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ACCOUNTING FOR DECISION MAKING

PROJECT

Submission Date: December 15, 2011 v

Group 1 Anthony Hemanth Neha Sandya Vidya Group 1(Evening) Anthony, Hemanth, Neha, Sandya, Vidya

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Table of Contents
About the company Key Information Overview Major Products and services History Company statements Key competitors Major developments affecting the company Recent happenings in the company Industry analysis Financial Statement Analysis Key Performance Indicators Strengths and Weaknesses Any other area/information. References

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ABOUT THE COMPANY

Borders Group, Inc. was an international book and music retailer based in Ann Arbor, Michigan. The company employed approximately 19,500 throughout the U.S., primarily in its Borders and Waldenbooks stores. As of January 30, 2010, the company operated 511 Borders superstores in the world, including 508 in the U.S. and three in Puerto Rico. The company also operated 175 stores in the Waldenbooks Specialty Retail segment, including Waldenbooks, Borders Express, Borders airport stores, and Borders Outlet stores. Borders Group formerly operated stores in Australia, New Zealand and Singapore. However, these were sold off to Pacific Equity Partners (which owned rival Angus & Robertson) in 2008, and then were later sold again to Red Group Retail. The stores continued to operate under the Borders brand under the unaffiliated Borders Asia Pacific brand until Red Group was placed into voluntary administration in February 2011; with the five New Zealand stores sold to the James Pascoe Group, and the Australian stores gradually shut down, with the last group to close by July 17. On February 16, 2011, Borders applied for Chapter 11 bankruptcy protection and began liquidating 226 of its stores in the United States. Despite an offer from the private-equity firm Najafi Companies, Borders was not able to find a buyer before its July 17 bidding deadline, and therefore began liquidating its remaining 399 retail outlets on July 22, with the last remaining stores closing their doors on Sunday, September 18, 2011.The Chapter 11 case was ultimately converted to Chapter 7. As of October 14, 2011, the Borders.com website has been replaced by a redirect to the Barnes & Noble website, effectively shutting down Borders.com entirely.
Borders Group - Key Information Borders Group Overview Borders Group - Major Products and Services Borders Group was under the following segments: Borders Superstores

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Page |4 Borders is a premier operator of book, music and movie superstores in the United States.Borders superstores offer customers a vast assortment of books, music and movies, gifts and stationery, superior customer service and an inviting and comfortable environment designed to encourage browsing. As of January 30, 2010, the majority of Borders superstores were in a book, music and movie format. We are focused on improving key retailing practices at our superstores. This includes increasing effectiveness of merchandise presentation, improving assortment planning, replenishment and supply chain effectiveness, and ensuring consistency of execution across the chain. Additionally, we have made significant reductions in corporate and other selling, general and administrative costs over the last twelve months. A key element of this strategy is the enhancement of certain key categories, which we believe will help to distinguish our domestic superstores from competitors. These categories include childrens, wellness, cooking, educational materials, Seattles Best Coffee cafes and Paperchase gifts & stationery shops, which continue to be drivers of both sales and increased profitability for their categories. Waldenbooks Specialty Retail Stores Waldenbooks Specialty Retail operates small format stores in malls, airports and outlet malls, offering customers a convenient source for new releases, hardcover and paperback bestsellers, periodicals and a standard selection of other titles. Waldenbooks Specialty Retail operates stores under the Waldenbooks, Borders Express and Borders Outlet names, as well as Borders-branded airport stores and our mall-based seasonal businesses. Average sales per store were $1.0 million and average sales per square foot were $282 for 2009. International Stores Our International stores include three Borders superstores in Puerto Rico and our Paperchase U.K. business. Paperchase is a brand leader in design-led and innovative stationery retailing in the United Kingdom. As of January 30, 2010, we operated 85 Paperchase locations, including 51 stand-alone stores, 27 concessions in the stores of other retailers, and seven stores located in railway stations. The vast majority of Paperchases merchandise is developed specifically by and for Paperchase and, as such, can only be found in Paperchase stores. Internet Our business strategy includes the operation of a proprietary e-commerce platform, launched in May 2008, which includes both in-store and online e-commerce components. Borders Group History The original Borders bookstore was located in Ann Arbor, Michigan, where it was founded in 1971 by brothers Tom and Louis Borders during their undergraduate and graduate years at the University of Michigan. The Borders brothers' inventory system tailored each store's offerings to its community. A sister company, Book Inventory Systems (BIS) (19761994), was founded to serve as a wholesaler for and provide the brothers' custom inventory system to regional independent bookstores such as John Rollins,

Group 1(Evening) Anthony, Hemanth, Neha, Sandya, Vidya

Page |5 Thackeray's, Schuler Books, and Joseph-Beth Booksellers. Former Hickory Farms president Robert F. DiRomualdo was hired in 1989 to expand the company. The first Borders bookshop, with a meager stock of used books, was located in two rooms above 209 State Street, north of the State Theater. From there the brothers soon moved, briefly, to a tiny ground floor + mezzanine operation in the Maynard House apartment building, on the southwest corner of William and Maynard Streets. In 1975 they bought out the stock of Wahr's, an 80-year-old bookstore that was ending business at 316 South State, and hired Michael Hildebrand and Harvey James Robin to stock it with rare books and manage the old shop. Hildebrand had managed Gibson's used and rare book department in East Lansing for years and Harvey Robin had been a local restorer of rare books, who moved his bindery upstairs. Wahr's had been mainly a textbook and school supplies vendor, but the brothers did not deal in textbooks. They moved the retail bookshop to much larger quarters that had become available across State Street, in the former location of the Wagner & Son men's clothing store. The old shop was renamed Charing Cross Bookshop and Tom Frick was sent over from the new bookshop to help. The chain's flagship store was in downtown Ann Arbor, Michigan at the corner of Liberty and Maynard Streets, in the building once occupied by the now defunct Jacobson's Department Store. Although not the original location, it was still identified as "Borders Borders Group Company Statements

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Borders Group Key competitors

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Page |8 We have experienced operating losses over the last two years and such losses may continue. We believe that the losses are attributable to a number of factors, including increased competition from Internet retailers and a greater concentration on the sale of books and music by mass merchants and other non-bookstore retailers. In addition, with respect to music and movies, the downloading of titles has significantly impacted our sale of CDs and DVDs. The increasing popularity of eBooks has the potential to significantly impact our sales of physical books. Also, the overall consumer demand for products that we sell, particularly music and movies, has either declined or not experienced significant growth in recent years.

The retail book business is highly competitive. Competition within the retail book industry is fragmented, with Borders facing competition from the Internet and other superstore operators. In addition, Borders and Waldenbooks compete with other specialty retail stores that offer books in a particular area of specialty, independent single store operators, discount stores, drug stores, warehouse clubs, mail order clubs, mass merchandisers and other non-bookstore retailers. In the future, Borders and Waldenbooks may face additional competition from other categories of Internet and brick and mortar retailers entering the retail book market.

The music and movie businesses are also highly competitive and Borders faces competition from large established music chains, established movie chains, as well as specialty retail stores, movie rental stores, discount stores, warehouse clubs and mass merchandisers. In addition, consumers receive television and mail order offers and have access to mail order clubs. The largest mail order clubs are affiliated with major manufacturers of prerecorded music and may have advantageous marketing relationships with their affiliates.

The Internet is a significant channel for retailing in all media categories that we carry. In particular, the retailing of books, music and movies over the Internet is highly competitive. In addition, we face competition from companies engaged in the business of selling books, music and movies via electronic means, including the downloading of books, music and movie content. Borders Group Major developments affecting the company Our financial condition and results of operations are dependent upon discretionary spending by consumers, which may be affected by general economic conditions. Worldwide economic conditions and consumer spending have deteriorated significantly and may remain depressed for some time. Some of the factors that are having an impact on discretionary consumer spending include increased unemployment, reductions in disposable income as a result of financial market declines and declines in residential real estate values, credit availability and consumer confidence. Our business is highly seasonal, with sales generally highest in the fourth quarter. In 2009, 33.6% of our sales and 36.8% of our gross margin dollars were generated in the fourth quarter. Our results of operations depend significantly upon the holiday selling season in the fourth quarter and less than satisfactory net sales for such period could have a material adverse effect on our financial condition or results of operations for the year and may not be sufficient to cover any losses which may be incurred in the first three quarters of the year. Other factors Group 1(Evening) Anthony, Hemanth, Neha, Sandya, Vidya

Page |9 that could affect the holiday selling season include general economic and geopolitical conditions, overall consumer spending patterns, weather conditions and, with respect to our mall business, overall mall traffic. Because of the seasonal nature of our business, our operations typically use cash during the first three quarters of the year and generate cash from operations in the fourth quarter. Borders Group Recent happenings in the company On February 16, 2011, the company announced that it had filed for Chapter 11 bankruptcy protection, listing $1.275 billion in assets and $1.293 billion in debts in its filing.[33] The company also announced the liquidation and closing of 226 stores.[34] Two private-equity firms, The Gores Group and Najafi Companies, expressed interest in purchasing half of the remaining Borders Group stores.[35][36] Borders Group announced on July 1, 2011, that it had found a bidder, Direct Brands, that would acquire the assets for $215 million and the assumption of $220 million in debt.[37][38][39][40] A group of Borders creditors rejected the Direct Brands takeover bid in July 2011.[41] Borders filed for an auction and the motion was approved by a judge;[42] however, the bid deadline expired on July 17 without a bidder.[43] A United States bankruptcy judge approved a petition to liquidate.[44][45] On July 22, 2011 Borders started closing its remaining 399 stores with a phased roll-out.[46][47] Business operations ceased in September 2011.[48] Former rival and the current second-largest chain of bookstores in the United States, Books-A-Million, had made a bid to acquire 30-35 stores and their assets on July 19, 2011, the day liquidation was approved by the courts. The two sides, however, were unable to come to an agreement suitable to all parties. Office equipment 'For Sale' sign at Borders corporate headquarters Books-A-Million later resurrected its offer to buy portions of Borders Group, purchasing the leases for 14 stores in primarily New England and Pennsylvania.[56][57][58] Borders USA closed the doors of its final remaining stores on Sunday, September 18, 2011. The last remaining Singaporean Borders store in Parkway Parade Shopping Center, closed its doors at 9pm (Singapore Time) after a final sale on Monday, September 26, 2011.[59] However, there are still international Borders stores operating in The United Arab Emirates, Oman, Malaysia and New Zealand. These Borders stores are now under different ownership from the original Borders Group, and were unaffected by their store closures. The Borders online store closed on September 27, 2011 at 10:30 pm Eastern/9:30 pm Central. A banner now appears on their website allowing users to browse but directing them to Barnes & Noble to complete their purchases. All Borders customers have until October 29th to prevent their personal contact and purchase information from being transferred to Barnes & Noble.[60] On October 1, Borders cardholders were informed by email: "As part of Borders ceasing operations, we [Barnes & Noble] acquired some of its assets including Borders brand trademarks and their customer list. The federal bankruptcy court approved this sale on September 26, 2011." Borders Group Industry analysis Top 5 Companies Company Sales Location

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BARNES & NOBLE BOOKSELLERS, INC.

3,899.30M

New York, NY

Follett Corporation

2,719.00M

River Grove, IL

WH SMITH TRAVEL HOLDINGS LTD

2,411.28M

Borders Group, Inc.

2,274.90M

Ann Arbor, MI

KINOKUNIYA COMPANY LTD.

1,331.81M

Meguro-Ku, Tokyo

he US bookstores industry includes about 10,000 stores with combined annual revenue of about $16 billion. Major companies include Barnes & Noble and Books-A-Million. The industry is highly concentrated: the 50 largest companies account for about 85 percent of sales. Books and bookstores, have been having a hard time in the United States in the last few years. Not long ago, large discount booksellers drove many small, independent book stores out of business. Now, those superstores are taking a hit from on-line and digital book sellers. Borders -- the countrys number two book chain -- recently declared bankruptcy and Amazon says it is now selling more e-books than printed ones. The US bookstores industry includes about 10,000 stores with combined annual revenue of about $16 billion. Major companies include Barnes & Noble and Books-A-Million. The industry is highly concentrated: the 50 largest companies account for about 85 percent of sales. The industry includes companies that operate physical retail locations. Online booksellers, such as Amazon.com, are covered in the industry profile for Internet and Catalog Retailers.

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COMPETITIVE LANDSCAPE Demand is driven by demographics and consumer income. The profitability of individual companies depends on merchandising and marketing. Large companies can provide broader selections and lower prices. Small companies can compete by offering specialized products or serving a local market. The industry is laborintensive: average annual sales per employee are about $130,000. Sales per employee tend to be lower for smaller, independent bookstores. The industry is being redefined as booksellers fend off intense competition from discount stores and online retailers and adjust to increasing acceptance by consumers of digital books as an alternative to printed books. Bookstores are finding the times challenging and Borders, once the nation's #2 chain, filed for bankruptcy in early 2011 before moving to liquidate its assets. PRODUCTS, OPERATIONS & TECHNOLOGY

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P a g e | 12 The industry is segmented into general, college, and specialty bookstores. General bookstores sell mostly trade books (fiction, nonfiction, adult, childrens); college bookstores, mostly textbooks; and specialty bookstores, mostly religious books. Trade books account for about 35 percent of sales, textbooks for nearly 30 percent, and religious ...

Sales growth (or loss) over previous seven years Company - %'s all rounded Barnes&Noble Bookstores Borders / Waldenbooks Amazon Media (books, music, DVDs) North America BN.com 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 -5% -3% +2% +2% +2% +8% +7% + 4% + 3% -0% -1% +2% +2% +4% + 1% + 3% + - 1% 10% + 21% -16% -15% -9%

+15% +11% +16% +29% +17% +18% +14% +21% +24% -2% +9% -1% +5% -2%

+4% + 4%

Borders Group Financial Statement Analysis Financial ratio -- the revenue trends,

Profitability Ratio ROE ROA EPS Group 1(Evening) Anthony, Hemanth, Neha, Sandya, Vidya

P a g e | 13 Liquidity CR QR Efficiency ITR RTR CTR Growth Margin leverage, financial position Borders Group Key Performance Indicators Borders Group Strengths and weaknesses

Any other area/information References http://www.fonerbooks.com/booksale.htm http://www.marketwatch.com/investing/stock/bgpiq/financials (financial data taken) http://www.marketwatch.com/investing/stock/bgpiq/financials/balance-sheet Dec 12, 2011 8:10 p.m.

Group 1(Evening) Anthony, Hemanth, Neha, Sandya, Vidya