Sales Increased 0.1% for the First Quarter
35 New Stores Estimated to Generate First Year
Sales of Approximately $117 Million
Barnes & Noble Education, Inc. (NYSE: BNED), one of the
largest contract operators of bookstores on college and university
campuses across the United States and a leading provider of digital
education services, today reported sales and earnings for the first
quarter for fiscal 2017.
Financial highlights for the first quarter 2017:
- Sales of $239.2 million increased 0.1%,
as compared to prior year period.
- Comparable store sales decreased 2.8%
for the quarter.
- Net loss of $(27.9) million included
restructuring costs of $1.8 million, compared with a net loss of
$(26.9) million in the prior year period.
- Non-GAAP Adjusted EBITDA of $(36.5)
million, a decrease of $1.4 million, as compared to prior year
period.
- Non-GAAP Adjusted Earnings of $(25.9)
million, as compared to Adjusted Earnings of $(26.9) million in the
prior year period.
Operational highlights for the first quarter 2017:
- Opened 33 new stores with estimated
annual sales of $110 million, bringing total stores operated to 770
locations as of July 30, 2016.
- Completed the acquisition of
Promoversity, a custom merchandise supplier and e-commerce
storefront solution serving the collegiate bookstore business and
its customers.
- Established partnership with
Instructure, Inc., a leading software-as-a-service (SaaS)
technology company and creator of the Canvas learning management
system (LMS), increasing capabilities to improve student outcomes
and retention.
“Our first quarter results reflect the typical seasonality of
our business, with schools in summer semester throughout the
country,” said Max J. Roberts, Chief Executive Officer, Barnes
& Noble Education. “The comparable store sales decline is the
result of lower student participation in summer classes and the
related decline in textbook sales. Our initiatives to expand our
product offerings have partially offset this, with general
merchandise sales now representing approximately 50% of the total
sales for the quarter and growing by 1.6% on a comparable store
basis. Looking ahead, we are gearing up for the fall rush period
for textbook and general merchandise sales. We are well positioned
to broaden and deepen our partnerships with schools to support
student success.”
First Quarter 2017 Results
Results for the 13 weeks of fiscal 2017 and fiscal 2016 are as
follows:
$ in millions 13 Weeks Selected Data
(unaudited) Q1 2017 Q2 2016 (1) Total Sales $239.2 $239.0 Net Loss
$(27.9) $(26.9) Non-GAAP(2) Adjusted EBITDA $(36.5) $(35.1)
Adjusted Earnings $(25.9) $(26.9) (1) Financials for
fiscal first quarter 2016 have been presented on a carve-out basis.
(2) These non-GAAP financial measures have been reconciled in the
attached schedules to the most directly comparable GAAP measure as
required under SEC rules regarding the use of non-GAAP financial
measures.
First quarter sales of $239.2 million increased $0.2 million, or
0.1%, as compared to the prior year period. The Company reported a
net loss of $(27.9) million, including restructuring costs of $1.8
million. Adjusted Earnings were $(25.9) million, an increase of
$1.0 million from the prior year period.
Comparable store sales decreased 2.8% for the quarter
representing approximately $6.2 million in revenue. The decrease is
primarily attributable to textbook sales, which were down 6.8%,
partially offset by an increase in general merchandise sales of
1.6%.
The Company opened 33 new stores while closing 14 stores, with
estimated annual net incremental sales of $86 million, bringing the
total stores operated to 770 locations as of July 30, 2016.
During the first quarter ended July 30, 2016, the Company
recorded restructuring costs totaling $1.8 million related to the
transition of its Yuzu® eTextbook platform to the VitalSource
platform, including the reduction in staff and closing of the
facilities in Mountain View, California, and Redmond,
Washington.
First quarter net loss was $(27.9) million, or $(0.60) per
diluted share, compared to net loss of $(26.9) million, or $(0.65)
per diluted share, in the prior year period. The current year’s
fiscal quarter has 46.3 million diluted shares outstanding, while
the prior year period had 41.4 million shares outstanding. The
Company reported non-GAAP Adjusted Earnings Loss of $(25.9) million
during the quarter, compared with net loss of $(26.9) million in
the prior year period.
The Company’s Adjusted EBITDA was $(36.5) million for the
quarter, as compared to $(35.1) million in the prior year period,
due primarily to lower comparable store sales of $6.2 million.
The current period reflects the dilution resulting from the
issuance of additional shares of Barnes & Noble, Inc. common
stock in connection with the previously disclosed conversion of
Series J preferred shares by Barnes & Noble, Inc. in July 2015,
prior to the legal separation from Barnes & Noble, Inc.,
partially offset by the Company’s share repurchase program
announced in December 2015. In the quarter, the Company purchased
676,048 shares for $6.6 million. Since the share repurchase program
began, the Company has purchased 2,391,317 shares for $23.2
million.
Outlook
For fiscal year 2017, the Company continues to expect total
sales to grow by 2.0% to 4.0%, while comparable store sales are
expected to be approximately flat to 2.0% lower than the prior
year. The Company expects Adjusted EBITDA to increase by
approximately 12%, and capital expenditures are expected to be
approximately $50 million.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 11:00 a.m. Eastern Time on Thursday,
September 8, 2016 and can be accessed at the Barnes & Noble
Education, Inc. corporate website at www.bned.com.
Barnes & Noble Education, Inc. expects to report fiscal 2017
second quarter results on or about December 6, 2016.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education,
Inc. (NYSE:BNED), one of the largest contract
operators of bookstores on college and university campuses
across the United States and a leading provider of
digital education services, enhances the academic and social
purpose of educational institutions. Through its Barnes &
Noble College subsidiary, Barnes & Noble
Education serves more than 5 million college students and
their faculty through its 770 stores on campuses nationwide,
delivering essential educational content and tools within a dynamic
retail environment. Through its digital platforms LoudCloud and
Yuzu®, Barnes & Noble Education offers an excellent
digital reading experience and access to a broad catalog of digital
academic relevant titles. Barnes & Noble Education acts as
a strategic partner to drive student success; provide value and
support to students and faculty; and create loyalty and retention,
all while supporting the financial goals of college and university
partners.
General information on Barnes & Noble Education,
Inc. can be obtained by visiting the Company's corporate
website: www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to Barnes & Noble Education
and its business that are based on the beliefs of the management of
Barnes & Noble Education as well as assumptions made by and
information currently available to the management of Barnes &
Noble Education. When used in this communication, the words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,”
“will,” “forecasts,” “projections,” and similar expressions, as
they relate to Barnes & Noble Education or the management of
Barnes & Noble Education, identify forward-looking statements.
Moreover, Barnes & Noble Education operates in a very
competitive and rapidly changing environment. New risks emerge from
time to time. It is not possible for the management of Barnes &
Noble Education to predict all risks, nor can Barnes & Noble
Education assess the impact of all factors on its business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements Barnes & Noble Education may make.
In light of these risks, uncertainties and assumptions, the future
events and trends discussed in this press release may not occur and
actual results could differ materially and adversely from those
anticipated or implied in the forward-looking statements.
Such statements reflect the current views of Barnes & Noble
Education with respect to future events, the outcome of which is
subject to certain risks, including, among others: general
competitive conditions, including actions the Company’s competitors
may take to grow their businesses; a decline in college enrollment
or decreased funding available for students; decisions by colleges
and universities to outsource their bookstore operations or change
the operation of their bookstores; the general economic environment
and consumer spending patterns; decreased consumer demand for the
Company’s products, low growth or declining sales; restructuring of
the Company’s digital strategy may not result in the expected
growth in the Company’s digital sales and/or profitability; risk
that digital sales growth does not exceed the rate of investment
spend; the performance of the Company’s online, digital and other
initiatives, integration of and deployment of, additional products
and services, and further enhancements to Yuzu® and any future
higher education digital products, and the inability to achieve the
expected cost savings; the Company’s ability to successfully
implement the Company’s strategic initiatives including the
Company’s ability to identify and execute upon additional
acquisitions and strategic investments; technological changes; the
Company’s international expansion could result in additional risks;
the Company’s ability to attract and retain employees; changes to
payment terms, return policies, the discount or margin on products
or other terms with the Company’s suppliers; risks associated with
data privacy, information security and intellectual property;
trends and challenges to the Company’s business and in the
locations in which the Company has stores; non-renewal of contracts
and higher-than-anticipated store closings; disruptions to the
Company’s computer systems, data lines, telephone systems or supply
chain, including the loss of suppliers; work stoppages or increases
in labor costs; possible increases in shipping rates or
interruptions in shipping service, effects of competition; obsolete
or excessive inventory; product shortages; changes in law or
regulation; the amount of the Company’s indebtedness and ability to
comply with covenants applicable to any future debt financing; the
Company’s ability to satisfy future capital and liquidity
requirements; the Company’s ability to access the credit and
capital markets at the times and in the amounts needed and on
acceptable terms; adverse results from litigation, governmental
investigations or tax-related proceedings or audits; changes in
accounting standards; challenges to running the Company
independently from Barnes & Noble, Inc. following the Spin-Off;
the potential adverse impact on the Company’s business resulting
from the Spin-Off; and the other risks and uncertainties detailed
in the section titled “Risk Factors” in the Barnes & Noble
Education Annual Report on Form 10-K for the year ended April 30,
2016 filed with the Securities and Exchange Commission.
Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described as anticipated,
believed, estimated, expected, intended or planned. Subsequent
written and oral forward-looking statements attributable to Barnes
& Noble Education or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this
paragraph. Barnes & Noble Education undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise after
the date of this press release.
EXPLANATORY NOTE On February 26, 2015,
Barnes & Noble, Inc. (“Barnes & Noble”) announced plans for
the complete legal and structural separation of Barnes & Noble
Education, Inc. (the “Company”) from Barnes & Noble (the
“Spin-Off”). Under the Separation and Distribution Agreement
between Barnes & Noble and the Company, Barnes & Noble
distributed all of its equity interest in the Company, consisting
of all of the outstanding shares of the Company's Common Stock, to
Barnes & Noble’s stockholders on a pro rata basis. On
July 14, 2015, Barnes & Noble approved the final distribution
ratio and declared a pro rata dividend of the outstanding shares of
the Company's Common Stock, par value $0.01 per share ("Common
Stock"), to Barnes & Noble’s existing stockholders. The pro
rata dividend was made on August 2, 2015 to the Barnes & Noble
stockholders of record (as of July 27, 2015). Each Barnes &
Noble stockholder of record received a distribution of 0.632 shares
of the Company's Common Stock for each share of Barnes & Noble
common stock held on the record date. Following the Spin-Off,
Barnes & Noble does not own any equity interest in the Company.
On August 2, 2015, the Company completed the legal
separation from Barnes & Noble, at which time the Company began
to operate as an independent publicly-traded company. The Company's
Common Stock began to trade on a “when-issued” basis on the NYSE
under the symbol “BNED WI” beginning on July 23, 2015. On August 3,
2015, when-issued trading of the Company's Common Stock ended, the
Company's Common Stock began “regular-way” trading under the symbol
“BNED.” The results of operations for the 13 weeks ended
August 1, 2015 reflected in the Company's condensed consolidated
financial statements are presented on a stand-alone basis since the
Company was still part of Barnes & Noble, Inc. until the
consummation of the Spin-Off on August 2, 2015, and the results of
operations for the 13 weeks ended July 30, 2016 reflected in the
Company's condensed consolidated financial statements are presented
on a consolidated basis as the Company became a separate
consolidated entity.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Operations (In thousands, except per share data)
(Unaudited)
13 weeks ended July
30, 2016 August 1, 2015 Sales: Product sales and
other $ 217,736 $ 218,716 Rental income 21,501
20,267 Total sales 239,237 238,983
Cost of sales: Product and other cost of sales 177,994
174,909 Rental cost of sales 13,830 12,530
Total cost of sales 191,824 187,439
Gross profit 47,413 51,544
Selling and administrative expenses 85,464 86,684 Depreciation and
amortization expense 12,921 13,100 Restructuring costs (a)
1,790 - Operating loss (52,762 ) (48,240 )
Interest expense, net 666 3 Loss before
income taxes (53,428 ) (48,243 ) Income tax benefit (25,512
) (21,325 ) Net loss $ (27,916 ) $ (26,918 )
Loss per common share: Basic $ (0.60 ) $ (0.65 ) Diluted $ (0.60 )
$ (0.65 ) Weighted average common shares outstanding: Basic
46,349 41,426 Diluted 46,349 41,426 (a) For
additional information, see Note (a) in the Non-GAAP disclosure
information of this Press Release.
Non-GAAP Disclosures: (a)
Adjusted Earnings $ (25,885 ) $ (26,918 ) Adjusted EBITDA $ (36,524
) $ (35,140 ) (a) For additional information, see the
Non-GAAP disclosure information of this Press Release.
Percentage of
sales: Sales: Product sales and other 91.0 % 91.5 % Rental
income 9.0 % 8.5 % Total sales 100.0 %
100.0 % Cost of sales: Product and other cost of sales (a) 81.7 %
80.0 % Rental cost of sales (a) 64.3 % 61.8 % Total
cost of sales 80.2 % 78.4 % Gross profit
19.8 % 21.6 % Selling and administrative
expenses 35.7 % 36.3 % Depreciation and amortization expense 5.4 %
5.5 % Restructuring costs 0.7 % 0.0 %
Operating loss (22.0 )% (20.2 )% Interest expense, net 0.3 %
0.0 % Loss before income taxes (22.3 )% (20.2 )%
Income tax benefit (10.7 )% (8.9 )% Net loss
(11.6 )% (11.3 )% (a) Represents the
percentage these costs bear to the related sales, instead of total
sales.
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIES Condensed Consolidated Balance Sheets
(In thousands, except per share data) (Unaudited)
July 30, 2016 August 1, 2015
ASSETS Current assets: Cash and cash equivalents $ 8,906 $ 8,887
Receivables, net 38,898 35,461 Merchandise inventories, net 724,329
766,767 Textbook rental inventories 7,527 7,640 Prepaid expenses
and other current assets 8,614 7,623 Total
current assets 788,274 826,378 Property
and equipment, net 107,347 108,783 Intangible assets, net 197,508
195,627 Goodwill 281,337 274,070 Other noncurrent assets
39,003 44,738 Total assets $ 1,413,469 $
1,449,596 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 560,163 $ 596,786 Accrued
liabilities 41,949 61,647 Total current
liabilities 602,112 658,433 Long-term deferred
taxes, net 35,636 49,772 Credit Facility borrowings 25,000 - Other
long-term liabilities 74,976 69,555 Total
liabilities 737,724 777,760 Commitments
and contingencies - - Stockholders' equity: Parent company
investment - 671,836 Preferred stock, $0.01 par value; authorized,
5,000 shares; issued and outstanding, none - - Common stock, $0.01
par value; authorized, 200,000 shares; issued, 48,655 and 0 shares,
respectively; outstanding, 46,086 and 0 shares, respectively 487 -
Accumulated other comprehensive loss (8 ) Additional paid-in
capital 701,401 - Retained earnings (914 ) - Treasury stock, at
cost (25,221 ) - Total stockholders' equity
675,745 671,836 Total liabilities and stockholders'
equity $ 1,413,469 $ 1,449,596
BARNES &
NOBLE EDUCATION, INC. AND SUBSIDIARIES Non-GAAP
Information (In thousands) (Unaudited)
Adjusted Earnings 13 weeks
ended July 30, 2016 August 1, 2015 Net
loss $ (27,916 ) $ (26,918 ) Reconciling items, after-tax (below)
2,031 - Adjusted Earnings (Non-GAAP) $
(25,885 ) $ (26,918 ) Reconciling items, pre-tax
Restructuring costs (a) $ 1,790 $ - Transaction costs (b)
1,527 - Reconciling items, pre-tax 3,317 -
Less: Pro forma income tax impact (c) 1,286 -
Reconciling items, after-tax $ 2,031 $ -
Adjusted EBITDA 13 weeks ended
July 30, 2016 August 1, 2015 Net loss $
(27,916 ) $ (26,918 ) Add: Depreciation and amortization expense
12,921 13,100 Interest expense, net 666 3 Income tax benefit
(25,512 ) (21,325 ) Restructuring costs (a) 1,790 - Transaction
costs (b) 1,527 - Adjusted EBITDA
(Non-GAAP) $ (36,524 ) $ (35,140 )
(a)
In Fiscal 2016, the Company implemented a
plan to restructure its digital operations and announced a
reduction in staff and closure of the facilities in Mountain View,
California, and Redmond, Washington, that support the Yuzu®
eTextbook platform. The Company recorded restructuring costs of
$8.8 million in Fiscal 2016 comprised of employee-related costs
(including severance and retention) and facility exit costs. During
the 13 weeks ended July 30, 2016, the Company recorded $1.8 million
in additional restructuring costs primarily for employee related
costs (including severance and retention). The majority of the
restructuring related to employee matters was completed in the
first quarter of Fiscal 2017.
(b)
Transaction costs are costs incurred for
business development and acquisitions, and are included in selling
and administrative expenses in the condensed consolidated statement
of operations.
(c)
The amounts shown represent the projected
reduction in income tax expense based on the Company's current
combined federal and state aggregate income tax rate.
Use of Non-GAAP Financial Information - Adjusted Earnings and
Adjusted EBITDA
To supplement the Company’s condensed consolidated financial
statements presented in accordance with generally accepted
accounting principles (“GAAP”), in the Press Release attached
hereto as Exhibit 99.1, the Company uses the non-GAAP financial
measures of Adjusted Earnings (defined as Net Income adjusted for
certain reconciling items) and Adjusted EBITDA (defined by the
Company as earnings before interest, taxes, depreciation and
amortization, as adjusted for additional items subtracted from or
added to net income).
These non-GAAP financial measures are not intended as
substitutes for and should not be considered superior to measures
of financial performance prepared in accordance with GAAP. In
addition, the Company's use of these non-GAAP financial measures
may be different from similarly named measures used by other
companies, limiting their usefulness for comparison purposes. These
non-GAAP financial measures should not be considered as
alternatives to net income as an indicator of the Company's
performance or any other measures of performance derived in
accordance with GAAP.
The Company's management reviews these Non-GAAP financial
measures as internal measures to evaluate the Company's performance
and manage the Company's operations. The Company's management
believes that these measures are useful performance measures which
are used by the Company to facilitate a comparison of on-going
operating performance on a consistent basis from period-to-period.
The Company's management believes that these Non-GAAP financial
measures provide for a more complete understanding of factors and
trends affecting the Company's business than measures under GAAP
can provide alone, as it excludes certain items that do not reflect
the ordinary earnings of its operations. The Company's Board of
Directors and management also use Adjusted EBITDA as one of the
primary methods for planning and forecasting overall expected
performance, for evaluating on a quarterly and annual basis actual
results against such expectations, and as a measure for performance
incentive plans. The Company's management believes that the
inclusion of Adjusted EBITDA and Adjusted Earnings results provides
investors useful and important information regarding the Company's
operating results.
The non-GAAP measures included in the Press Release attached
hereto as Exhibit 99.1 has been reconciled to the comparable GAAP
measures as required under Securities and Exchange Commission (the
“SEC”) rules regarding the use of non-GAAP financial
measures. All of the items included in the reconciliations
below are either (i) non-cash items or (ii) items that
management does not consider in assessing the Company's on-going
operating performance. The Company urges investors to carefully
review the GAAP financial information included as part of the
Company’s Form 10-K dated April 30, 2016 filed with the SEC on June
29, 2016, which includes consolidated financial statements for each
of the three years for the period ended April 30, 2016 (Fiscal
2016, Fiscal 2015, and Fiscal 2014).
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Earnings (Loss) Per Share (In thousands, except per share
data) (Unaudited)
13 weeks ended
July 30, 2016 August 1, 2015 Numerator for basic
and diluted loss per share: Net loss available to common
shareholders $ (27,916 ) $ (26,918 )
Denominator for
basic and diluted loss per share: Basic and diluted weighted
average common shares (a)(b) 46,349 41,426
Loss per common share: Basic $ (0.60 )
$ (0.65 ) Diluted $ (0.60 ) $ (0.65 )
(a)
For periods prior to the Spin-Off from
Barnes & Noble on August 2, 2015, Basic earnings per share and
weighted-average basic shares outstanding are based on the number
of shares of Barnes & Noble common stock outstanding as of the
end of the period, adjusted for an assumed distribution ratio of
0.632 shares of the Company's Common Stock for every one share of
Barnes & Noble common stock held on the record date for the
Spin-Off.
(b)
For periods prior to the Spin-Off from
Barnes & Noble on August 2, 2015, Diluted earnings per share
and weighted-average diluted shares outstanding reflect potential
common shares from Barnes & Noble equity plans in which the
Company's employees participated based on the distribution
ratio.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160908005359/en/
Media:Barnes & Noble
Education, Inc.Carolyn J. Brown, 908-991-2967Vice
PresidentCorporate Communicationscbrown@bned.comorInvestors:Barnes & Noble Education,
Inc.Thomas Donohue, 908-991-2966Vice PresidentTreasurer and
Investor Relationstdonohue@bned.com
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