March 16, 2001, 12:00 AM

Borders online sales improving; company is outsourcing fulfillment

Borders Group Inc. reported sales through Borders.com of $9.7 million for the fourth quarter, an increase of 33%. Ingram Book Group will take over fulfillment.

Borders Group Inc. reported sales through Borders.com of $9.7 million for the fourth quarter, an increase of 33%. Total annual sales were $27.4 million. The segment generated a $4.9 million loss for the quarter, a 13% improvement over 1999. For the year, Borders.com lost $18.4 million, which is 7% more than last year.

Consolidated sales, including domestic Borders superstores, International operations, Waldenbooks and Borders.com, reached $1.2 billion for the fourth quarter, contributing to record consolidated sales of $3.3 billion for the year, an increase of 10.2% over 1999. For the year, Borders Group produced $267 million of EBITDA, which is 3% higher than 1999.

Borders also announced today that it will outsource fulfillment for special orders and web sales to the Ingram Book Group. The transaction includes the sale to Ingram of a large percentage of the book inventory housed in Borders Group`s Fulfillment Center in La Vergne, Tenn., which currently handles the function to be assumed by Ingram. Borders expects to complete the transition to Ingram in the second quarter. The company says it expects to reduce costs.

"Ingram is the most respected name in product distribution throughout the publishing industry," said Borders Group President and Chief Executive Officer Greg Josefowicz. "The alliance will serve our customers well and assure quick, efficient and economical delivery. This, plus the positive impact the agreement will have on our financial results, makes this pact an important initiative in driving increased shareholder value."

Borders Group anticipates the move will lower its operating costs and improve earnings by approximately $.02 per share (excluding one-time charges) in 2001 and about $.04 per share in 2002. A related one-time, after-tax charge of approximately $15 to $20 million will be taken in the first quarter of 2001. This charge is substantially non-cash and is primarily related to the write-down of assets used by the Fulfillment Center, including warehouse equipment, hardware and software, as well as a reduction in recorded inventory.

Based on the result of the Ingram agreement, combined with actions taken in the fourth quarter of last year and actions planned for the future, the company expects that Internet losses will decrease from $.23 per share in 2000 to $.15 per share in 2001.

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