SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________.
Commission file number 1-13740
Borders Group, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3196915
(State or other (I.R.S.
jurisdiction of Employer
incorporation or Identification
organization) No.)
500 East Washington Street, Ann Arbor, Michigan 48104
(Address of principal executive offices)
(zip code)
(313) 913-1100
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for
the past 90 days.
Yes___X___ No_______
Title of Class Shares Outstanding As Of
Common Stock September 6, 1996
($.001 par value) 37,841,342
BORDERS GROUP, INC.
INDEX
Part I - Financial Information
Page
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Part II - Other Information
Item 1. Legal Proceedings N/A
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a vote of
Securityholders 19
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 20
Signatures
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions except per common share data)
(Unaudited)
13 Weeks Ended
July 28, July 23,
1996 1995
_______ ________
Sales $ 414.3 $ 363.8
Cost of merchandise sold, including
occupancy costs 316.4 282.8
______ _______
Gross profit 97.9 81.0
Expenses, selling, general
and administrative 98.1 87.8
Pre-opening expense 1.6 1.3
Goodwill amortization and writedown 0.2 182.6
Operating losses of stores identified
for closure (--) (1.0)
_______ _______
Operating loss (2.0) (189.7)
Interest expense 1.6 0.4
_______ _______
Loss before income tax (3.6) (190.1)
Income tax benefit (1.4) (3.2)
_______ _______
Net loss $ (2.2) $(186.9)
======= =======
Loss per common share data (Pro forma
for 13 weeks ended July 23, 1995- Note 2):
Loss per common share $(0.05) $(4.28)
======= =======
Weighted average common shares
outstanding (in thousands) 41,775 43,636
====== =======
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions except per common share data)
(Unaudited)
26 Weeks Ended
July 28, July 23,
1996 1995
_______ _______
Sales $ 818.3 $ 717.4
Cost of merchandise sold, including
occupancy costs 627.3 557.2
______ ______
Gross profit 191.0 160.2
Selling, general and
administrative expenses 194.3 174.5
Pre-opening expense 2.0 2.0
Goodwill amortization and writedown 0.5 184.5
Operating losses of stores identified
for closure (--) (2.3)
_____ ______
Operating loss (5.8) (198.5)
Interest expense 3.5 0.3
_____ ______
Loss before income tax (9.3) (198.8)
Income tax benefit (3.6) (6.3)
_____ ______
Net loss $ (5.7) $(192.5)
====== =======
Loss per common share data (Pro forma
for 26 weeks ended July 23, 1995- Note 2):
Loss per common share $(0.14) $(4.41)
======= =======
Weighted average common shares
outstanding (in thousands) 41,856 43,603
====== =======
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per common share data)
(Unaudited)
7/28/96 7/23/95 1/28/96
Assets
Current Assets
Cash $ 35.1 $ 62.4 $ 36.5
Merchandise inventories 628.4 573.7 637.5
Accounts receivable and other current
assets 41.5 36.2 66.2
------ ------ ------
Total current assets 705.0 672.3 740.2
Property and equipment, net of
accumulated depreciation of $222.6,
$181.6 and $218.5, respectively 268.6 280.3 243.5
Other assets and deferred charges 38.8 37.6 29.0
Goodwill, net of accumulated
amortization of $40.9, $39.2, and
$40.4, respectively (Note 3) 39.0 75.0 39.6
------- -------- -------
$1,051.4 $1,065.2 $1,052.3
======= ======= =======
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per common share data)
(Unaudited)
Liabilities and Stockholders'
Equity
Current liabilities:
Short-term debt and capital lease
obligations due within one year $ 125.6 $ 55.2 $ 60.5
Trade accounts payable 282.7 229.1 304.8
Accrued payroll and other 127.5 130.1 157.0
liabilities
Restructuring reserve 4.6 33.0 7.0
Taxes, including income taxes 3.5 5.6 13.6
_______ _______ _______
Total Current Liabilities 543.9 453.0 542.9
Long-term debt and capital lease
obligations 8.8 11.0 8.1
Other long-term liabilities 27.1 48.0 29.3
Commitments and contingencies -- -- --
(Note 5) _______ _______ _______
Total Liabilities 579.8 512.0 580.3
Stockholders' equity:
Preferred Stock, par value $.001 per
share; 10,000,000 shares
authorized; no shares issued and
outstanding -- -- --
Common stock, par value $.001 per
share; 200,000,000 shares authorized;
37,808,127, 42,867,659 and
37,658,992 issued and outstanding at
July 28, 1996, July 23, 1995, and
January 28, 1996, respectively -- -- --
Additional paid-in capital 672.0 729.9 669.2
Officers receivables and deferred
compensation (0.9) (1.5) (3.4)
Retained earnings (deficit) (199.5) (175.2) (193.8)
_______ _______ _______
Total stockholders' equity 471.6 553.2 472.0
_______ _______ _______
$1,051.4 $1,065.2 $1,052.3
======= ======= =======
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE 26 WEEKS ENDED JULY 28, 1996
(Dollars in millions)
(Unaudited)
Officers
Rec. Add'l Retained
Common Stock Deferred Paid-in Earnings
Shares Amount Comp Capital (Deficit) Total
Balance at
1/28/96 37,658,992 $- $ (3.4) $ 669.2 $(193.8) $ 472.0
Net loss -- - -- -- (5.7) (5.7)
Issuance of
common stock 149,135 - 2.8 -- 2.8
Payment of
receivable and
deferred -- -- 2.5 -- -- 2.5
compensation __________ _____ _______ ______ ________ ______
Balance at 37,808,127 $0.0 $(0.9) $ 672.0 $(199.5) $471.6
7/28/96 ========== ==== ====== ======= ======== ======
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
BORDERS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
26 Weeks Ended
July 28, July 23,
1996 1995
Cash provided by (used for):
Operations
Net loss $(5.7) $(192.5)
Adjustments to reconcile net loss
to operating cash flows:
Depreciation and goodwill amortization 19.8 203.0
and writedown
Other non-cash charges
Increase (decrease) in other long-term
assets and liabilities (12.0) (0.6)
Cash provided by (used for) current
assets and current liabilities:
(Increase)decrease in inventories 9.1 (46.2)
Decrease in restructuring reserve (1.6) (13.3)
Decrease in property held for resale 13.5 --
Decrease in accounts payable (22.1) (42.3)
Other, net (25.3) 8.4
_______ _______
Net cash used for operations (24.3) (83.5)
_______ _______
Investing
Capital expenditures (45.8) (54.4)
Proceeds from asset sale 0.9 ---
_______ _______
Net cash used for investing (44.9) (54.4)
_______ _______
Financing
Net funding from credit facility 65.0 55.0
Proceeds from construction funding -- 7.9
Issuance of common stock 3.0 --
Repayment of long-term debt (0.2) (4.6)
Repayment of Kmart borrowings -- (95.0)
______ ______
Net cash provided by (used for) financing 67.8 (36.7)
______ ______
Net increase (decrease) in cash and
equivalents (1.4) (174.6)
Cash and equivalents at beginning of year 36.5 237.0
_______ ______
Cash and equivalents at end of period $35.1 $62.4
======= ======
See accompanying Notes to Unaudited Condensed
Consolidated Financial Statements.
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of Borders Group, Inc. (the Company) have been
prepared in accordance with Rule 10-01 of Regulation S-X and do
not include all the information and notes required by generally
accepted accounting principles for complete financial statements.
All adjustments, consisting only of normal recurring adjustments,
have been made which, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods.
The results of operations for such interim periods are not
necessarily indicative of results of operations for a full year.
The unaudited condensed consolidated financial statements should
be read in conjunction with the Company's consolidated financial
statements and notes thereto for the fiscal year ended January
28, 1996 (the 1995 consolidated financial statements).
The Company's fiscal year ends on the Sunday immediately
preceding the last Wednesday in January. At July 28, 1996, the
Company operated a chain of 966 mall-based bookstores, 127 book
superstores, and 7 music stores throughout the United States.
Certain reclassifications of previously reported July 23,
1995 balances have been made to conform with the 1995 change in
reporting presentation.
Note 2 - Public Offering of Common Stock
An initial public offering of the Company's common stock
(the IPO) was completed June 1, 1995. Prior to the IPO, the
Company was a majority-owned subsidiary of Kmart. As a result of
the IPO and a subsequent transaction completed in August 1995,
Kmart no longer holds an interest in the Company's common stock.
See the 1995 consolidated financial statements for further
discussion.
Weighted average shares outstanding are calculated as
follows:
Pro
Forma
13 13
Weeks Weeks
Ended Ended
7/28/96 7/23/95
_______ _______
Shares outstanding at beginning of 37,753 28,760
period
Shares sold by the Company in the IPO 12,531
Shares issued upon completion of the IPO 1,428
Shares issued during the period 23
Common stock equivalents 3,999 884
______ ______
Weighted average common shares 41,775 43,603
outstanding ====== ======
The pro forma earnings per common share data are based on actual
common shares outstanding after the IPO and assume the IPO took
place at the beginning of fiscal 1995.
Note 3 - Accounting for Goodwill
In the second and fourth quarters of 1995 the Company
recorded pre-tax charges to operations of $182.0 and $19.8,
respectively, to reflect the change in the method of evaluating
the recoverability of goodwill. These noncash write-downs in
goodwill were the result of a change in policy by the Company
after the IPO to evaluate the recoverability of goodwill based on
a fair value method. There was no write-down required under this
policy in the quarter ended July 28, 1996.
Note 4 - Restructuring Program
In 1993, the Company implemented a restructuring plan
pursuant to which it planned to close 187 underperforming Walden
stores and to combine certain distribution and headquarters
functions of Borders and Walden. The Company recorded a
restructuring charge of $142.8 to provide for the estimated costs
of implementing the plan. The Company recorded an additional
charge of $6.4 in the fourth quarter of 1994 to reflect revised
estimates of the cost of completing the reconstruction plan. As
of January 28, 1996, the program was substantially complete. For
the 13 weeks and 26 weeks ended July 28, 1996, $1.5 and $1.6 of
cash expenditures were charged to the restructuring reserve.
Note 5 - Commitments and Contingencies
There are various claims, lawsuits, and actions pending
against the Company and its subsidiaries which are incident to
their operations. It is the opinion of management that the
ultimate resolution of these matters will not have a material
effect on the Company's liquidity, financial position or results
of operations.
During 1994, the Company entered into an agreement in which
leases with respect to four Borders' locations serve as
collateral for certain mortgage pass-through certificates. These
mortgage pass-through certificates include a provision requiring
the Company to repurchase the underlying mortgage notes in
certain events, including the failure by the Company to make
payments of rent under the related leases, the failure by Kmart
to maintain required investment grade ratings or the termination
of the guarantee by Kmart of the Company's obligations under the
related leases (which would require mutual consent of Kmart and
Borders). In the event the Company is required to repurchase all
of the underlying mortgage notes, the Company would be obligated
to pay approximately $36.6. Kmart has failed to maintain
investment grade ratings and therefore these notes are now
subject to put by the holder. To date, the holder has not
exercised its rights to put the notes.
In addition to the contingent repurchase obligations
described above, leases relating to two other Borders locations
served as collateral for certain mortgage pass-thru certificates.
On March 11, 1996 Kmart was required to repurchase the underlying
notes. The Company purchased the notes from Kmart for
approximately $12.1 on June 18, 1996, which fully satisfied the
Company's contingent obligation.
The Company does not believe that the note purchase has had
a material effect on the Company's financial position or
earnings.
Note 6 - Financing
Credit Facility: The Company has a credit agreement which
provides a $300, five-year working capital facility. Borrowings
under the credit facility bear interest at a base rate or an
increment over LIBOR at the Company's option. The credit
agreement contains operating covenants which limit the Company's
ability to incur indebtedness, make acquisitions, dispose of
assets and issue, repurchase or pay dividends on its common
stock, and require the Company to meet certain financial measures
regarding fixed charge coverage, leverage and tangible net worth.
The Company had borrowings outstanding under the credit facility
of $125.0 at July 28, 1996 and $175.0 at September 10, 1996.
Lease Financing Facility: On November 26, 1995 the Company
entered into a five year, $150 lease financing facility ("the
Facility") to finance new stores and other property through
operating leases. The Facility will provide financing to Lessors
through loans from a third party lender for up to 95% of a
project cost. It is expected that Lessors will make equity
contributions approximating 5% of each project. Independent of
its obligations as lessee, the Company will guarantee payment
when due of all amounts required to be paid to the third party
lender. The principal amount guaranteed will be limited to
approximately 89% of the original cost of a project so long as
the Company is not in default under the lease relating to such
project. There was $59.3 outstanding under the lease facility at
July 28, 1996 and $72.9 at September 10, 1996.
In February 1996, the Company entered into interest rate
swaps with a total notional amount of $140, which effectively
converted variable rate borrowings to a fixed rate based on 3
month LIBOR. These swap agreements all expire within 12 months
of the date the Company entered into the agreements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company, through its subsidiaries, is the second largest
operator of book superstores and the largest operator of mall-
based bookstores in the United States based upon both sales and
number of stores. At July 28, 1996, the Company operated 127
book superstores under the Borders name, 966 mall-based and other
bookstores primarily under the Waldenbooks name, and 7 stores
under the names Planet Music and CD Superstore.
The Company's second quarter of 1996 and 1995 consisted of
the 13 weeks ended July 28, 1996 and July 23, 1995, respectively.
Reporting Format - During 1995, the Company changed its reporting
format from prior years to reclassify certain occupancy costs and
exclude buying costs from cost of sales. Previously reported
July 23, 1995 balances have been reclassified to conform to the
revised presentation.
Results of Operations
The following table presents the Company's statement of
operations data, as a percentage of sales, for the periods
indicated:
13 Weeks Ended 26 Weeks Ended
_______________ _______________
July 28, July 23, July 28, July 23,
1996 1995 1996 1995
_____ _____ _____ _____
Sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold,
including
occupancy costs 76.4 77.7 76.7 78.2
_____ _____ _____ _____
Gross margin 23.6 22.3 23.3 21.8
Selling, general and
administrative expenses 23.7 24.1 23.7 23.8
Pre-opening expense 0.4 0.4 0.2 0.3
Goodwill amortization and 0.0 50.2 0.1 25.7
writedown
Operating losses of stores
identified for closure (1) -- (0.2) -- (0.0)
_____ _____ _____ _____
Operating loss (0.5) (52.1) (0.7) (27.7)
Interest expense 0.4 0.2 0.4 0.0
_____ _____ _____ _____
Loss before income tax (0.9) (52.3) (1.1) (27.7)
Income tax benefit 0.4 0.9 0.4 0.9
_____ _____ _____ _____
Net Loss (0.5)% (51.4)% (0.7)% (26.8)%
===== ===== ===== =====
Net Loss excluding writedown (0.5)% (1.3)% (0.7)% (1.5)%
===== ===== ===== =====
(1) Operating losses from stores included in the Waldenbooks
restructuring program are charged against the reserve for such
losses in 1995.
Store Activity
The Company's store activity is summarized below:
7/28/96 7/23/95 1/28/96
Borders Superstores
Beginning number of stores 116 75 75
Openings 11 6 41
_____ _____ _____
Ending number of stores 127 81 16
===== ===== =====
Walden Mall Bookstores
Beginning number of stores 992 1,102 1,102
Openings 3 0 5
Closings (29) (49) (115)
_____ _____ _____
Ending number of stores 966 1,053 992
===== ===== =====
CD Superstores/ Planet Music
Superstores:
Beginning number of stores 9 10 10
Openings (2) --- 1
_____ _____ _____
Endings 7 10 9
===== ===== =====
13 Weeks Ended July 28, 1996 and July 23, 1995
Sales in the second quarter of 1996 were $414.3 million, a
$50.5 million, or 13.9%, increase over second quarter 1995 sales
of $363.8 million. This increase reflects a $65.6 million, or
46.4%, increase in Borders' sales resulting from new store
openings and a comparable store sales increase of 10.7%. This
increase was offset in part by a decline in Waldenbooks sales of
$12.7 million due to store closings and a 1.8% decrease in
comparable store sales.
Cost of merchandise sold, including occupancy costs, was
$316.4 million in the second quarter of 1996, as compared with
$282.8 million in the second quarter of 1995. Gross margin as a
percentage of sales was 23.6% in 1996 versus 22.3% in 1995. This
1.3% improvement reflects the impact of consolidated distribution
operations and improved buying resulting in higher initial
product margin and tighter control of inventory shrinkage.
Selling, general and administrative ("SG&A") expenses in the
second quarter of 1996 were up $10.3 million, or 11.7%, over SG&A
expenses in the second quarter of 1995 ($98.1 million versus
$87.8 million). As a percentage of sales, SG&A expenses fell
from 24.1 to 23.7% in 1996. This 0.4% decrease is primarily due
to the leveraging of corporate overhead over the Company's
expanding sales base, as well as headcount and wage savings
resulting from the move of the Waldenbooks headquarters from
Stamford, Connecticut to Ann Arbor, Michigan in the third quarter
of 1995 and higher co-op advertising rebates.
Pre-opening expense in the second quarter of 1996 was $1.6
million as compared to $1.3 million in 1995. Pre-opening expense
consists principally of grand-opening advertising expense and
store payroll related to the opening, and is expensed in the
first full fiscal month of a store's operations. Pre-opening
expense per store varies primarily as a result of differing
levels of grand opening advertising, depending on the presence of
the Company and its competitors in the market and differing
levels of labor costs associated with merchandising the store.
The Company opened 3 Borders superstores and 2 Waldenbooks mall-
based store in the second quarter of 1996 as compared to 7
Borders superstores and 1 Waldenbooks store in the second quarter
of 1995. The increase in pre-opening expense is a result of the
timing of the 1996 store openings. The majority of the expense
incurred in the second quarter is associated with first quarter
store openings.
Goodwill amortization was $0.2 million in the second quarter
1996 as compared to $0.6 million in 1995. The decrease in
goodwill amortization is a result of the aforementioned goodwill
write-down taken in 1995.
Interest expense was $1.6 million in 1996 as compared to
$0.4 in 1995. The increase is due primarily to borrowings
outstanding during the period ended July 28, 1996 used to fund
the Kmart share purchase in the third quarter of 1995.
Income tax benefit in the second quarter of 1996 was $1.4
million as compared to a benefit of $3.2 million in 1995.
26 Weeks Ended July 28, 1996 and July 23, 1995
Sales for the 26 weeks ended July 28, 1996, were $818.3
million, a $100.9 million, or 14.1%, increase over sales for the
26 weeks ended July 23, 1995, of $714.4 million. This increase
reflects a $130.9 million, or 48%, increase in Borders' sales
resulting from new store openings and a comparable store sales
increase of 9.5%. This increase was offset in part by a decline
in Waldenbooks sales of $26.7 million due to store closings and a
1.6% decrease in comparable store sales.
Cost of merchandise sold, including occupancy costs, was
$627.3 million in the first 26 weeks of 1996, as compared with
$557.2 million in the same period of 1995. Gross margin as a
percentage of sales was 23.3% in 1996 versus 22.3% in 1995. This
1.3% improvement reflects the impact of higher initial margin due
to improved buying, tighter control of inventory shrinkage and
savings from consolidated distribution operations.
Selling, general and administrative ("SG&A") expenses in the
26 weeks ended July 28, 1996 were $98.1 million versus $87.8
million for the same period of 1995. As a percentage of sales,
SG&A expenses fell from 24.3% in 1995 to 23.7% 1996. This 0.6%
decrease is primarily due to the leveraging of corporate overhead
over the Company's expanding sales base, as well as headcount and
wage savings resulting from the move of the Waldenbooks
headquarters from Stamford, Connecticut to Ann Arbor, Michigan in
the third quarter of 1995 and higher co-op advertising rebates.
Pre-opening expense in the first 26 weeks of 1996 and 1995
was $2.0 million. The Company opened 11 Borders superstores and 3
Waldenbooks mall-based store in the second quarter of 1996 as
compared to 13 Borders superstores and 1 Waldenbooks store in the
first 26 weeks of 1995.
Goodwill amortization was $0.5 million in the first 26 weeks
of 1996 as compared to $2.5 million in the first 26 weeks of
1995. The decrease in goodwill amortization is a result of the
aforementioned goodwill write-down taken in 1995.
Interest expense was $3.5 million in 1996 as compared to
$0.3 in 1995. The increase is due primarily to borrowings
outstanding during the period ended July 28, 1996 used to fund
the Kmart share purchase in the third quarter of 1995.
Income tax benefit in the second quarter of 1996 was $3.6
million as compared to a benefit of $6.3 million in 1995.
Liquidity and Capital Resources
The Company's principal capital requirements are to fund
working capital needs, the opening of new stores and the
refurbishment and expansion of existing stores.
Net cash used for operations for the 26 weeks ended July 28,
1996 was $24.3 million as compared to $83.5 million in the
corresponding period in the prior year. The current year
activity primarily reflects a net loss of $5.7 million combined
with a decrease in payables of $22.1 million and decrease in
other current assets of $25.3 million offset by a decrease in
inventories of $9.1 million and a decrease of $13.5 million of
property held for resale. The decrease in cash used for
operations as compared to the prior year is primarily
attributable to the decrease in inventory over the prior year
representing the Company's focus on reducing its investment in
inventory at mall stores. Other operating cash flow primarily
represents decreases in accrued liabilities and other non-trade
accounts payable. The Company expects to complete the sale of
properties included in property held for resale during 1996.
Net cash used for investing for the first 26 weeks of 1996
was $44.9 million as compared to $54.4 million in the first 26
weeks of 1995. The Company opened 11 new superstores and 3 new
Waldenbooks stores in the first 26 weeks of 1996 versus 13 new
superstores in the first 26 weeks of 1995. The decrease is due
primarily to the use of the Company's lease facility to construct
developer financed store locations.
Net cash provided by financing in the first 26 weeks of 1996
was $67.8 million versus cash used for financing of $36.7 million
in the first 26 weeks of 1995. Net cash provided by financing in
1996 resulted primarily from net borrowings under the credit
facility.
The Company anticipates that planned closings of Waldenbooks
stores will decrease Waldenbooks' annual working capital
requirements. On a consolidated basis, the Company expects its
working capital requirements to increase as a result of its
expansion program for its Borders books and music superstores.
In 1995 the Company entered into a $300 million, five-year
working capital line of credit, with a syndicate of banks. The
Company had $125.0 million in outstanding borrowings under the
Credit Facility as of July 28, 1996
On November 26, 1995 the Company entered into a five year
$150 million lease financing facility to finance new stores and
other property through operating leases. The lease facility will
provide financing to Lessors through loans from a first party
lender for up to 95% of a project cost. It is expected that
Lessors will make equity contributions approximating 5% of each
project. Independent of its obligations as lessee, the Company
will guarantee payment when due of all amounts required to be
paid to the first party lender. The principal amount guaranteed
will be limited to approximately 89% of the original cost of a
project so long as the Company is not in default under the lease
relating to such project. There were 22 properties financed
through the lease facility, with a financed value of $59.3
million, at July 28, 1996.
During 1994, the Company entered into agreements in which
leases with respect to four Borders' locations serve as
collateral for certain mortgage pass-through certificates. These
mortgage pass-through certificates include a provision requiring
the Company to repurchase the underlying mortgage notes in
certain events, including the failure by the Company to make
payments of rent under the related leases, the failure by Kmart
to maintain required investment grade ratings or the termination
of the guarantee by Kmart of the Company's obligations under the
related leases (which would require mutual consent of Kmart and
Borders). In the event the Company is required to repurchase all
of the underlying mortgage notes, the Company would be obligated
to pay approximately $36.6 million. The Company would expect to
fund this obligation through its line of credit. Kmart has
failed to maintain investment grade ratings, and therefore, these
notes are now subject to put by the holder. To date, the holder
has not exercised its right to put the notes.
In addition to the contingent repurchase obligations
described above, leases relating to two other Borders locations
served as collateral for certain mortgage pass-thru certificates.
On March 11, 1996 Kmart was required to repurchase the underlying
notes. The Company purchased the notes from Kmart for
approximately $12.1 on June 18, 1996, which fully satisfied the
Company's contingent obligation
The Company does not believe that the note purchase has had
a material effect on the Company's financial position or
earnings.
Item 4. Submission of Matters to a Vote of Security Holders
The following actions were taken at the Annual Meeting of
Stockholders of the Company held on May 16, 1996, with the votes
on such matters being as indicated below:
1. The following individuals were elected to serve as
directors for three year terms expiring in 1999:
Name For Authority
Withheld
Peter R. Formanek 31,143,527 shares 40,296 shares
Brian P. Lamb 31,084,927 shares 99,896 shares
Amy B. Lane 31,141,316 shares 42,507 shares
2. The Amendment to the Company's Director Stock Plan
described in the Proxy Statement of the Company dated April 18,
1996, was approved:
For Against Abstain
26,661,512 4,437,588 84,723
The following individuals continue to serve as directors for
terms expiring after the 1996 Annual Meeting: Larry Pollock;
George R. Mrkonic; Leonard A. Schlesinger; and Robert F.
DiRomualdo.
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on form 8-K
Exhibits:
(a) Exhibits: 10.33 Amendment No.6 and Consent to Credit Agreement
among Borders Group, Inc., its subsidiaries
and the lenders Party thereto.
11.1 Statement of Computation of per share earnings
27.0 Financial Data Schedule
(b) Reports on Form 8-K: None
SIGNATURES
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 thereto duly authorized.
BORDERS GROUP, INC.
(Registrant)
Date: September 10, 1996 By: \s\ George R. Mrkonic
Vice Chairman and President
(Principal Financial and
Accounting Officer)
document2
Exhibit 10.33 to Form 10-Q
AMENDMENT NO. 6 AND CONSENT TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 6 AND CONSENT TO CREDIT AGREEMENT
(the "Amendment") is entered into as of the 18th day of
June, 1996, by and between PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent under the Credit Agreement described
bellow, on behalf of the Lenders, and BORDERS GROUP, INC., a
Delaware corporation (the "Company"), on behalf of the
Borrowers.
WITNESSETH:
WHEREAS, the Borrowers, the Lenders, the Administrative
Agent and the Syndication Agent have entered into that
certain Credit Agreement dated as of March 28, 1995, (as
heretofore amended, the "Agreement"; terms defined in the
Agreement, as amended hereby, which are used herein shall
have the same meanings as are set forth in the Agreement for
such terms unless otherwise defined herein);
WHEREAS, the Borrowers have requested that the Lenders
amend certain provisions of the Agreement and consent to
certain actions of the Borrowers, and the Lenders are
willing to do so on the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, pursuant to Section 12.01 of the Agreement,
the Administrative Agent, with the written consent of the
Required Lenders, may enter into certain prescribed
amendments to the Agreement on behalf of the Lenders, and
the Company may enter into amendments of the Agreement on
behalf of the Borrowers;
NOW, THEREFORE, in consideration of the premises set
forth above, the terms and conditions contained herein, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lenders
and the Borrowers hereby agree as follows:
1. Amendment to Agreement. Subject to the
satisfaction of each of the conditions precedent set forth
in Section 3 below, the Agreement is amended as follows:
a. The first paragraph of the Agreement is
hereby amended by deleting the words "Borders Group, Inc., a
Delaware corporation (the "Company"), Borders, Inc., a
Delaware corporation ("Borders"), Walden Book Company, Inc.,
a New York corporation ("Walden") and Planet Music, Inc., a
North Carolina corporation ("Planet") and inserting in lieu
thereof the following: "Borders Group, Inc. (the
"Company"), Borders, Inc. ("Borders"), Walden Book Company,
Inc. ("Walden") and Planet Music, Inc. ("Planet").
b. Section 1.01 of the Agreement is amended by
deleting the definitions of "Borders", "Planet" and "Walden"
and inserting in lieu thereof the following in their proper
alphabetical sequence:
"Borders" shall mean Borders, Inc., a corporation organized
and existing under the laws of the State of Delaware, and is
permitted successors and assigns.
"Planet" shall mean Planet Music, Inc., a corporation
organized and existing under the laws of the State of North
Carolina, and its permitted successors and assigns.
"Walden" shall mean Walden Book Company, Inc., a corporation
organized and existing under the laws of the State of New
York, and its permitted successors and assigns.
c. Schedule 6.01(a) of the Agreement is hereby
deleted and replaced by Schedule 6.01(a) attached hereto.
d. Schedule 6.01(c) of the Agreement is hereby
deleted and replaced by Schedule 6.01(c) attached hereto.
2. Consent. Subject to the satisfaction of the
conditions precedent specified in Section 3 below, the
Lenders and the Agents hereby consent as follows:
a. notwithstanding Sections 8.01(a), 8.01(m),
8.02(d), 8.02(f), 8.02(h), 8.02(i) and 8.02(n) of the
Agreement, (i) to the creation by either Borders or the
Company of a wholly-owned subsidiary incorporated under the
laws of the State of Colorado ("New Borders") and (ii)
merger of Borders with and into New Borders, (iii) the
incorporation by Walden or the Company of a wholly-owned
subsidiary incorporated under the laws of the State of
Colorado ("New Walden") and (iv) the merger of Walden with
and into New Walden; and
b. notwithstanding the provisions of Section
8.02(d) of the Agreement, the purchase by the Company from
Kmart prior to June 21, 1996 of (i) a promissory note dated
July 1, 1993, in the principal amount of $5,187,000 executed
by Utica Borders Associates Limited Partnership, and payable
to the order of United States Trust Company (the "Utica
Note") and (ii) the purchase (for an amount not to exceed
$7,100,000) of a participation interest in a promissory
note, dated May 20, 1993, in the principal amount of
$15,616,000 executed by Manchester Crossroads I Associates
Limited Partnership and payable to the order of the United
States Trust Company of New York (the "Manchester Note");
the Utica Note and the Manchester Note are referred to
herein collectively as the "Put Notes"), provided, that no
later than the day after the purchase by the Company of the
Utica Note and the participation interest in the Manchester
Note, the Company shall have received the original Utica
Note from Kmart, duly endorsed in favor of the Company, and
the original Manchester Note shall have been deposited with
the Custodian (as defined in the Participation Agreement,
dated as of June 18, 1996, among Kmart, the Company, Borders
and certain other parties (the "Participation Agreement")).
3. Conditions of Effectiveness. The amendments to
the Agreements contained in Section 1 and the consents
contained in Section 2a. (such amendments and consents are
referred to herein as the "Merger Amendments") shall become
effective when and only when each of the conditions
specified in clauses a. and b. (other than clause (7)
thereof) below has been satisfied, and the consents
contained in Section 2b. (such consents are referred to
herein as the "Kmart Consents") shall become effective when
and only when each of the conditions specified in clauses a.
and b. (other than clauses (5), (6) and (9) thereof) below
has been satisfied:
a. no Event of Default or Potential Default
shall have occurred and be continuing on the date hereof or
on the date of the Merger Amendments or Kmart Consents, as
the case may be, are effective and the representations and
warranties made in the Agreement and in Section 4 hereof
shall be true and correct on the date hereof and on the date
the Merger Amendments or the Kmart Consents, as the case may
be, are effective and the Borrowers shall have delivered to
the Administrative Agent for the benefit of each Lender an
officer's certificate to both such effects (and with respect
to the Merger Amendments, executed by Borders and Walden so
as to confirm the foregoing both before and after the
mergers described in Section 2a. above);
b. the Administrative Agent shall have received
for the benefit of each Lender all of the following
documents, each document being in form and substance
satisfactory to the Administrative Agent:
(1) written Approval Memos from the Required
Banks;
(2) this Amendment, duly executed by the Company;
(3) the officer's certificate referenced in
clause a. above;
(4) a consent to this Amendment executed by each
of Borders Properties, Inc. and Waldenbooks Properties,
Inc., in the form of Exhibit A hereto;
(5) copies of the Certificates of Incorporation,
the By-Laws and Good Standing Certificates in respect of
each of New Borders and New Walden from the Secretary of
State of the State of Colorado.
(6) copies of the Merger Agreement and related
Articles and Certificates of Merger and such confirmation as
may be deemed necessary by the Administrative Agent that
such Articles and Certificates have been filed as necessary
with the States of Colorado, New York and Delaware, an the
mergers described in Section 2a. above are effective;
(7) copies of the Utica Note, the Manchester
Note, the Participation Agreement, the Settlement and
Release Agreement, dated as of June 17, 1996, among Kmart,
the Company and Borders, and the Conveyance Agreement, dated
as of June 17, 1996, among Kmart, the Company and Borders;
(8) such instruments, agreements, opinions of
Thomas D. Carney, General Counsel of the Borrowers, and
other items as the Administrative Agent may request; and
(9) such opinions of Holland & Hart, special
Colorado counsel to the Borrowers as the Administrative
Agent may request.
4. Representation and Warranties. Each of the
Borrowers represents and warrants as follows: (i) it has
all necessary power and authority to execute and deliver
this Amendment and to perform its obligations hereunder;
(ii) the execution, delivery and performance of this
Amendment have been duly authorized by it; (iii) this
Amendment and the Agreement, as amended hereby, constitute
legal, valid and binding obligations of such Borrower and
are enforceable against such Borrower in accordance with
their terms; and (iv) the approval, execution, delivery and
performance of the terms hereof and of the Agreement, as
amended hereby, do not violate any contractual provision to
which it is a party or by which it is or its properties are
bound or any Law applicable to it.
5. Reference to the Effect on the Agreement.
a. Subject to satisfaction of the conditions
precedent set forth in Section 3 hereof: (i) each reference
in the Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import shall mean and be a
reference to the Agreement as amended hereby and (ii) each
reference to the Agreement in all other Loan Documents shall
mean and be a reference to the Agreement, as amended hereby.
b. Except as specifically amended above, the
Agreement, and all other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
c. The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided
herein, operate as an amendment to any provision of the
Agreement nor a waiver of any right, power or remedy of any
Lender or Agent, nor constitute a waiver of, or consent to
any departure from, any provision of the Agreement or any
other Loan Document.
6. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws (as
opposed to conflicts of law provisions) of the State of
Illinois.
7. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other
purpose.
8. Counterparts. This Amendment may be executed by
one or more of the parties to this Amendment on any number
of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same
instrument. Delivery of a duly executed counterpart copy of
this Amendment may be made by telecopy.
9. Expenses. The Borrowers will upon demand pay to
each of the Agents the amount of any and all expenses,
including the reasonable fees and expenses of each Agent's
attorneys (which attorneys may be an Agent's employees to
the extent agreed to in advance by Borrowers) which any such
Agent may incur in connection with the preparation,
negotiation and enforcement of this Amendment and each of
the agreements, instruments and other documents to be
delivered to the Agents or the Lenders in connection
herewith.
[Signature pages to follow]
AMENDMENT NO. 6
IN WITNESS WHEREOF, this Amendment has been duly
executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent
acting on behalf of the Lenders pursuant to Section 12.01 of
the Agreement.
By: \s\ Neal Shipley
Title: Commercial Banking Officer
BORDERS GROUP, INC., acting on behalf of the Borrowers
pursuant to Section 12.01 of the Agreement.
By: \s\ Cedric J. Vanzura
Title:VP, Grp Plng & Resource Mgmt.
CONSENT
Each of the undersigned, as a Guarantor under that
certain Credit Agreement dated as of March 28, 1995, among
PNC Bank, National Association, as Administrative Agent,
Borders Group, Inc. (the "Company"), and each of the other
Borrowers and Lenders a party thereto (as heretofore
amended, the "Agreement"; terms defined in the Agreement, as
amended by Amendment No. 6 and Consent referred to below,
which are used herein shall have the meanings as are set
forth in the Agreement for such terms unless otherwise
defined herein), hereby (i) consents to Amendment No. 6 and
Consent to Credit Agreement, dated as of June 18, 1996,
between the Administrative Agent, on behalf of the Lenders,
and the Company, on behalf of the Borrowers (the
"Amendment"), and the amendments contained therein and (ii)
confirms and agrees that, notwithstanding the Amendment and
the effectiveness of the amendments contained therein, the
Agreement is, and shall continue to be, in full force and
effect and is hereby confirmed and ratified in all respects,
including, without limitation, each of the undersigned's
obligations under Article IX thereof. Nothing herein is
intended or shall be deemed to limit any Agent's or Lender's
rights under the Agreement to take actions without the
consent of the undersigned.
Dated as of June 18, 1996
Borders Properties, Inc.
By:\s\ Cedric J. Vanzura
Title: Treasurer
Waldenbooks Properties, Inc.
By:\s\ Cedric J. Vanzura
Title: Treasurer
Exhibit 10.34 to Form 10-Q
AMENDMENT NO. 2 AND CONSENT TO GUARANTEE
THIS AMENDMENT NO. 2 AND CONSENT TO GUARANTEE (the
"amendment") is entered into as of the 14th day of June,
1996, by and between BANKERS TRUST COMPANY, as Agent for the
other Lenders under the Credit Agreement (as defined below),
and BORDERS GROUP, INC., (the "Company"), and each of the
corporations that is a signatory hereto (collectively, with
the Company, the "Guarantors")
WITNESSETH:
WHEREAS, the Guarantors have executed and delivered
that certain Guarantee Agreement dated as of November 22,
1995, (the "Guaranty"; terms defined in the Guaranty, as
amended hereby, which are used herein shall have the same
meanings as are set forth in the Guaranty for such terms
unless otherwise defined herein);
WHEREAS, the Guarantors have requested that the Agent,
on behalf of the Lenders, agree to the amendment of certain
provisions of the Guaranty, and the Agent, on behalf of the
Lenders is willing to do so on the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, pursuant to Section 12.1 of the Credit
Agreement dated as of November 22, 1995 (the "Credit
Agreement") among the Agent, the lenders who are a signatory
thereto (the "Lenders":) and Wilmington Trust Company, not in
its individual capacity, but solely as Owner Trustee, the
Agent, with the written consent of the Required Lenders, may
enter into certain amendments to the Guaranty on behalf of
the Lenders;
NOW, THEREFORE, in consideration of the premises set
forth above, the terms and conditions contained herein, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Agent, on
behalf of the Lenders and the Guarantors hereby agree as
follows:
1. Amendment to Agreement. Subject to the
satisfaction of each of the conditions precedent set forth
in Section 4 below, the Agreement is amended as follows:
Appendix A to the Guarantee is amended by deleting
the definitions of "Borders" and "Walden" and inserting in
lieu thereof the following in their proper alphabetical
sequence:
"Borders" shall mean Borders, Inc., a corporation organized
and existing under the laws of the State of Delaware, and is
permitted successors and assigns.
"Walden" shall mean Walden Book Company, Inc., a corporation
organized and existing under the laws of the State of New
York, and its permitted successors and assigns.
2. Consent. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, the
Lenders hereby consent as follows:
a. notwithstanding Sections 11.1, 11.12, 12.4,
12.6, 12.8, 12.9 and 12.14 of the Guarantee, (i) to the
creation by either Borders or the Company of a wholly-owned
subsidiary incorporated under the laws of the State of
Colorado ("New Borders") and (ii) merger of Borders with and
into New Borders, (iii) the incorporation by Walden or the
Company of a wholly-owned subsidiary incorporated under the
laws of the State of Colorado ("New Walden") and (iv) the
merger of Walden with and into New Walden; and
b. notwithstanding the provisions of Section
12.4 of the Guarantee, the purchase by the Company from
Kmart prior to June 21, 1996 of (i) a promissory note dated
July 1, 1993, in the principal amount of $5,187,000 executed
by Utica Borders Associates Limited Partnership, and payable
to the order of United States Trust Company (the "Utica
Note") and (ii) the purchase of a participation interest in
the approximate amount of $6,804,181 in a promissory note,
dated May 20, 1993, in the principal amount of $15,616,000
executed by Manchester Crossroads I Associates Limited
Partnership and payable to the order of the United States
Trust Company of New York (the "Manchester Note"); the Utica
Note and the Manchester Note are referred to herein
collectively as the "Put Notes"), provided, that no later
than the day after the purchase by the Company of the Utica
Note and the participation interest in the Manchester Note,
the Company shall have received the original Utica Note from
Kmart, duly endorsed in favor of the Company, and the
original Manchester Note shall have been deposited with the
Custodian (as defined in the Participation Agreement, dated
as of June 18, 1996, among Kmart, the Company, Borders and
certain other parties (the "Participation Agreement")).
3. Confirmation of Guarantee. By its execution
below, New Borders (to be re-named Borders, Inc., a Colorado
corporation) and New Walden (to be re-named Walden Book
company, Inc., a Colorado corporation) hereby confirm each
of their respective obligations under the Guarantee as if
each such entity were an original signatory thereto.
4. Conditions of Effectiveness. The amendments to
the Guarantee contained in Section 1 and the consents
contained in Section 2(a). (such amendments and consents are
referred to herein as the "Merger Amendments") shall become
effective when and only when each of the conditions
specified in clauses (a) and (b) (other than clause (6)
thereof) below has been satisfied, and the consents
contained in Section 2(b) (such consents are referred to
herein as the "Kmart Consents") shall become effective when
and only when each of the conditions specified in clauses
(a) and (b) (other than clauses (4), (5) and (8) thereof)
below has been satisfied:
(a) no Event of Default or Potential Default
shall have occurred and be continuing on the date hereof or
on the date of the Merger Amendments or Kmart Consents, as
the case may be, are effective and the representations and
warranties made in the Guarantee or in the Participation
Agreement and in Section 4 hereof shall be true and correct
on the date hereof and on the date the Merger Amendments or
the Kmart Consents, as the case may be, are effective and
the Guarantors shall have delivered to the Agent for the
benefit of each Lender an officer's certificate to both such
effects (and with respect to the Merger Amendments, executed
by Borders and Walden so as to confirm the foregoing both
before and after the mergers described in Section 2(a)
above);
(b) the Agent shall have received for the benefit
of each Lender all of the following documents, each document
being in form and substance satisfactory to the Agent:
(1) written consents from the Required Lenders;
(2) this Amendment, duly executed by each of the
Guarantors;
(3) the officer's certificate referenced in
clause (a) above;
(4) copies of the Certificates of Incorporation,
the By-Laws and Good Standing Certificates in respect of
each of New Borders and New Walden from the Secretary of
State of the State of Colorado.
(5) copies of the Merger Agreement and related
Articles and Certificates of Merger and such confirmation as
may be deemed necessary by the Agent that such Articles and
Certificates have been filed as necessary with the States of
Colorado, New York and Delaware, an the mergers described in
Section 2(a) above are effective;
(6) copies of the Utica Note, the Manchester
Note, the Participation Agreement, the Settlement and
Release Agreement, dated as of June 17, 1996, among Kmart,
the Company and Borders, and the Conveyance Agreement, dated
as of June 17, 1996, among Kmart, the Company and Borders;
(7) such instruments, agreements, opinions of
Thomas D. Carney, General Counsel of the Borrowers, and
other items as the Administrative Agent may request; and
(8) such opinions of Holland & Hart, special
Colorado counsel to the Borrowers as the Administrative
Agent may request.
5. Representation and Warranties. Each of the
Guarantors represents and warrants as follows: (i) it has
all necessary power and authority to execute and deliver
this Amendment and to perform its obligations hereunder;
(ii) the execution, delivery and performance of this
Amendment have been duly authorized by it; (iii) this
Amendment and the Guarantee, as amended hereby, constitute
legal, valid and binding obligations of such Guarantor and
are enforceable against such Borrower in accordance with
their terms; and (iv) the approval, execution, delivery and
performance of the terms hereof and of the Guarantee, as
amended hereby, do not violate any contractual provision to
which it is a party or by which it is or its properties are
bound or any Law applicable to it.
6. Reference to the Effect on the Agreement.
(a) Subject to satisfaction of the conditions
precedent set forth in Section 4 hereof: (i) each reference
in the Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import shall mean and be a
reference to the Guarantee as amended hereby and (ii) each
reference to the Guarantee in all other Operative Documents
shall mean and be a reference to the Guarantee, as amended
hereby.
(b) Except as specifically amended above, the
Guarantee, and all other Operative Documents shall remain in
full force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided
herein, operate as an amendment to any provision of the
Guarantee nor a waiver of any right, power or remedy of any
Lender or Agent, nor constitute a waiver of, or consent to
any departure from, any provision of the Guarantee or any
other Operative Document.
7. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws (as
opposed to conflicts of law provisions) of the State of New
York.
8. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other
purpose.
9. Counterparts. This Amendment may be executed by
one or more of the parties to this Amendment on any number
of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same
instrument. Delivery of a duly executed counterpart copy of
this Amendment may be made by telecopy.
10. Expenses. The Guarantors will upon demand pay to
the Agent the amount of any and all expenses, including the
reasonable fees and expenses of the Agent's attorneys which
Agent may incur in connection with the preparation,
negotiation and enforcement of this Amendment and each of
the agreements, instruments and other documents to be
delivered to the Agent or the Lenders in connection
herewith.
[Signature pages to follow]
IN WITNESS WHEREOF, this Amendment has been duly
executed as of the day and year first above written.
BANKERS TRUST COMPANY, as Agent acting on behalf of the
Lenders pursuant to Section 12.1 of the Credit Agreement.
By: \s\
BORDERS GROUP, INC., a Delaware corporation
By: \s\
BORDERS, INC., a Colorado corporation
By: \s\
WALDEN BOOK COMPANY, INC., a Colorado corporation
By: \s\
PLANET MUSIC, INC., a North Carolina corporation
By: \s\
BORDERS PROPERTIES, INC., a Delaware corporation
By: \s\
WALDENBOOKS PROPERTIES, INC., a Delaware corporation
By: \s\
Exhibit 11.1
Statement of Computation of Per Share Earnings
(dollars in millions except per share data)
For the For the
13-weeks Ended 26-weeks Ended
July 28, 1996 July 28, 1996
Primary Earnings per Common Share:
Net loss $ (2.2) $ (5.7)
Pro forma weighted
average shares
outstanding (000's) 41,775 41,856
--------- -------
Primary E.P.S. $ (0.05) $ (0.14)
Fully Diluted Earnings per Common Share:
Net Loss $ (2.2) $ (5.7)
Pro forma weighted
average shares
outstanding (000's) 42,036 41,986
-------- --------
Fully Diluted E.P.S. $ (0.05) $ (0.14)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-26-1997 JAN-26-1997
<PERIOD-START> APR-29-1996 JAN-29-1996
<PERIOD-END> JUL-28-1996 JUL-28-1996
<CASH> 35 35
<SECURITIES> 0 0
<RECEIVABLES> 42 42
<ALLOWANCES> 0 0
<INVENTORY> 628 628
<CURRENT-ASSETS> 705 705
<PP&E> 492 492
<DEPRECIATION> 223 223
<TOTAL-ASSETS> 1051 1051
<CURRENT-LIABILITIES> 544 544
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 472 472
<TOTAL-LIABILITY-AND-EQUITY> 1051 1051
<SALES> 414 818
<TOTAL-REVENUES> 414 818
<CGS> 316 627
<TOTAL-COSTS> 316 627
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2 4
<INCOME-PRETAX> (3) (9)
<INCOME-TAX> (1) (3)
<INCOME-CONTINUING> (2) (6)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2) (6)
<EPS-PRIMARY> (.05) (.14)
<EPS-DILUTED> (.05) (.14)
</TABLE>
