-- Publishers Weekly, 1/4/2010 8:37:00 AM
In a financial analysis prepared in late December by the law firm of Lowenstein Sandler, the challenges facing Borders are laid out in a synopsis of the report. The “highlights” of the report are the retailer’s declining revenue and profit margins; a short-term liquidity crunch; a highly leveraged capital structure; and a challenging operating environment. The report draws no conclusions on what is likely to happen to the nation’s second largest bookstore chain.
The report notes that as of October 31, 2009, Borders had $32.8 million in cash and equivalents and an available current borrowing capacity of $215.0 million under its revolving credit facility, which expires in July 2011. With $674.2 million of short-term obligations, the report says, Borders is likely to face a short-term liquidity crunch if it is not able to refinance its debt or generate sufficient cash from operations.
As the report noted, Borders’ revenue have been on the decline since fiscal 2007 and went down 14.1% in the third quarter. Operating and net margins have also been on a downtrend since fiscal 2006 and declined again in the most recent period. In addition, Borders’ capital structure is highly leveraged with total assets of $1,741.9 million and a total debt of $407.8 million. It has a debt to equity ratio of 4.1x and a total debt to asset ratio of 0.2x as of the third quarter. Peers’s average debt to equity ratio and total debt to asset ratio for the quarter was 0.2x and 0.05x, respectively.Borders’s operating environment, “has become increasingly competitive, technology-driven and price-sensitive,” the report noted. “Rising online book sales, e-books and a growing online user population is changing the dimension of a bleak environment for the U.S. book retailers.
Today I almost bought a trade paperback for $9 at Costco,
but I can't do that. I support all bookstores including the
big boxes. Costco is not a bookstore, however they do have
really fresh fruit at great prices. So when I got home here
was my daily email from Publisher's Weekly. It makes me
very sad ~ I spent 8 years complaining about Borders when
I worked there, but we need them.