www.barnesandnobleinc.com/webcasts.

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 674 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
692 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 Associates 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 risks associated with changes in the strategic direction of the
device business, including possible reduction in sales of content, accessories
and other merchandise and other adverse financial impacts, 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 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 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 Company’s businesses resulting
from the review of strategic alternatives and a potential separation of the
Company’s businesses, the risk that the transactions with Microsoft and
Pearson do not achieve the expected benefits for the parties or impose costs
on the Company in excess of what the Company anticipates, including the risk
that NOOK Media’s applications are not commercially successful or that the
expected distribution of those applications is not achieved, other risks
associated with the international expansion contemplated by the relationship
with Microsoft, including that it is not successful or is delayed, the risk
that NOOK Media is not able to perform its obligations under the Microsoft and
Pearson commercial agreements and the consequences thereof, risks associated
with the restatement contained in, the delayed filing of, and the material
weakness in internal controls described in Barnes & Noble’s Annual Report on
Form 10-K for the fiscal year ended April 27, 2013 and associated risks 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 for the fiscal year ended April 27, 2013,
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)
(Unaudited)

                                                                             
                                  13 weeks ended          13 weeks ended
                                  July 27, 2013           July 28, 2012
                                                                             
Sales                             $   1,329,502         1,453,507
Cost of sales and occupancy          961,301          1,037,702   
Gross profit                         368,201          415,805     
Selling and administrative              377,146           410,055
expenses
Depreciation and                     54,999           58,035      
amortization
Operating loss                          (63,944   )       (52,285     )
Interest expense, net                7,552            8,941       
Loss before taxes                       (71,496   )       (61,226     )
Income taxes                         15,526           (21,398     )
Net loss                          $   (87,022   )       (39,828     )
                                                                             
                                                                             
                                                                             
Loss per common share:
Basic                             $     (1.56     )       (0.76       )
Diluted                           $     (1.56     )       (0.76       )
                                                                             
Weighted average common
shares outstanding:
Basic                                   58,768            58,021
Diluted                                 58,768            58,021
                                                                             
Percentage of sales:
Sales                                   100.0     %       100.0       %
Cost of sales and occupancy          72.3      %       71.4        %
Gross profit                         27.7      %       28.6        %
Selling and administrative              28.4      %       28.2        %
expenses
Depreciation and                     4.1       %       4.0         %
amortization
Operating loss                          -4.8      %       -3.6        %
Interest expense, net                0.6       %       0.6         %
Loss before taxes                       -5.4      %       -4.2        %
Income taxes                         1.2       %       -1.5        %
Net loss                             -6.5      %       -2.7        %
                                                                             
                                                                             

                                                                    
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)

                                                                             
                             July 27, 2013            July 28, 2012
ASSETS
Current assets:
Cash and cash                $   80,049             $   20,221
equivalents
Receivables, net                   154,145                  153,500
Merchandise                        1,747,729                1,947,422
inventories
Prepaid expenses and            291,980              192,316    
other current assets
Total current assets            2,273,903            2,313,459  
                                                                             
Property and
equipment:
Land and land                      2,541                    2,541
improvements
Buildings and                      1,231,415                1,200,928
leasehold improvements
Fixtures and equipment          1,899,348            1,804,193  
                                   3,133,304                3,007,662
Less accumulated
depreciation and                2,570,883            2,410,984  
amortization
Net property and                562,421              596,678    
equipment
                                                                             
Goodwill                           494,389                  518,578
Intangible assets, net             543,591                  562,522
Other noncurrent                55,150               62,650     
assets
Total assets                 $   3,929,454         $   4,053,887  
                                                                             
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable             $     1,199,534          $     1,288,887
Accrued liabilities                510,961                  540,105
Gift card liabilities           329,038              312,855    
Total current                   2,039,533            2,141,847  
liabilities
                                                                             
Long-term debt                     7,500                    302,800
Long-term deferred                 245,878                  242,384
taxes
Other long-term                    437,725                  359,357
liabilities
                                                                             
Redeemable Preferred
Shares; $.001 par
value; 5,000
shares authorized; 204
and 204 shares issued,             193,851                  192,589
respectively
Preferred Member
Interests in NOOK                  382,069                  -
Media, LLC
                                                                             
Shareholders' equity:
Common stock; $.001
par value; 300,000
shares
authorized; 93,136 and
91,833 shares issued,              93                       92
respectively
Additional paid-in                 1,387,802                1,347,990
capital
Accumulated other                  (16,692    )             (16,635    )
comprehensive loss
Retained earnings                  318,627                  542,102
Treasury stock, at
cost, 34,248 and                (1,066,932 )          (1,058,639 )
33,743 shares,
respectively
Total shareholders'             622,898              814,910    
equity
Commitments and                 -                    -          
contingencies
Total liabilities and        $   3,929,454         $   4,053,887  
shareholders' equity
                                                                             
                                                                             

                                                                          
BARNES & NOBLE, INC. AND SUBSIDIARIES
Segment Information
(In thousands)
(Unaudited)

                                                  
                                  13 weeks ended          13 weeks ended
                                  July 27, 2013           July 28, 2012
                                                                             
Sales  
       Retail                     $   1,008,202         1,119,387
       College                          226,022           220,718
       NOOK                             153,138           191,975
       Elimination                   (57,860   )       (78,573     )
Total                             $   1,329,502        1,453,507   
                                                                             
Gross Profit
       Retail                     $     300,726           338,653
       College                          50,249            51,043
       NOOK                          17,226           26,109      
Total                             $   368,201          415,805     
                                                                             
Selling and
Administrative Expenses
       Retail                     $     235,965           262,175
       College                          69,344            65,075
       NOOK                          71,837           82,805      
Total                             $   377,146          410,055     
                                                                             
EBITDA 
       Retail                     $     64,761            76,478
       College                          (19,095   )       (14,032     )
       NOOK                          (54,611   )       (56,696     )
Total                             $   (8,945    )       5,750       
                                                                             
Net Loss
       EBITDA                     $     (8,945    )       5,750
       Depreciation and                 (54,999   )       (58,035     )
       Amortization
       Interest Expense,                (7,552    )       (8,941      )
       net
       Income Taxes                  (15,526   )       21,398      
Total                             $   (87,022   )       (39,828     )
                                                                             
                                                                             
                                                                             
Percentage of sales:
                                                                             
Gross Margin
       Retail                           29.8      %       30.3        %
       College                          22.2      %       23.1        %
       NOOK                          18.1      %       23.0        %
Total                                   27.7      %       28.6        %
                                                                             
Selling and
Administrative Expenses
       Retail                           23.4      %       23.4        %
       College                          30.7      %       29.5        %
       NOOK                          75.4      %       73.0        %
Total                                   28.4      %       28.2        %
                                                                             
                                                                             

                                                                    
BARNES & NOBLE, INC. AND SUBSIDIARIES
Earnings (Loss) Per Share
(In thousands, except per share data)
(Unaudited)
                                                   
                                                                             
                                     13 weeks ended
                                 July 27, 2013      July 28, 2012
Numerator for basic loss per
share:
Loss                                 $   (87,022 )       (39,828   )
Preferred stock dividends                  (3,942  )       (3,942    )
Accretion of dividends on               (758    )       (316      )
preferred stock
Net loss available to common         $   (91,722 )       (44,086   )
shareholders
                                                                             
Numerator for diluted loss per
share:
Net loss available to common         $   (91,722 )       (44,086   )
shareholders
                                                                             
Denominator for basic and
diluted loss per share:
Basic weighted average common           58,768         58,021    
shares
                                                                             
Denominator for diluted loss
per share:
Basic weighted average common           58,768         58,021    
shares
                                                                             
                                                                             
Loss per common share
Basic                                $   (1.56   )       (0.76     )
Diluted                              $   (1.56   )       (0.76     )
                                                                             
                                                                             

Contact:

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