BKS Barnes and Noble Inc

Comparable Store Sales Increase 1.1%

Updates EBITDA Outlook

Barnes & Noble, Inc. (NYSE:BKS) today reported sales and earnings for its fiscal 2019 third quarter ended January 26, 2019.

Total sales for the third quarter were $1.2 billion, flat with the prior year period. Comparable store sales increased 1.1%, reflecting the Company’s best quarterly performance in several years.

The consolidated third quarter operating profit was $79.2 million, as compared to the prior year operating loss of $34.9 million. Third quarter results include asset impairment charges of $22.1 million, and non-recurring professional fees of $5.1 million. The prior year quarter included asset impairment charges of $135.4 million, and severance charges of $10.7 million. Excluding these charges, third quarter adjusted EBITDA was $133.0 million, as compared to $139.5 million last year. Adjusted EBITDA decreased $6.5 million due to the increased marketing and promotional spend.

Consolidated third quarter net earnings were $66.9 million, or $0.91 per share, as compared to a loss of $63.5 million, or $0.87 per share, in the prior year. Excluding the charges noted above, adjusted third quarter EPS was $1.21 in the current year.

“In fiscal 2019, we have been focused on growing the top line, which contributed to our best holiday in years,” said Len Riggio, Chairman of Barnes & Noble, Inc. “Sales benefitted from our new ad campaign, increased marketing and promotions, and an improved omni-channel experience for our customers. We believe these efforts are laying the foundation for sustained growth.”

Outlook

The Company expects fiscal 2019 EBITDA to be in a range of $140 million to $155 million, excluding unusual or non-recurring items. This outlook includes the impact of incremental investments the company is making in its business, as well as lower than expected post-holiday sales.

Conference Call

A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 10:00 A.M. ET on Thursday, March 7, 2019, and is accessible at investors.barnesandnobleinc.com.

Barnes & Noble, Inc. will report year-end earnings on or about June 20, 2019.

About Barnes & Noble, Inc.

Barnes & Noble, Inc. (NYSE: BKS) is the nation’s largest retail bookseller, and a leading retailer of content, digital media and educational products. The Company operates 627 Barnes & Noble bookstores in 50 states, and one of the Web’s premier e-commerce sites, BN.com (www.bn.com). The Nook Digital business offers a lineup of popular NOOK® tablets and eReaders and an expansive collection of digital reading and entertainment content through the NOOK Store®. The NOOK Store (www.nook.com) features digital books, periodicals and comics, and offers the ability to enjoy content across a wide array of popular devices through Free NOOK Reading Apps™ available for Android™, iOS® and Windows®.

General information on Barnes & Noble, Inc. can be obtained by visiting the Company's corporate website at www.barnesandnobleinc.com.

BKS – Financial

Forward-Looking Statements

This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. 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 or the management of Barnes & Noble, identify forward-looking statements.

Such statements reflect the current views of Barnes & Noble with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for Barnes & Noble’s products, low growth or declining sales and net income due to various factors, including store closings, higher-than-anticipated or increasing costs, including with respect to store closings, relocation, occupancy (including in connection with lease renewals) and labor costs, the effects of competition, the risk of insufficient access to financing to implement future business initiatives, risks associated with data privacy and information security, risks associated with Barnes & Noble’s supply chain, including possible delays and disruptions and increases in shipping rates, various risks associated with the digital business, including the possible loss of customers, declines in digital content sales, risks and costs associated with ongoing efforts to rationalize the digital business, risks associated with the eCommerce business, including the possible loss of eCommerce customers and declines in eCommerce sales, the risk that financial and operational forecasts and projections are not achieved, the performance of Barnes & Noble’s initiatives including but not limited to new store concepts and eCommerce initiatives, unanticipated adverse litigation results or effects, potential infringement of Barnes & Noble’s intellectual property by third parties or by Barnes & Noble of the intellectual property of third parties, and other factors, including those factors discussed in detail in Item 1A, “Risk Factors,” in Barnes & Noble’s Annual Report on Form 10-K for the fiscal year ended April 28, 2018, and in Barnes & Noble’s other filings made hereafter from time to time with the SEC.

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 or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Barnes & Noble 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 communication.

  BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)                     13 weeks ended   13 weeks ended   39 weeks ended   39 weeks ended January 26, 2019   January 27, 2018 January 26, 2019   January 27, 2018   Sales $ 1,231,348 $ 1,231,771 $ 2,797,312 $ 2,876,204 Cost of sales and occupancy   833,990     831,745     1,946,535     1,994,002   Gross profit   397,358     400,026     850,777     882,202   Selling and administrative expenses 269,442 271,220 717,489 767,243 Depreciation and amortization 26,622 28,245 74,955 81,842 Asset impairments   22,067     135,436     22,067     135,436   Operating income (loss) 79,227 (34,875 ) 36,266 (102,319 ) Interest expense, net   3,372     2,536     10,056     7,254   Income (loss) before taxes 75,855 (37,411 ) 26,210 (109,573 ) Income tax provision (benefit)   8,925     26,125     3,712     (5,165 ) Net income (loss) $ 66,930   $ (63,536 ) $ 22,498   $ (104,408 )   Income (loss) per common share:         Basic $ 0.91   $ (0.87 ) $ 0.31   $ (1.44 ) Diluted $ 0.91   $ (0.87 ) $ 0.31   $ (1.44 )   Weighted average common shares outstanding: Basic 73,022 72,649 72,881 72,566 Diluted 73,317 72,649 73,075 72,566   Dividends declared per common share $ 0.15 $ 0.15 $ 0.45 $ 0.45   Percentage of sales: Sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales and occupancy   67.7 %   67.5 %   69.6 %   69.3 % Gross profit   32.3 %   32.5 %   30.4 %   30.7 % Selling and administrative expenses 21.9 % 22.0 % 25.6 % 26.7 % Depreciation and amortization 2.2 % 2.3 % 2.7 % 2.8 % Asset impairments   1.8 %   11.0 %   0.8 %   4.7 % Operating income (loss) 6.4 % -2.8 % 1.3 % -3.6 % Interest expense, net   0.3 %   0.2 %   0.4 %   0.3 % Income (loss) before taxes 6.2 % -3.0 % 0.9 % -3.8 % Income tax provision (benefit)   0.7 %   2.1 %   0.1 %   -0.2 % Net income (loss) 5.4 % -5.2 % 0.8 % -3.6 %     BARNES & NOBLE, INC. AND SUBSIDIARIES Segment Information (In thousands) (Unaudited)                     13 weeks ended   13 weeks ended   39 weeks ended   39 weeks ended January 26, 2019 January 27, 2018 January 26, 2019 January 27, 2018   Sales Retail $ 1,214,552 $ 1,210,417 $ 2,743,455 $ 2,810,162 NOOK 24,372 30,930 71,405 86,394 Elimination   (7,576 )   (9,576 )   (17,548 )   (20,352 ) Total $ 1,231,348   $ 1,231,771   $ 2,797,312   $ 2,876,204     Gross Profit Retail $ 386,854 $ 384,559 $ 817,471 $ 837,885 NOOK   10,504     15,467     33,306     44,317   Total $ 397,358   $ 400,026   $ 850,777   $ 882,202     Selling and Administrative Expenses Retail $ 256,923 $ 257,374 $ 685,484 $ 725,325 NOOK   12,519     13,846     32,005     41,918   Total $ 269,442   $ 271,220   $ 717,489   $ 767,243     Asset Impairments Retail $ 22,067 $ 135,436 $ 22,067 $ 135,436 NOOK   -     -     -     -   Total $ 22,067   $ 135,436   $ 22,067   $ 135,436     EBITDA Retail $ 107,864 $ (8,251 ) $ 109,920 $ (22,876 ) NOOK   (2,015 )   1,621     1,301     2,399   Total $ 105,849   $ (6,630 ) $ 111,221   $ (20,477 )   Depreciation and Amortization Retail $ (24,347 ) $ (25,295 ) $ (67,513 ) $ (72,491 ) NOOK   (2,275 )   (2,950 )   (7,442 )   (9,351 ) Total $ (26,622 ) $ (28,245 ) $ (74,955 ) $ (81,842 )   Operating Income (Loss) Retail $ 83,517 $ (33,546 ) $ 42,407 $ (95,367 ) NOOK   (4,290 )   (1,329 )   (6,141 )   (6,952 ) Total $ 79,227   $ (34,875 ) $ 36,266   $ (102,319 )   Net income (Loss) Operating income (loss) $ 79,227 $ (34,875 ) $ 36,266 $ (102,319 ) Interest expense, net (3,372 ) (2,536 ) (10,056 ) (7,254 ) Income tax provision (benefit)   (8,925 )   (26,125 )   (3,712 )   5,165   Total $ 66,930   $ (63,536 ) $ 22,498   $ (104,408 )       Percentage of sales:   Gross Margin Retail 31.9 % 31.8 % 29.8 % 29.8 % NOOK   62.5 %   72.4 %   61.8 %   67.1 % Total 32.3 % 32.5 % 30.4 % 30.7 %   Selling and Administrative Expenses Retail 21.2 % 21.3 % 25.0 % 25.8 % NOOK   74.5 %   64.8 %   59.4 %   63.5 % Total 21.9 % 22.0 % 25.6 % 26.7 %   Asset Impairments Retail 1.8 % 11.2 % 0.8 % 4.8 % NOOK   0.0 %   0.0 %   0.0 %   0.0 % Total 1.8 % 11.0 % 0.8 % 4.7 %   EBITDA Retail 8.9 % -0.7 % 4.0 % -0.8 % NOOK   -12.0 %   7.6 %   2.4 %   3.6 % Total 8.6 % -0.5 % 4.0 % -0.7 %   Depreciation and Amortization Retail 2.0 % 2.1 % 2.5 % 2.6 % NOOK   13.5 %   13.8 %   13.8 %   14.2 % Total 2.2 % 2.3 % 2.7 % 2.8 %   Operating Income (Loss) Retail 6.9 % -2.8 % 1.5 % -3.4 % NOOK   -25.5 %   -6.2 %   -11.4 %   -10.5 % Total 6.4 % -2.8 % 1.3 % -3.6 %     BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) (Unaudited)             January 26, 2019   January 27, 2018   ASSETS Current assets: Cash and cash equivalents $ 15,863 $ 11,500 Receivables, net 62,246 62,952 Merchandise inventories, net 1,000,306 975,055 Prepaid expenses and other current assets   68,178     79,175   Total current assets   1,146,593     1,128,682     Property and equipment: Land and land improvements 2,541 2,541 Buildings and leasehold improvements 1,062,749 1,075,491 Fixtures and equipment   1,538,834     1,650,352   2,604,124 2,728,384 Less accumulated depreciation and amortization   2,358,560     2,466,032   Net property and equipment   245,564     262,352     Goodwill 71,593 73,769 Intangible assets, net 303,732 309,757 Other non-current assets   16,667     13,285   Total assets $ 1,784,149   $ 1,787,845     LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 510,532 $ 490,886 Accrued liabilities 271,623 285,598 Gift card liabilities   239,296     358,609   Total current liabilities   1,021,451     1,135,093     Long-term debt 129,251 59,805 Deferred taxes 72,147 58,118 Other long-term liabilities 87,802 91,712   Shareholders' equity: Common stock; $0.001 par value; 300,000 shares authorized; 112,763 and 112,238 shares issued, respectively 112 112 Additional paid-in capital 1,752,646 1,747,478 Accumulated other comprehensive income 276 315 Retained earnings (156,965 ) (183,064 ) Treasury stock, at cost, 39,738 and 39,585 shares, respectively   (1,122,571 )   (1,121,724 ) Total Barnes & Noble, Inc. shareholders' equity   473,498     443,117   Commitments and contingencies   -     -   Total liabilities and shareholders' equity $ 1,784,149   $ 1,787,845       BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statement of Cash Flows (In thousands) (Unaudited)             39 weeks ended   39 weeks ended January 26, 2019 January 27, 2018   Cash flows from operating activities: Net income (loss) $ 22,498 $ (104,408 )

Adjustments to reconcile net income (loss) to net cash flows from

operating activities: Depreciation and amortization (including amortization of deferred financing fees) 76,515 83,306 Stock-based compensation expense 3,091 4,788 Impairment charges 22,067 135,436 Deferred taxes - (25,667 ) Loss on disposal of property and equipment 699 589 Net increase (decrease) in other long-term liabilities 1,474 (7,599 ) Net (increase) decrease in other non-current assets 255 (3,614 ) Changes in operating assets and liabilities, net   26,291     25,302   Net cash flows provided by operating activities   152,890     108,133   Cash flows from investing activities: Purchases of property and equipment   (79,722 )   (69,971 ) Net cash flows used in investing activities   (79,722 )   (69,971 ) Cash flows from financing activities: Proceeds from credit facility 912,025 877,822 Payments on credit facility (941,474 ) (882,917 ) Cash dividends paid (32,874 ) (32,719 ) Purchase of treasury stock related to stock-based compensation (847 ) (653 ) Cash dividends paid for long-term incentive awards (479 ) (188 ) Payment of amended credit facility related fees   (4,425 )   -   Net cash flows used in financing activities   (68,074 )   (38,655 ) Net increase (decrease) in cash and cash equivalents 5,094 (493 ) Cash and cash equivalents at beginning of period   10,769     11,993   Cash and cash equivalents at end of period $ 15,863   $ 11,500     Changes in operating assets and liabilities, net: Receivables, net $ 2,316 $ 4,342 Merchandise inventories, net (42,110 ) (28,146 ) Prepaid expenses and other current assets (3,025 ) 22,641

Accounts payable, accrued liabilities and gift card liabilities

  69,110     26,465   Changes in operating assets and liabilities, net $ 26,291   $ 25,302       BARNES & NOBLE, INC. AND SUBSIDIARIES Non-GAAP Reconciliation & Forward-Looking Statement (In millions) (Unaudited)             Forward-Looking Fiscal 2019   EBITDA Adjusted EBITDA (a) $ 140 $ 155 Asset impairments 22 22 Professional fees   9     9   EBITDA $ 109   $ 124     Operating income EBITDA $ 109 $ 124 Depreciation and amortization   (100 )   (100 ) Operating income $ 9   $ 24       13 weeks ended 13 weeks ended January 26, 2019 January 27, 2018 EBITDA Adjusted EBITDA (a) $ 133 $ 139 Asset impairments (b) 22 135 Professional fees 5 - Severance   -     11   EBITDA $ 106   $ (7 )   Operating income (loss) EBITDA $ 106 $ (7 ) Depreciation and amortization   (27 )   (28 ) Operating income (loss) $ 79   $ (35 )   Income per common share: Diluted earnings per share as reported $ 0.91

Impact of non-recurring charges above, net of tax

  0.30   Adjusted diluted earnings per share $ 1.21     (a) Excludes any unusual or non-recurring items.  

(b) Fiscal 2018 includes goodwill and store impairment charges.

 

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Media:Mary Ellen KeatingSenior Vice PresidentCorporate CommunicationsBarnes & Noble, Inc.(212) 633-3323mkeating@bn.com

Investors:Andy MilevojVice PresidentInvestor Relations and Corporate FinanceBarnes & Noble, Inc.(212) 633-3489amilevoj@bn.com