UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) March 17, 2005
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BARNES & NOBLE, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-12302 06-1196501
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(Commission File Number) (IRS Employer Identification No.)
122 Fifth Avenue, New York, NY 10011
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(Address of Principal Executive Offices) (Zip Code)
(212) 633-3300
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On March 17, 2005, Barnes & Noble, Inc. (the "Company") issued a press
release announcing its financial results for the fourth quarter and full year
ended January 29, 2005. A copy of this press release is attached hereto as
Exhibit 99.1.
The information in this Form 8-K and the Exhibit attached hereto shall not
be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, nor shall it be deemed incorporated by reference in any filing under the
Securities Act of 1933, except as shall be expressly set forth by specific
reference in such filing.
Use of Non-GAAP Financial Information
To supplement the Company's consolidated financial statements presented in
accordance with generally accepted accounting principles ("GAAP"), in the press
release attached hereto as Exhibit 99.1 the Company uses the non-GAAP financial
measure of EBITDA (defined by the Company as operating profit before
depreciation and amortization) for the 13 and 52 weeks ended January 29, 2005
and January 31, 2004. Additionally, following the Company's acquisition of
Bertelsmann AG's interest in barnesandnoble.com inc. ("B&N.com") on September
15, 2003, the Company consolidated the results of B&N.com. Accordingly, the
Company is disclosing in the press release attached hereto as Exhibit 99.1 pro
forma results as if the Company consolidated B&N.com for all of fiscal 2003.
Furthermore, in the press release attached hereto as Exhibit 99.1, the Company
provides certain financial results which exclude the one-time charge relating to
the redemption of its convertible subordinated notes. This one-time charge was
to write-off the unamortized portion of the deferred financing fees from the
issuance of the notes and for payment of the redemption premium.
The Company's management reviews these non-GAAP measures internally to
evaluate the Company's performance and manage its operations. In addition, since
the Company has historically provided EBITDA results to the investment
community, the Company believes that the inclusion of EBITDA results provides a
consistent and comparable measure to help investors understand the Company's
operating results. Furthermore, since the Company will consolidate B&N.com on a
going forward basis, the Company believes that pro forma results (as if the
Company consolidated B&N.com) provide investors a better understanding of the
Company's current operating results and provide a comparable measure to help
investors understand the Company's future operating results. The Company has
also provided certain financial results which exclude a one-time charge relating
to the redemption of its convertible subordinated notes because the Company
believes that such information also provides investors a better understanding of
the Company's current operating results and provides a comparable measure to
help investors understand the Company's future operating results. The non-GAAP
measures included in the press release attached hereto as Exhibit 99.1 have been
reconciled to the comparable GAAP measure as required under SEC rules regarding
the use of non-GAAP financial measures. The Company urges investors to carefully
review the GAAP financial information included as part of the Company's Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, and quarterly earnings
releases.
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review
(a) As disclosed in the press release attached hereto as Exhibit 99.1, in
light of the recent SEC clarification on lease accounting and after discussions
with the Company's independent registered public accounting firm, BDO Seidman,
LLP, the Company has re-evaluated its lease accounting practices. Although
amounts involved in correcting the Company's method of accounting for lease
transactions are not material to any one year, the Company has decided to
restate prior year financial statements to correct errors resulting from its
prior method of accounting for lease transactions. Like many other public
companies, the Company will correct the way it accounts for its leases,
specifically the accounting for tenant allowances and rent holidays (store
build-out period).
Management and the Board of Directors of the Company concluded on March 10,
2005 that the Company's financial statements for the fiscal years ended January
31, 2004, February 1, 2003 and February 2, 2002 (fiscal years 2003, 2002 and
2001) and for the first three interim quarters of the fiscal year ended January
29, 2005 (fiscal 2004) should be restated to correct its accounting for leases,
and that such previously filed financial statements should no longer be relied
upon. Management discussed these matters with BDO Seidman, LLP.
Consistent with common retail industry practice, the Company had previously
classified tenant allowances received as a result of store openings as a
reduction in capital expenditures. The Company has reclassified tenant
allowances received from a reduction of depreciation expense to a reduction of
rent expense. As a result, the Company has increased gross margins and increased
depreciation expense by $32.1 million, $28.7 million and $24.5 million,
respectively, in fiscal years 2003, 2002 and 2001. On the balance sheet, the
Company has increased net property and equipment, and increased other long-term
liabilities by $225.0 million and $227.4 million to reflect the aggregate amount
of all unamortized tenant allowances received as of January 31, 2004 and
February 1, 2003, respectively. There is no earnings impact due to this
reclassification.
In addition, the Company had recognized the straight line expense for
leases beginning on the commencement date of the lease, which had the effect of
excluding the construction period of its stores from the calculation of the
period over which it expenses rent. In order to correct the straight line rent
expense to include the store build-out period, the Company has decreased net
income for prior fiscal years by an aggregate amount of approximately $18.6
million, $0.7 million relating to fiscal years 2003, 2002 and 2001, and $17.9
million which represents the cumulative effect relating to periods prior to
fiscal year 2001. Earnings per share for fiscal years 2003, 2002 and 2001
decreased by approximately $0.00, $0.01 and $0.00, respectively and prior
interim results for the nine months ended October 30, 2004, decreased by
approximately $0.00. The impact on future years' earnings is not expected to be
material. The related balance sheet impact of this restatement was to increase
other long-term liabilities by $31.7 million and $31.6 million, and increase
long-term deferred income tax assets by $13.2 million and $13.1 million, as of
January 31, 2004 and February 1, 2003, respectively.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release of Barnes & Noble, Inc., dated March 17, 2005.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BARNES & NOBLE, INC.
(Registrant)
By: /s/ Joseph J. Lombardi
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Joseph J. Lombardi
Chief Financial Officer
Date: March 17, 2005
Barnes & Noble, Inc.
EXHIBIT INDEX
Exhibit Number Description
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99.1 Press Release of Barnes & Noble, Inc., dated March 17, 2005.