Borders Group Reports Q2 2009 Results; Adjusted EBITDA $6.9 Million and Operating Cash Flow $40.6 Million

Borders Group Reports Q2 2009 Results; Adjusted EBITDA $6.9 Million and Operating Cash Flow $40.6 Million

ANN ARBOR, Mich., Aug. 25 /PRNewswire-FirstCall/ -- Borders Group, Inc. (NYSE:BGP) today reported results for the fiscal second quarter of 2009, ended Aug. 1.

(Logo: http://www.newscom.com/cgi-bin/prnh/20060208/BORDERSGRPLOGO )

Second quarter results, compared to the same period a year ago, include the following highlights:

   --  Adjusted EBITDA was $6.9 million compared to $14.9 million in the       prior year quarter. On a year-to-date basis, adjusted EBITDA was $9.9       million compared to $0.6 million in 2008.   --  SG&A expenses, on an operating basis, were reduced by $35.8 million.   --  Inventory was reduced by $201.3 million, including a reduction in       multimedia inventory of $57.3 million.   --  Debt, net of cash, at the end of the second quarter was $242.5       million, a reduction from the prior year of $179.3 million, or 42.5%.        Debt, net of cash, compared to year-end levels was reduced by $40.1       million, or 14.2%.   --  Total consolidated sales were $616.8 million, down $132.4 million, or       17.7%.   --  Comparable store sales declined by 17.9% and 10.8% at Borders       superstores and Waldenbooks Specialty Retail stores, respectively.        Excluding multimedia, comparable store sales at Borders declined by       13.0%.    --  On an operating basis, the company generated a loss from continuing       operations of $12.7 million or $0.21 per share compared to a loss of       $10.5 million or $0.18 per share a year ago. On a GAAP basis, the loss       from continuing operations was $45.6 million or $0.76 per share       compared to a loss of $11.3 million or $0.19 per share a year ago. The       $0.76 per share loss includes $0.55 per share of non-operating charges       that were primarily non-cash.    

"The second quarter was a transitional one as we made significant space and inventory reductions to strategically position declining categories for profitability while further developing businesses that have potential," said Borders Group Chief Executive Officer Ron Marshall. "While this transition impacted sales in the short run, our stores are now better positioned to drive improved sales in the back half of the year. Further, we are pleased that even with the level of transformation we undertook in the second quarter, our financial disciplines remained intact and we continued to strengthen our balance sheet by cutting debt, generating positive cash flow, reducing inventory and tightly managing working capital. The big changes for the year are behind us now and the challenge is to deliver on the opportunity we have created to drive sales."

Consolidated Results

All sales and earnings/loss figures reported throughout this news release are on a continuing operations basis unless otherwise noted.

Second quarter consolidated sales were $616.8 million, down 17.7% from a year ago. On an operating basis, Borders Group generated a second quarter loss of $12.7 million or $0.21 per share compared to a loss of $10.5 million or $0.18 per share for the same period last year. On a GAAP basis, the second quarter loss was $45.6 million or $0.76 per share compared to a GAAP loss of $11.3 million or $0.19 per share a year ago. The second quarter GAAP loss includes non-operating, after-tax charges--primarily non-cash--totaling $32.9 million.

Excluding non-operating charges, SG&A as a percent of sales improved over last year by 0.2% from 26.0% to 25.8% due to the company's aggressive expense reduction initiatives, which were partially offset by de-leveraging due to negative sales trends. Expense reduction initiatives helped reduce SG&A dollar expenses by $35.8 million compared to the prior year. On a GAAP basis, SG&A as a percent of sales was flat with last year at 27.4%.

Operating cash flow in the second quarter was $40.6 million compared to $71.1 million one year ago when the company first initiated a significant inventory reduction program.

Second quarter capital expenditures were $2.0 million compared to $27.1 million in 2008 as the company continued to manage capital prudently. Debt, net of cash, at the end of the second quarter totaled $242.5 million compared to debt, net of cash, at the end of the second quarter a year ago of $421.8 million, a reduction of 42.5%. Inventory was reduced by 18.5% as the company reduced its second quarter inventory investment to $889.0 million compared to year-ago inventory of $1.1 billion.

Non-Operating Adjustments

The table below details the non-operating adjustments for the second quarter and the year to date.

   Non-Operating                  Line Item    Adjustments         Item       Impact        Q2 2009         YTD 2009    Consulting,          Cash      Gross Margin  $4.7 million    $8.9 million    professional and               and SG&A    other fees    Store closure and    Cash      Gross Margin  $0.9 million    $0.7 million    related items                  and SG&A    Severance and        Cash      Gross Margin  $1.6 million    $2.0 million    other compensation             and SG&A    costs    Asset impairments    Non-cash  Asset         $0.7 million    $0.8 million    and other                      Impairments    writedowns    Accelerated          Non-cash  SG&A          $2.8 million    $7.1 million    depreciation-    multimedia    space reduction    Term loan            Non-cash  Interest      $1.1 million    $2.7 million    cost/discount                  Expense    amortization    International        Non-cash  Warrant/Put   $0.0 million   $16.2 million    "put" expiration               Expense    Warrant liability    Non-cash  Warrant/Put  $14.7 million   $47.6 million    fair value                     Expense    adjustment    Total pre-tax                               $26.5 million   $86.0 million    non-operating    adjustments    Normalized income    Non-cash  Income Taxes  $6.4 million   $17.0 million    taxes                          (Benefit)    Total after-tax                             $32.9 million  $103.0 million    non-operating    adjustments                                                $0.55 EPS       $1.71 EPS     Borders Superstores  

Total sales at Borders superstores, including Borders.com, in the second quarter were $513.6 million, down 17.4% from a year ago. Comparable store sales decreased by 17.9% at Borders superstores in the second quarter. Excluding multimedia, which was substantially transitioned out of stores throughout the second quarter, comparable store sales at Borders declined by 13.0%.

On an operating basis, the segment generated a second quarter operating loss of $9.0 million compared to an operating loss of $3.1 million for the same period a year ago. On a GAAP basis, the segment generated an operating loss in the second quarter of $17.4 million compared to an operating loss of $7.7 million the prior year.

Two Borders superstores were closed in the second quarter, ending the period with 513 locations.

Waldenbooks Specialty Retail

Total sales in the second quarter within the Waldenbooks Specialty Retail segment were $74.5 million, a 23.1% decline compared to the same period in 2008 as the number of stores was decreased to 370 at the end of the second quarter this year compared to 468 stores that were open at the close of the same period a year ago. The company closed six Waldenbooks locations in the second quarter of this year. Comparable store sales in the second quarter at Waldenbooks decreased by 10.8%.

On an operating basis, the segment generated an operating loss of $2.9 million in the second quarter compared to an operating loss of $6.7 million for the same period in 2008. On a GAAP basis, the segment generated a second quarter operating loss of $3.1 million compared to an operating loss of $7.7 million for the same period in 2008.

International

Total sales within the International segment (which consists primarily of Paperchase) totaled $28.7 million in the second quarter, which is down by 5.6% compared to a year ago. Excluding the impact of foreign currency translation, segment sales increased by 10.4% for the period.

On an operating basis, the segment generated an operating loss of $1.0 million in the second quarter compared to an operating loss of $1.3 million for the same period in 2008. On a GAAP basis, the segment generated a second quarter operating loss of $1.7 million compared to an operating loss of $1.4 million for the same period in 2008.

Conference Call Today

Management will review second quarter results on a conference call today at 10 a.m. Eastern. This call is being web cast by Thomson Financial and can be accessed at the Borders Group corporate Web site at www.bordersgroupinc.com. A replay will be accessible on the Web site through Sept. 25. In addition, a replay phone service will be available toll-free 800-229-6237, or for international calls, at 402-220-9680. The phone service will be available through Sept. 8 until 11:59 p.m. Eastern.

   Next Financial Release-Q3 2009   Borders Group plans to issue fiscal third quarter 2009 results Nov. 24.    About Borders Group  

Headquartered in Ann Arbor, Mich., Borders Group, Inc. (NYSE:BGP) is a leading retailer of books, music and movies with more than 25,000 employees. Through its subsidiaries, the company operates approximately 1,000 stores worldwide primarily under the Borders and Waldenbooks brand names. For online shopping, visit Borders.com. For more information about the company, visit www.borders.com/investors.

Safe Harbor Statement

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. One can identify these forward-looking statements by the use of words such as "expect," "planning," "possibility," "opportunity" "goal," "will," "may," "intend," "anticipates," and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address matters such as the company's future financial condition and performance (including earnings per share, liquidity, sales, inventory levels and capital expenditures), its cost reduction initiatives and plans for the expansion of product categories. These statements are subject to risks and uncertainties that could cause actual results and plans to differ materially from those included in the company's forward-looking statements.

These risks and uncertainties include, but are not limited to, consumer demand for the company's products, particularly during the holiday season, which is believed to be related to general economic and geopolitical conditions, competition and other factors; the availability of adequate capital--including vendor credit--to fund the company's operations and to carry out its strategic plans, adverse litigation results or other claims and the performance of the company's information technology systems.

The company's periodic reports filed from time to time with the Securities and Exchange Commission contain more detailed discussions of these and other risk factors that could cause actual results and plans to differ materially from those included in the forward-looking statements, and those discussions are incorporated herein by reference. The company does not undertake any obligation to update forward-looking statements.

                       Borders Group, Inc. Financial Statements                    (dollars in millions, except per share amounts)                                      Unaudited                    Sales and Earnings Summary                         Quarter Ended                  Quarter Ended                         August 1, 2009                August 2, 2008 (1)                 Operating  Adjustments GAAP   Operating   Adjustments  GAAP                 Basis (2)      (2)     Basis  Basis (3)       (3)      Basis   Borders    Superstores    $513.6        $-    $513.6    $621.9        $-    $621.9   Waldenbooks    Specialty    Retail           74.5         -      74.5      96.9         -      96.9   International     28.7         -      28.7      30.4         -      30.4     Total sales    616.8         -     616.8     749.2         -     749.2   Other revenue      7.9         -       7.9       9.3         -       9.3     Total revenue  624.7         -     624.7     758.5         -     758.5   Cost of goods    sold, including    occupancy costs 481.7       0.2     481.9     576.5         -     576.5   Gross margin     143.0      (0.2)    142.8     182.0         -     182.0   Selling, general    and administrative    expenses        159.1       9.8     168.9     194.9      10.2     205.1   Asset impairments    and other    writedowns          -       0.7       0.7         -         -         -   Operating loss   (16.1)    (10.7)    (26.8)    (12.9)    (10.2)    (23.1)   Interest expense   4.1       1.1       5.2       6.6       4.5      11.1   Warrant/put    expense (income)    -      14.7      14.7         -     (10.9)    (10.9)   Total interest    expense           4.1      15.8      19.9       6.6      (6.4)      0.2   Loss before    income taxes    (20.2)    (26.5)    (46.7)    (19.5)     (3.8)    (23.3)   Income taxes    (benefit)        (7.5)      6.4      (1.1)     (9.0)     (3.0)    (12.0)   Loss from    continuing    operations     $(12.7)   $(32.9)   $(45.6)   $(10.5)    $(0.8)   $(11.3)   Loss from    operations of    discontinued    operations    (net of tax)        -         -         -      (0.5)        -      (0.5)   Gain on disposal   of discontinued   operations   (net of tax)         -         -         -         -       2.6       2.6     Income      (loss) from      discontinued      operations      (net of tax)      -         -         -      (0.5)      2.6       2.1     Net loss      $(12.7)   $(32.9)   $(45.6)   $(11.0)     $1.8     $(9.2)    Basic EPS from    continuing    operations     $(0.21)   $(0.55)   $(0.76)   $(0.18)   $(0.01)   $(0.19)   Basic EPS    from    discontinued    operations         $-        $-        $-        $-     $0.04     $0.04   Basic EPS    including    discontinued    operations     $(0.21)   $(0.55)   $(0.76)   $(0.18)    $0.03    $(0.15)   Basic weighted    avg. common    shares           60.2      60.2      60.2      60.5      60.5      60.5    Comparable Store    Sales   Borders    Superstores     (17.9%)                        (8.9%)   Waldenbooks    Specialty    Retail          (10.8%)                        (7.0%)                 Sales and Earnings Summary (As Percentage of Total Sales)                       Quarter Ended                     Quarter Ended                      August 1, 2009                   August 2, 2008 (1)                Operating  Adjustments  GAAP   Operating  Adjustments  GAAP                Basis (2)      (2)      Basis  Basis (3)       (3)     Basis   Borders    Superstores       83.3%        -%     83.3%     83.0%        -%    83.0%   Waldenbooks    Specialty Retail  12.1         -      12.1      12.9         -     12.9   International       4.6         -       4.6       4.1         -      4.1     Total sales     100.0         -     100.0     100.0         -    100.0   Other revenue       1.3         -       1.3       1.2         -      1.2     Total revenue   101.3         -     101.3     101.2         -    101.2   Cost of goods    sold, including    occupancy costs   78.1         -      78.1      76.9         -     76.9     Gross margin     23.2         -      23.2      24.3         -     24.3   Selling, general    and administrative    expenses          25.8       1.6      27.4      26.0       1.4     27.4   Asset impairments    and other    writedowns           -       0.1       0.1         -         -        -     Operating loss   (2.6)     (1.7)     (4.3)     (1.7)     (1.4)    (3.1)   Interest expense    0.7       0.2       0.9       0.9      (0.6)     1.5   Warrant/put    expense (income)     -       2.4       2.4         -      (1.5)    (1.5)     Total interest      expense          0.7       2.6       3.3       0.9      (0.9)       -     Loss before      income taxes    (3.3)     (4.3)     (7.6)     (2.6)     (0.5)    (3.1)   Income taxes    (benefit)         (1.2)      1.0      (0.2)     (1.2)     (0.4)    (1.6)     Loss from      continuing      operations      (2.1)%    (5.3)%    (7.4)%    (1.4)%    (0.1)%   (1.5)%    (1) The results of Borders Australia, Borders New Zealand and Borders       Singapore are reported as discontinued operations.    (2) Results from 2009 were impacted by a number of non-operating items,       including accelerated depreciation related to our multimedia reduction       initiative, asset impairments, severance costs, store closure costs,       professional fees related to our turnaround efforts, amortization of       the term loan discount and debt issuance costs, and a non-cash charge       related to the fair market value adjustment of the warrant liability.       Therefore, solely for analytical purposes and as an aid to better       understand underlying trends, operating basis data are presented       excluding these items.  To aid in the comparability to last year,       operating basis data is presented using a normalized tax rate.    (3) Results from 2008 were impacted by a number of non-operating items,       including store closure costs, severance costs, professional fees       related to strategic alternatives and amortization of the term loan       discount and debt issuance costs, offset by income related to the fair       market value adjustment of the warrant liability and related tax       benefit. Therefore, solely for analytical purposes and as an aid to       better understand underlying trends, operating basis data are       presented excluding these items.                          Borders Group, Inc. Financial Statements                   (dollars in millions, except per share amounts)                                      Unaudited                  Sales and Earnings Summary                    Six Months Ended                 Six Months Ended                     August 1, 2009                  August 2, 2008 (1)               Operating   Adjustments  GAAP    Operating  Adjustments  GAAP               Basis (2)        (2)     Basis   Basis (3)      (3)      Basis   Borders    Superstores $1,050.3       $-    $1,050.3   $1,222.6      $-    $1,222.6   Waldenbooks    Specialty    Retail         151.4        -       151.4      192.9       -       192.9   International    56.6        -        56.6       63.2       -        63.2     Total sales 1,258.3        -     1,258.3    1,478.7       -     1,478.7   Other revenue    16.6        -        16.6       15.6       -        15.6     Total      revenue    1,274.9        -     1,274.9    1,494.3       -     1,494.3   Cost of goods    sold, including    occupancy    costs          989.4     (0.7)      988.7    1,142.6     1.5     1,144.1     Gross margin  285.5      0.7       286.2      351.7    (1.5)      350.2   Selling,    general and    administrative    expenses       321.9     19.4       341.3      405.8    12.4       418.2   Asset    impairments    and other    writedowns         -      0.8         0.8          -       -           -     Operating      loss         (36.4)   (19.5)      (55.9)     (54.1)  (13.9)      (68.0)   Interest    expense          9.0      2.7        11.7       14.9     5.7        20.6   Warrant/put    expense    (income)           -     63.8        63.8          -   (14.5)      (14.5)     Total      interest      expense        9.0     66.5        75.5       14.9    (8.8)        6.1     Loss before      income      taxes        (45.4)   (86.0)     (131.4)     (69.0)   (5.1)      (74.1)   Income    taxes    (benefit)      (16.8)    17.0         0.2      (28.0)   (4.7)      (32.7)     Loss from      continuing      operations  $(28.6) $(103.0)    $(131.6)    $(41.0)  $(0.4)     $(41.4)   Loss from    operations    of    discontinued    operations    (net of tax)       -        -           -       (1.7)      -        (1.7)   Gain on    disposal of    discontinued    operations    (net of tax)       -        -           -          -     2.2         2.2     Income      (loss) from      discontinued      operations      (net of tax)     -        -           -       (1.7)    2.2         0.5     Net loss     $(28.6) $(103.0)    $(131.6)    $(42.7)   $1.8      $(40.9)    Basic EPS    from    continuing    operations    $(0.48)  $(1.71)     $(2.19)    $(0.68) $(0.01)     $(0.69)   Basic EPS    from    discontinued    operations    $    -   $    -      $    -     $(0.03) $ 0.04       $0.01   Basic EPS    including    discontinued    operations    $(0.48)  $(1.71)     $(2.19)    $(0.71)  $0.03      $(0.68)   Basic    weighted    avg. common    shares          60.1     60.1        60.1       60.0    60.0        60.0    Comparable Store    Sales   Borders    Superstores    (15.7%)                          (6.5%)   Waldenbooks    Specialty    Retail          (8.2%)                          (4.0%)                 Sales and Earnings Summary (As Percentage of Total Sales)                       Six Months Ended                 Six Months Ended                       August 1, 2009                 August 2, 2008 (1)                Operating  Adjustments GAAP    Operating   Adjustments  GAAP                Basis (2)      (2)     Basis   Basis (3)        (3)     Basis   Borders    Superstores     83.5%        -%     83.5%     82.7%         -%     82.7%   Waldenbooks    Specialty    Retail          12.0         -      12.0      13.0          -      13.0   International     4.5         -       4.5       4.3          -       4.3     Total sales   100.0         -     100.0     100.0          -     100.0   Other revenue     1.3         -       1.3       1.1          -       1.1     Total revenue 101.3         -     101.3     101.1          -     101.1   Cost of goods    sold, including    occupancy costs 78.6         -      78.6      77.3        0.1      77.4     Gross margin   22.7         -      22.7      23.8       (0.1)     23.7   Selling,    general and    administrative    expenses        25.6       1.5      27.1      27.5        0.8      28.3   Asset    impairments    and other    writedowns         -       0.1       0.1         -          -         -     Operating      loss          (2.9)     (1.6)     (4.5)     (3.7)      (0.9)     (4.6)   Interest    expense          0.7       0.2       0.9       1.0        0.4       1.4   Warrant/put    expense    (income)           -       5.1       5.1         -       (1.0)     (1.0)     Total interest      expense        0.7       5.3       6.0       1.0       (0.6)      0.4     Loss before      income taxes  (3.6)     (6.9)    (10.5)     (4.7)      (0.3)     (5.0)   Income taxes    (benefit)       (1.3)      1.3         -      (1.9)      (0.3)     (2.2)     Loss from      continuing      operations    (2.3)%    (8.2)%   (10.5)%    (2.8)%        -%     (2.8)%    (1) The results of Borders Australia, Borders New Zealand and Borders       Singapore are reported as discontinued operations.    (2) Results from 2009 were impacted by a number of non-operating items,       including accelerated depreciation related to our multimedia reduction       initiative, asset impairments, severance costs, store closure costs,       professional fees related to our turnaround efforts, amortization of       the term loan discount and debt issuance costs, and non-cash charges       related to the write-off of an intangible asset and the fair market       value adjustment of the warrant liability. Therefore, solely for       analytical purposes and as an aid to better understand underlying       trends, operating basis data are presented excluding these items. To       aid in the comparability to last year, operating basis data is       presented using a normalized tax rate.    (3) Results from 2008 were impacted by a number of non-operating items,       including store closure costs, severance costs, professional fees       related to strategic alternatives and amortization of the term loan       discount and debt issuance costs, offset by income related to the fair       market value adjustment of the warrant liability and related tax       benefit. Therefore, solely for analytical purposes and as an aid to       better understand underlying trends, operating basis data are       presented excluding these items.                        Borders Group, Inc. Financial Statements                               (dollars in millions)                                    Unaudited                       Condensed Consolidated Balance Sheets                                           August 1,   August 2,   January 31,                                            2009       2008         2009    Assets     Cash and cash equivalents              $45.1      $43.9       $53.6     Merchandise inventories                889.0    1,090.3       915.2     Other current assets                    76.3      118.1       102.4     Property and equipment, net            444.6      584.5       494.2     Other assets and deferred charges       47.6      114.6        43.4     Goodwill                                 0.3       40.5         0.2        Total assets                      $1,502.9   $1,991.9    $1,609.0    Liabilities and Stockholders' Equity     Short-term borrowings and current      portion of long-term debt            $281.3     $459.4      $329.8     Trade accounts payable                 410.0      469.2       350.0     Other current liabilities              279.8      268.4       313.9     Long-term debt                           6.3        6.3         6.4     Other long-term liabilities            388.6      363.9       345.8        Total liabilities                  1,366.0    1,567.2     1,345.9       Total stockholders' equity           136.9      424.7       263.1          Total liabilities and          stockholders' equity           $1,502.9   $1,991.9    $1,609.0                         Store Activity Summary                            Quarter Ended      Six Months Ended    Year Ended                         August 1, August 2, August 1, August 2,  January 31,                           2009      2008      2009      2008        2009   Borders Superstores   Beginning number of    stores                   515       514       515       509       509   Openings                    -         4         -         9        12   Closings                   (2)        -        (2)        -        (6)   Ending number of stores   513       518       513       518       515   Ending square footage    (in millions)           12.7      12.7      12.7      12.7      12.8    Waldenbooks Specialty    Retail Stores (1)   Beginning number of    stores                   376       476       386       490       490   Openings                    -         -         1         -         8   Closings                   (6)       (8)      (17)      (22)     (112)   Ending number of stores   370       468       370       468       386   Ending square footage    (in millions)            1.3       1.8       1.3       1.8       1.4     (1) Includes all small format stores in malls, airports and outlet malls.                          Borders Group, Inc. Financial Statements                                  (dollars in millions)                                       Unaudited                    Condensed Consolidated Statements of Cash Flows                                       Quarter Ended        Six Months Ended                                    August 1, August 2,   August 1, August 2,                                      2009      2008        2009      2008   CASH PROVIDED BY (USED FOR):   OPERATIONS     Loss from continuing operations$  (45.6)  $(11.3)  $(131.6)   $(41.4)     Adjustments to reconcile loss      from continuing operations to      operating cash flows:        Depreciation                     25.8     27.8      53.4      54.7       Loss on disposal of assets        0.5        -       0.5       0.1       Stock based compensation cost     0.6      1.4         -       3.3       Change in other long-term        assets, liabilities and        deferred charges                13.3      5.9      39.7      (0.2)       Write-off of intangible asset       -        -      16.2         -       Asset impairments and other        writedowns                       0.7        -       0.8         -       Decrease in inventories           6.2     57.6      29.1     151.6       Increase (decrease) in        accounts payable                36.2      6.7      58.9     (42.7)     Cash provided by (used for) other      current assets and other current      liabilities                        2.9    (17.0)    (24.0)    (71.4)       Net cash provided by        operating activities of        continuing operations           40.6     71.1      43.0      54.0   INVESTING     Capital expenditures               (2.0)   (27.1)     (4.4)    (54.1)     Proceeds from the sale of      discontinued operations              -     87.9         -      87.9      Net cash provided by (used for)       investing activities of       continuing operations            (2.0)    60.8      (4.4)     33.8   FINANCING     Net repayment of financing      obligations                      (38.9)  (128.8)    (46.4)    (83.6)     Issuance and repurchase of      common stock                      (0.1)     0.1      (0.4)      0.3     Net funding from (repayment of)      long-term debt                    (0.3)    (0.4)     (0.3)      0.7     Net repayment of capital lease      obligations                       (0.4)       -      (0.5)        -     Cash dividends paid                   -        -         -      (6.5)      Net cash used for financing       activities of       continuing operations           (39.7)  (129.1)    (47.6)    (89.1)   Effect of exchange rates on cash    and cash equivalents                 0.5      0.1       0.5       0.1   Net cash provided by (used for)    discontinued operations                -      6.0         -     (13.4)   NET INCREASE (DECREASE) IN CASH    AND CASH EQUIVALENTS                (0.6)     8.9      (8.5)    (14.6)   Cash and cash equivalents at    beginning of period                 45.7     35.0      53.6      58.5   Cash and cash equivalents at    end of period                      $45.1    $43.9     $45.1     $43.9                    Borders Group, Inc. Segment Financial Information                   (dollars in millions, except per share amounts)                                    Unaudited                         Quarter Ended August 1,    Quarter Ended August 2,                                 2009                        2008                     Operating  Adjustments GAAP  Operating Adjustments GAAP                     Basis (1)     (1)      Basis Basis (2)    (2)      Basis     Borders Superstores       Sales            $513.6         $-   $513.6   $621.9        $-  $621.9      Depreciation       expense           19.7        2.8     22.5     24.1         -    24.1      Operating loss     (9.0)      (8.4)   (17.4)    (3.1)     (4.6)   (7.7)      Adjusted EBITDA(5) 10.7                         21.0   Waldenbooks Specialty    Retail      Sales             $74.5         $-    $74.5    $96.9        $-   $96.9      Depreciation       expense            1.9          -      1.9      2.2         -     2.2      Operating loss     (2.9)      (0.2)    (3.1)    (6.7)     (1.0)   (7.7)      Adjusted EBITDA(5) (1.0)                        (4.5)   International(3)     Sales              $28.7         $-    $28.7    $30.4        $-   $30.4     Depreciation      expense             1.4          -      1.4      1.5         -     1.5     Operating loss      (1.0)      (0.7)    (1.7)    (1.3)     (0.1)   (1.4)     Adjusted EBITDA(5)   0.4                          0.2   Corporate (4)     Operating loss     $(3.2)     $(1.4)   $(4.6)   $(1.8)    $(4.5)  $(6.3)     Adjusted EBITDA(5)  (3.2)                        (1.8)   Consolidated(3)     Sales             $616.8         $-   $616.8   $749.2        $-  $749.2     Depreciation      expense            23.0        2.8     25.8     27.8         -    27.8     Operating loss     (16.1)     (10.7)   (26.8)   (12.9)    (10.2)  (23.1)     Adjusted EBITDA(5)   6.9                         14.9                              Six Months Ended          Six Months Ended                            August 1, 2009            August 2, 2008                     Operating  Adjust-   GAAP   Operating  Adjust-   GAAP                     Basis (1)  ments (1) Basis  Basis (2)  ments (2) Basis    Borders    Superstores     Sales           $1,050.3      $-   $1,050.3 $1,222.6     $-    $1,222.6     Depreciation      expense            39.8     7.1       46.9     47.1      -        47.1     Operating loss     (21.7)  (12.2)     (33.9)   (31.0)  (6.7)      (37.7)     Adjusted      EBITDA (5)         18.1                        16.1   Waldenbooks    Specialty    Retail     Sales             $151.4      $-     $151.4   $192.9     $-      $192.9     Depreciation      expense             3.8       -        3.8      4.6      -         4.6     Operating loss      (8.5)   (1.4)      (9.9)   (19.5)  (1.8)      (21.3)     Adjusted      EBITDA (5)         (4.7)                      (14.9)   International    (3)     Sales              $56.6      $-      $56.6    $63.2     $-       $63.2     Depreciation      expense             2.7       -        2.7      3.0      -         3.0     Operating loss      (0.9)   (0.7)      (1.6)     0.1   (0.1)          -     Adjusted      EBITDA (5)          1.8                         3.1   Corporate (4)     Operating loss     $(5.3)  $(5.2)    $(10.5)   $(3.7) $(5.3)      $(9.0)     Adjusted      EBITDA (5)         (5.3)                       (3.7)   Consolidated    (3)     Sales           $1,258.3      $-   $1,258.3 $1,478.7     $-    $1,478.7     Depreciation      expense            46.3     7.1       53.4     54.7      -        54.7     Operating loss     (36.4)  (19.5)     (55.9)   (54.1) (13.9)      (68.0)     Adjusted      EBITDA (5)          9.9                         0.6    (1) Results from 2009 were impacted by a number of non-operating items,       including accelerated depreciation related to our multimedia reduction       initiative, asset impairments, severance costs, store closure costs,       and professional fees related to our turnaround efforts. Therefore,       solely for analytical purposes and as an aid to better understand       underlying trends, operating basis data are presented excluding these       items.    (2) Results from 2008 were impacted by a number of non-operating items,       including store closure costs, severance costs, and professional fees       related to strategic alternatives. Therefore, solely for analytical       purposes and as an aid to better understand underlying trends,       operating basis data are presented excluding these items.    (3) Excludes the results of 2008 discontinued operations (Borders       Australia, Borders New Zealand and Borders Singapore).    (4) The Corporate segment includes various corporate governance costs       and corporate incentive costs.    (5) Adjusted EBITDA is operating income (loss) before depreciation and       amortization.  Adjusted EBITDA is not a Generally Accepted Accounting       Principles (GAAP) measurement. Adjusted EBITDA information is being       included as we believe it is a commonly used measure of operating       performance in the retail industry. Adjusted EBITDA is provided to       enhance an investor's understanding of our operating results. It       should not be construed as an alternative to income from operations       as an indicator of operating performance or as an alternative to cash       flows from operating activities as a measure of liquidity as       determined in accordance with GAAP. All companies do not calculate       Adjusted EBITDA in the same manner. As a result, Adjusted EBITDA as       reported may not be comparable to Adjusted EBITDA as reported by other       companies.  

First Call Analyst: Wilhelm, Ed
FCMN Contact: aroman@bordersgroupinc.com

Photo: http://www.newscom.com/cgi-bin/prnh/20060208/BORDERSGRPLOGO

Source: Borders Group, Inc.

CONTACT: Investors, Mark Bierley, +1-734-477-4105, Media, Anne Roman,
+1-734-477-1392

Web Site: http://www.bordersgroupinc.com/

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Profile: International Entertainment