Barnes & Noble filed restated historical financial statements with the SEC after concluding that they had “overstated certain accruals for the periods prior to April 27, 2013, as a result of inadequate controls over the accrual reconciliation process at its distribution centers.” The company made a few other historical restatements as well.
The primary effect was to increase their reportable earnings from the past three years–so the 2012 net loss got $4 million smaller; the 2011 loss got $5 million smaller; and the 2010 earnings rose $6 million.
With those corrections, the company also filed their delayed annual report with the SEC, for fiscal year 2013, ending April 27. Former ceo William Lynch’s “resignation” in early July — which looked to the world like a dismissal — is now referred as “his termination of employment.” Lynch was paid cash severance of $3.65 million, and given full vesting of 275,000 restricted shares of stock, worth roughly $5 million.
Barnes & Noble now officially admits that their previously stated date for broad international expansion of Nook has been revised — again. “Under its partnership agreements with Microsoft, the Company previously disclosed that it expected to be in 10 international markets by June 30, 2013. While substantial progress has been made towards meeting the target expansion requirement, the Company now expects expansion into these 10 markets to be accomplished by the end of 2013.”
Elsewhere in the filing, BN has restated a portion of their official company strategy. They have dropped last year’s first bullet point asserting the aim to “continue to invest in the digital business to fuel Nook and content sales” and instead will “drive content sales through the web, Nook Readers and 3rd party devices.” A new strategic bullet indicates they plan to “continue to grow campus partnerships including store locations and students served while continuing its investment in the digital higher education business.”
They warn that the “adjustment in Nook’s hardware strategy” is expected “to incur restructuring charges” that “are currently not estimable.” Additional, BN is “in negotiations” with vendors over outstanding Nook device “purchase commitments” of about $55 million, which is more than they want given their revised device strategy. They have set aside $13.8 million as an estimate of their liability against those agreements.
They also provide a somewhat more extensive formal statement of where they stand with their approach to Nook:
“While the Company experienced disappointing Nook device sales over the most recent holiday selling season, the Company’s digital strategy is to offer customers any digital book or magazine, any time, on any device. The Company remains committed to continuing to have a premier digital bookstore. In terms of its device strategy, the Company intends to reduce its existing cost structure. Further, the Company’s business plans are being adjusted to reduce its investment in sourcing, assembling and manufacturing the Company’s own Nook tablets and to explore outsourcing or co-sourcing such functions. This revised strategy is intended to capitalize on the Company’s design capabilities in partnering with third parties to source co-branded tablets with Nook content. This new partnership model may reduce the Company’s risk associated with designing and manufacturing its own tablets in the competitive tablet market, while allowing the Company to offer its vast digital catalog, and high-quality digital bookstore service. Nook expects to continue to innovate and design best-in-class dedicated eReaders.”