<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES ACT OF
1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____ .
Commission file number 1-13740
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Borders Group Savings Plan
B. Name of issuer of securities held pursuant to the plan and the address
of its principal executive office:
Borders Group, Inc.
100 Phoenix Drive
Ann Arbor, MI 48108
(734) 477-1100
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(Registrant's telephone number, including area code)
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Borders Group Savings Plan
Year Ended December 31, 1999 and 1998
Page(s)
Report of Independent Accountants.............................................1
Financial Statements:
Statements of Net Assets Available for Benefits.............................2
Statement of Changes in Net Assets Available for Benefits...................3
Notes to Financial Statements.............................................4-8
Additional Information:
Schedule I - Schedule of Assets Held for Investment Purposes..................9
Other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under ERISA have been omitted
because they are not applicable.
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Report of Independent Accountants
To the Participants and Administrator of
Borders Group Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Borders Group Savings Plan (the "Plan") at December 31, 1999 and 1998, and
the changes in net assets available for benefits for the year ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Plan's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Assets Held
for Investment Purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
This supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
------------------------------
Bloomfield Hills, Michigan
June 28, 2000
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Borders Group Savings Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
December 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash $ 99,488 $ -
Investments at fair value (participant-directed) 77,594,378 63,280,912
Receivables
Accrued investment income 3,695 -
Company contributions 90,480 89,418
Participants' contributions 246,974 226,977
----------- -----------
Total receivables 341,149 316,395
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Total assets 78,035,015 63,597,307
Liabilities
Amounts due to participants 6,168 -
----------- -----------
Net assets available for benefits $78,028,847 $63,597,307
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
Borders Group Savings Plan
Statement of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
<S> <C>
Additions to net assets attributed to:
Investment income:
Net realized and unrealized
appreciation
in fair value of investments $ 4,963,835
Dividends and interest 3,129,576
-----------
Total investment income 8,093,411
Contributions:
Participants 8,723,315
Company 2,803,485
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Total contributions 11,526,800
-----------
Total additions 19,620,211
-----------
Deductions from net assets attributed to:
Participant withdrawals 5,176,885
Administrative expenses 11,786
-----------
Total deductions 5,188,671
-----------
Increase in net assets 14,431,540
Net Assets:
Beginning of year 63,597,307
-----------
End of year $78,028,847
===========
</TABLE>
See notes to financial statements.
3
<PAGE>
Borders Group Savings Plan
Notes to Financial Statements
1. Plan Description
The following description of the Borders Group Savings Plan (the "Plan")
provides only general information. Participants should refer to the Plan
Agreement for a more complete description of the Plan's provisions.
General
The Plan, as amended effective February 28, 1995, is a defined contribution
plan covering substantially all employees of Borders Group, Inc. (the
"Company") who have six months of eligible service, as defined, and are age
21 or older. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Effective January 1, 1999, Merrill Lynch Trust Company of Michigan (`Merrill
Lynch") became trustee of the Plan. Scudder Trust Company (`Scudder") served
as trustee of the Plan through December 31, 1998. The Borders Group, Inc.
Savings Plan Committee serves as Plan Administrator. The Company performs
certain administrative functions.
Contributions
Participants may elect to contribute to the Plan up to 15% in 1% increments
of their annual compensation in any Plan year. For purposes of computing
allowable participant contributions, participant compensation includes an
employee's base salary or wages, bonus, commissions and overtime pay.
The Company provides matching contributions of 50% of the first 6% of
compensation contributed to the Plan by participants and may make
discretionary contributions to the Plan in amounts as determined by the
Company's Board of Directors. Matching contributions are allocated to each
participant's account in the same manner as participant contributions.
Subsequent to February 28, 1995, Company discretionary contributions are
invested in the Company's common stock. Prior to February 28, 1995, Company
contributions were allocated to each participant's account in the same
manner as participant contributions. There was no Company discretionary
contribution to the Plan for the year ended December 31, 1999.
Participant Accounts
Each participant's account is credited with the participant's contribution,
matching and discretionary Company contributions and earnings on the
investments in which the participant's account is invested. The benefit to
which a participant is entitled is the benefit that can be provided from the
participant's account. Participants are fully vested at all times in their
account balances.
Participant Loans
Participants may borrow up to 50% of their account balance. Loan repayments,
including interest, are made through payroll deductions. Annual interest
rates in effect at December 31, 1999 and 1998 were 9.5% and 7.5%,
respectively. Loan balances of terminated employees that are not repaid
within 30 days of termination are treated as distributions.
Payment of Benefits
Upon termination of service, attainment of age 59-1/2, death or any other
distributive event as defined in the Plan document, participants or their
beneficiaries may elect to receive either a lump-sum amount equal to the
value of their account balances or fixed periodic payments, subject to
certain limitations. Participants who leave the Company may allow their
balances to remain in the Plan until the end of the calendar year in which
they attain age 65.
Investment of Plan Assets
Participant and Company matching contributions are invested, at the
direction of the participants, in the investment programs described below.
4
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Merrill Lynch Institutional Fund - A tax-exempt mutual fund which seeks to
provide capital preservation, current income and liquidity by investing in
short-term money market instruments, including securities issued by the
U.S. government and its agencies.
State Street Research Government Income Fund - Mutual fund which seeks to
provide high current income by investing in primarily in U.S.
government securities.
AIM International Equity Fund - Mutual fund which seeks to provide
long-term capital growth by investing in international equity securities.
Davis New York Venture Fund, Inc. - Mutual fund which seeks to provide
long-term capital growth by investing primarily in common stocks.
Lord Abbott Developing Growth Fund, Inc. - Mutual fund which seeks to
provide capital growth by investing a majority of its total assets in
securities of companies in the "developing growth" phase of corporate
growth.
Merrill Lynch Equity Index Trust - Mutual fund which seeks to replicate
the total return of the Standard & Poor's 500 Composite Stock Price Index.
MFS Capital Opportunities Fund - Mutual fund which seeks to provide
capital appreciation with dividend income as a secondary objective by
investing primarily in common stocks as well as certain fixed-income
securities and convertible securities.
MFS Massachusetts Investors Growth Stock Fund - Mutual fund which seeks to
provide long-term growth of capital by investing in common stocks and
convertible securities.
Borders Group, Inc. Common Stock - A single stock investment consisting
of shares of Company common stock.
Kmart Corporation Common Stock - Certain Company employees who previously
invested in the Kmart Corporation Common Stock Fund under the Kmart
Savings Plan were allowed to continue to invest in such a fund after their
balances were transferred to the Plan. No further contributions to the
Kmart Stock Fund are allowed under the Plan.
In addition, Plan participants can invest in three model portfolios designed
by Merrill Lynch comprised of the investments mentioned above in varying
proportions.
Administration
Certain administrative expenses, comprising fees for administrative
services, are paid by the Plan and allocated to participant accounts based
on account balances. Remaining administrative expenses, such as accounting,
trustee and legal fees, are paid by the Company.
2. Summary of Significant Accounting Policies
Investment Valuation and Income Recognition
The financial statements of the Plan are prepared under the accrual method
of accounting. The fair values of the Plan's mutual fund investments and
common stocks are determined by quoted market prices. Participant loans are
stated at cost which approximate fair value. Investments in commingled funds
are stated at unit prices which represent fair value as determined by the
trustee of the Plan. Investment transactions are recorded as of the trade
date. Participant and Company contributions are recorded in the month in
which the participants' contributions are deducted from the Plan
participants' earnings.
5
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Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
3. Investments
The following presents investments that represent 5 percent or more of the
Plan's net assets.
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ -----------
<S> <C> <C>
Merrill Lynch Institutional Fund,
14,426,367 and 0 shares,
respectively $14,426,367 $ -
AIM International Equity Fund,
311,377 and 0 shares,
respectively 8,659,409 -
MFS Massachusetts Investors
Growth Stock Fund, 197,173 and
0 shares, respectively 4,008,527 -
MFS Capital Opportunities Fund,
377,987 and 0 shares,
respectively 7,941,514 -
Davis New York Venture Fund,
Inc., 962,918 and 0 shares,
respectively 27,693,533 -
Borders Group, Inc. Common Stock,
446,707 and 396,560 shares,
respectively 7,258,996 9,889,220
Scudder Development Fund, 0 and
124,052 shares, respectively - 4,671,796
Scudder International Fund, 0 and
87,120 shares, respectively - 4,242,761
Scudder Large Company Value Fund,
0 and 347,167 shares,
respectively - 9,543,618
Scudder Growth and Income Fund, 0
and 538,673 shares, respectively - 14,172,476
Scudder Cash Investment Trust, 0
and 12,835,529 shares,
respectively - 12,835,529
</TABLE>
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated in
value by $4,963,835 as follows:
<TABLE>
<S> <C>
Mutual funds $ 8,882,913
Common stocks (3,919,078)
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$ 4,963,835
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</TABLE>
6
<PAGE>
4. Plan Termination
The Company has reserved the right to terminate the Plan or to permanently
discontinue making contributions to the Plan by resolution of its Board of
Directors. Upon Plan termination or the complete discontinuance of Company
contributions, all interests of participants will remain fully vested and
nonforfeitable. The value of the participant accounts will be determined as
of the effective date of the termination and be distributed as provided by
the Plan.
The Pension Benefit Guaranty Corporation does not insure benefits payable
under this type of defined contribution plan.
5. Tax Status of Plan
The Plan has obtained a determination letter dated April 25, 2000, in which
the Internal Revenue Service stated that the Plan, as designed, is in
compliance with applicable requirements of the Internal Revenue Code.
6. Reconciliation of Financial Statements to IRS Form 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31,
1999 1998
----------- -----------
<S> <C> <C>
Net assets available for benefits per
the financial statements $78,028,847 $63,597,307
Amounts allocated to withdrawing
participants (87,794) -
----------- -----------
Net assets available for benefits per
the Form 5500 $77,941,053 $63,597,307
=========== ===========
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
-----------
<S> <C>
Participant withdrawals per the financial statements $ 5,176,885
Add - Amounts allocated to withdrawing participants
at December 31, 1999 87,794
-----------
Participant withdrawals per the Form 5500 $ 5,264,679
===========
</TABLE>
Amounts allocated to withdrawing participants are recorded as benefits
payable on the Form 5500 for benefit claims that have been processed and
approved for payment prior to December 31 but not yet paid as of that date.
7
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7. Transactions with Plan Trustee
As of December 31, 1999, plan assets invested in mutual funds sponsored by
an affiliate of Merrill Lynch, which also acts as Plan trustee, included the
Merrill Lynch Institutional Fund and the Merrill Lynch Equity Index Trust.
Assets at December 31, 1998, except Company Common Stock, Kmart Corporation
Common Stock, Franklin Templeton Small Capital Growth, Janus Worldwide Fund,
Founders Growth Fund and loans receivable, were invested in mutual funds
sponsored by an affiliate of Scudder, which served as Plan trustee through
December 31, 1998. Merrill Lynch and Scudder are therefore
parties-in-interest as defined by applicable regulations. However, these
investments and related transactions are not prohibited transactions under
ERISA.
8
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<TABLE>
<CAPTION>
Borders Group Savings Plan Schedule I
Schedule of Assets Held for Investment Purposes
December 31, 1999
Description of investment, including
Identity of issuer, borrower, maturity date, rate of interest, Current
lessor, or similar party collateral, par or maturity value Cost Value
<S> <C> <C> <C>
* Merrill Lynch Institutional Fund 14,426,367.000 Shares ** $ 14,426,367
State Street Research Government Income Fund 99,747.836 Shares ** 1,197,971
AIM International Equity Fund 311,377.531 Shares ** 8,659,409
Davis New York Venture Fund, Inc. 962,918.393 Shares ** 27,693,533
Lord Abbott Developing Growth Fund, Inc. 83,748.739 Shares ** 1,713,499
* Merrill Lynch Equity Index Trust 18,715.303 Shares ** 1,893,989
MFS Capital Oppurtunities Fund 377,987.361 Shares ** 7,941,514
MFS Massachusetts Investors Growth Stock Fund 197,173.001 Shares ** 4,008,527
* Borders Group, Inc. Common Stock 446,707.432 Shares ** 7,258,996
Kmart Corporation Common Stock 103,636.122 Shares ** 1,042,787
* Participant Loans 7.5% - 9.5% interest, various maturities ** 1,757,786
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$ 77,594,378
=============
* Party-in-interest
** Cost information is not included as it is no longer required by the Department of Labor.
</TABLE>
9
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities and Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this report to be signed by the undersigned thereunto duly
authorized.
Date: June 28, 2000 Borders Group Savings Plan
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(Name of the Plan)
By: SAVINGS PLAN COMMITTEE
/s/ James Brigham
-------------------------------
James Brigham, Member
