Sales Increase 0.6% for the 2nd Quarter and
1.8% Year to Date
New School Contracts Top $64 Million in
Estimated Annual Sales
Comparable Sales Decline Due to Falling
Enrollment in Two Year Community Colleges
Barnes & Noble Education, Inc. (NYSE:BNED) today
reported sales and earnings for its fiscal 2016 second quarter
ended on October 31, 2015. Second quarter sales of $755.9 million
increased $4.2 million, or 0.6%, as compared to the prior year. The
Company reported net income of $33.4 million which is $3.6 million
lower than the prior year period.
As previously disclosed, the Company became a separate public
company on August 2nd, 2015, after Barnes & Noble, Inc.
(NYSE:BKS) completed the legal and structural separation of its
Retail and College businesses. “This second quarter of fiscal 2016
was the Company’s first stand-alone period as an independent public
company, and we are proud of our booksellers’ performance,” said
Max J. Roberts, Chief Executive Officer, Barnes & Noble
Education, Inc. The Company continues to win new contracts, opening
7 new stores in the second quarter of 2016 with estimated annual
sales of $6.6 million. In addition, the Company has been awarded
contracts to open an additional 10 stores with estimated annual
sales of $13.0 million. This brings the total year to date actual
and planned store openings to 38, with estimated annual sales of
$64.5 million. As of October 31, the Company operated 743 stores
nationwide.
Comparable sales decreased 3.0% during the quarter and 1.9% year
to date. “This fall rush period was negatively impacted by student
enrollments, specifically in two year community colleges.
Enrollments in our two year community colleges are down mid-single
digits year over year which resulted in comparable sales in these
schools decreasing by approximately 7%,” Mr. Roberts continued.
“Comparable store sales excluding two year community colleges
decreased by 1.3% for the quarter and 0.2% year to date.” The
Company has a very balanced portfolio of schools with approximately
24% of its revenue generated by two year community colleges, and
the rest coming from state schools, private schools and collegiate
superstores. While the current enrollment trend is negative, the
Company believes the long term enrollment trends are positive.
According to the National Center for Education Statistics of the
U.S. Department of Education (NCES), enrollment in post-secondary
degree-granting institutions is expected to increase 13.9% from
21.0 million in 2012 to 23.9 million in 2022.
“Emblematic apparel continues to lead the growth in general
merchandise sales increasing 1.3% for the quarter and 3.5% year to
date on a comparable basis. During the fall rush season, school and
computer supplies make up a higher percentage of our general
merchandise sales and have been impacted by the decrease in
enrollment and have not experienced the consistent growth of
emblematic apparel,” explained Mr.Roberts.
The Company’s EBITDA was $72.7 million for the quarter, as
compared to $77.9 million in the prior year, due primarily to
reduced earnings from lower comparable store sales, increased
expenses in technology and store support programs, separation
expenses, and continued investments in digital education. These
items were partially offset by earnings from our new stores.
Second Quarter 2016 Results from Operations
Results for the fiscal 2016 and fiscal 2015 second quarters are
as follows:
Revenues (unaudited) $ in millions
Increase/(Decrease) Q2 2016 Q2 2015 $ % Product sales and
other $684.0 $678.9 $5.1 0.8% Rental Income $71.9 $72.8 $(0.9)
(1.3)% Total $755.9 $751.7 $4.2 0.6% EBITDA(1) (unaudited) $
in millions Increase/(Decrease) Q2 2016 Q2 2015
$
% EBITDA
$72.7 $77.9 ($5.2)
(6.7)%
(1) This non-GAAP financial measure has 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. Financials for fiscal 2015 have been presented on a
carve-out basis.
Net Results
Second quarter net income was $33.4 million, or $0.69 per
diluted share, compared to net income of $37.0 million, or $0.95
per diluted share, in the prior year. The current year’s fiscal
quarter has 48.6 million diluted shares outstanding, while the
prior year period had 37.5 million shares outstanding. 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 Series J preferred shares
by Barnes & Noble, Inc. in July 2015.
Outlook
For fiscal year 2016, the Company is revising its comparable
store sales expectations from increasing approximately 1% to be
flat to down 2.0%. Also, the Company expects capital expenditures
to be approximately $50 million, a decrease from the $55 million
previously disclosed.
Conference Call
A conference call with Barnes & Noble Education, Inc.’s
senior management will be webcast at 10:00 a.m. Eastern Time on
Tuesday, December 8, and can be accessed at Barnes & Noble
Education, Inc.’s corporate website at www.bned.com.
Barnes & Noble Education, Inc. expects to report fiscal 2016
third quarter results on or about March 8, 2016.
About Barnes & Noble Education, Inc.
Barnes & Noble Education, Inc. (NYSE:BNED) 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 743 stores on campuses nationwide, delivering
essential educational content and tools within a dynamic retail
environment. The company is at the forefront of digital education
with its digital education platform, Yuzu®, weaving together
digital learning materials to enhance the teaching and learning
experience. 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: challenges to
running Barnes & Noble Education independently from Barnes
& Noble, Inc. (“Barnes & Noble”) now that the complete
legal and structural separation of Barnes & Noble Education
from Barnes & Noble (the “Spin-Off”) has been completed;
general competitive conditions, including actions Barnes &
Noble Education’s competitors may take to grow their businesses;
trends and challenges to Barnes & Noble Education’s business
and in the locations in which it has stores; decisions by colleges
and universities to outsource their bookstore operations or change
the operation of their bookstores; non-renewal of contracts; the
general economic environment and consumer spending patterns, a
decline in college enrollment or decreased funding available for
students; decreased consumer demand for Barnes & Noble
Education’s products, low growth or declining sales; disruptions to
Barnes & Noble Education’s computer systems, data lines,
telephone systems or supply chain, including the loss of suppliers;
changes to payment terms, return policies, the discount or margin
on products or other terms with Barnes & Noble Education’s
suppliers; risks associated with data privacy, information security
and intellectual property; work stoppages or increases in labor
costs; Barnes & Noble Education’s ability to attract and retain
employees; possible increases in shipping rates or interruptions in
shipping service, effects of competition; obsolete or excessive
inventory; product shortages; Barnes & Noble Education’s
ability to successfully implement its strategic initiatives; the
performance of Barnes & Noble Education’s online, digital and
other initiatives, including possible delays in the deployment of,
and further enhancements to, Yuzu® and any future higher education
digital products; technological changes; risk that digital sales
growth is less than expectations and the risk that it does not
exceed the rate of investment spend; higher-than-anticipated store
closings; changes in law or regulation; the amount of Barnes &
Noble Education’s indebtedness and ability to comply with covenants
applicable to any future debt financing; Barnes & Noble
Education’s ability to satisfy future capital and liquidity
requirements; Barnes & Noble Education’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; the potential adverse impact on
Barnes & Noble Education’s business resulting from the
Spin-Off; and the other risks and uncertainties detailed in the
section titled “Risk Factors” in Barnes & Noble Education’s
Prospectus filed with the Securities and Exchange Commission
(“SEC”) on July 15, 2015 and in Barnes & Noble Education’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 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
planned to distribute all of its equity interest in us, consisting
of all of the outstanding shares of our Common Stock, to Barnes
& Noble’s stockholders on a pro rata basis. Following the
Spin-Off, Barnes & Noble would not own any equity interest in
us, and we would operate independently from Barnes & Noble.
On July 14, 2015, Barnes & Noble approved the final
distribution ratio and declared a pro rata dividend of the
outstanding shares of our 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 our Common Stock for each share of Barnes &
Noble common stock held on the record date. On August 2,
2015, we completed the legal separation from Barnes & Noble, at
which time we began to operate as an independent publicly-traded
company. Our 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 our Common Stock ended,
our Common Stock began “regular-way” trading under the symbol
“BNED.” The results of operations for the 26 weeks ended
November 1, 2014 and the 13 weeks ended August 1, 2015 reflected in
our consolidated financial statements are presented on a
stand-alone basis, since we were still part of Barnes & Noble,
Inc. until the Spin-Off on August 2, 2015, and the results of
operations for the 13 weeks ended October 31, 2015 reflected in our
consolidated financial statements are presented on a consolidated
basis as we became a separate consolidated entity.
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIESConsolidated Statements of Income(In
thousands, except per share data)(Unaudited)
13 weeks ended
26 weeks ended October 31, 2015 November 1,
2014 October 31, 2015 November 1, 2014
Sales: Product sales and other $ 684,006 $ 678,905 $ 902,722
$ 885,093 Rental income 71,858 72,797 92,125
92,350 Total sales 755,864 751,702
994,847 977,443 Cost of sales and occupancy: Product and
other cost of sales and occupancy 537,380 534,137 712,289 700,190
Rental cost of sales and occupancy 43,363 44,054
55,893 56,432 Total cost of sales and occupancy
580,743 578,191 768,182 756,622 Gross
profit 175,121 173,511 226,665 220,821
Selling and administrative expenses 102,439 95,587 189,123 176,859
Depreciation and amortization 13,169 12,508
26,269 25,052 Operating income 59,513 65,416 11,273 18,910
Interest expense, net 554 14 557 19
Income before income taxes 58,959 65,402 10,716 18,891 Income tax
expense 25,558 28,451 4,233 8,153 Net
income $ 33,401 $ 36,951 $ 6,483 $ 10,738 Earnings
per common share: Basic $ 0.69 $ 0.95 $ 0.14 $ 0.26 Diluted $ 0.69
$ 0.95 $ 0.14 $ 0.26 Weighted average common shares
outstanding: Basic 48,207 37,505 44,816 37,471 Diluted 48,562
37,544 45,023 37,504 Percentage of sales: Sales: Product
sales and other 90.5% 90.3% 90.7% 90.6% Rental income 9.5%
9.7% 9.3% 9.4% Total sales 100.0%
100.0% 100.0% 100.0% Cost of sales and
occupancy: Product and other cost of sales and occupancy (a) 78.6%
78.7% 78.9% 79.1% Rental cost of sales and occupancy (a)
60.3% 60.5% 60.7% 61.1% Total cost of sales
and occupancy 76.8% 76.9% 77.2% 77.4%
Gross profit 23.2% 23.1% 22.8% 22.6%
Selling and administrative expenses 13.6% 12.7% 19.0% 18.1%
Depreciation and amortization 1.7% 1.7% 2.6%
2.6% Operating income 7.9% 8.7% 1.2% 1.9% Interest expense,
net 0.1% 0.0% 0.1% 0.0% Income before
income taxes 7.8% 8.7% 1.1% 1.9% Income tax expense 3.4%
3.8% 0.4% 0.8% Net income 4.4%
4.9% 0.7% 1.1%
(a) Represents the percentage these costs bear to the related
sales, instead of total sales.
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIESConsolidated Balance Sheets(In thousands,
except per share data)(Unaudited)
October 31,
2015 November 1, 2014 ASSETS Current assets: Cash
and cash equivalents $ 214,281 $ 252,916 Receivables, net 91,383
81,977 Merchandise inventories, net 431,023 340,513 Textbook rental
inventories 83,846 83,245 Prepaid expenses and other current assets
6,304 4,051 Short-term deferred tax assets, net 24,182
24,345 Total current assets 851,019 787,047
Property and equipment: Buildings and leasehold improvements
159,234 145,844 Fixtures and equipment 349,770
325,329 509,004 471,173 Less accumulated depreciation and
amortization 398,055 366,914 Net property and
equipment 110,949 104,259 Goodwill 274,070
274,070 Intangible assets, net 193,113 203,315 Other noncurrent
assets 46,335 36,093 Total assets $ 1,475,486 $
1,404,784 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 475,072 $ 431,189 Accrued
liabilities 137,412 121,973 Total current liabilities
612,484 553,162 Long-term deferred taxes, net 63,739
75,003 Other long-term liabilities 69,585 61,726
Total liabilities 745,808 689,891 Commitments
and contingencies - - Stockholders' Equity: Preferred
membership interests - 384,282 Parent company investment - 330,611
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, 48,219 and 0 shares,
respectively; outstanding, 48,217 and 0 shares, respectively 482 -
Additional paid-in capital 695,816 - Retained earnings 33,401 -
Treasury stock, at cost (21) - Total stockholders'
equity 729,678 714,893 Total liabilities and
stockholders' equity $ 1,475,486 $ 1,404,784
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIESEBITDA (Non-GAAP) Information(In
thousands)(Unaudited)
13 weeks ended 26 weeks ended
October 31, 2015 November 1, 2014 October
31, 2015 November 1, 2014 EBITDA $ 72,682
$ 77,924 $ 37,542 $ 43,962 Subtract:
Depreciation and amortization
13,169 12,508 26,269 25,052
Interest expense, net
554 14 557 19
Income taxes
25,558 28,451 4,233 8,153 Net income $
33,401 $ 36,951 $ 6,483 $ 10,738
Use of Non-GAAP Financial Information
To supplement the Company’s 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 measure of
EBITDA (defined by the Company as earnings before interest, taxes,
depreciation and amortization).
The Company’s management reviews this non-GAAP measure
internally to evaluate the Company’s performance and manage its
operations. The Company believes that the inclusion of EBITDA
results provides investors useful and important information
regarding the Company’s operating results. The non-GAAP measure
included in the Press Release attached hereto as Exhibit 99.1 has
been reconciled to the comparable GAAP measure as required under
Securities and Exchange Commission (the “SEC”) rules regarding the
use of non-GAAP financial measures. The Company urges investors to
carefully review the GAAP financial information included as part of
the Company’s Prospectus dated July 15, 2015 and filed with the SEC
on that date, which includes consolidated financial statements for
each of the three years for the period ended May 2, 2015 (fiscal
2015, fiscal 2014 and fiscal 2013), the quarterly earnings release
for the period ended August 1, 2015 included as part of the
Company's Form 8-K dated September 9, 2015 and filed with the SEC
on that date, and the Company's Quarterly Report on Form 10-Q for
the period ended August 1, 2015 filed with the SEC on September 10,
2015.
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIESEarnings Per Share(In thousands, except
per share data)(Unaudited)
13 weeks ended
26 weeks ended October 31, 2015 November 1,
2014 October 31, 2015 November 1, 2014
Numerator for basic earnings per share: Net income $ 33,401
$ 36,951 $ 6,483 $ 10,738 Accretion of dividends on preferred stock
- (443) - (885) Less allocation of earnings and dividends to
participating securities (22) (944) (26)
(255) Net income available to common shareholders $ 33,379 $
35,564 $ 6,457 $ 9,598
Numerator for diluted earnings per
share: Net income available to common shareholders $ 33,379 $
35,564 $ 6,457 $ 9,598 Accretion of dividends on preferred stock
(a) - - - - Allocation of earnings and dividends to participating
securities 22 944 26 255 Less diluted allocation of earnings and
dividends to participating securities (22) (943)
(26) (255) Net income available to common
shareholders $ 33,379 $ 35,565 $ 6,457 $ 9,598
Denominator for basic earnings per share: Basic weighted
average common shares (b) 48,207 37,505 44,816
37,471
Denominator for diluted earnings per
share: (b) (c) Basic weighted average common shares
48,207 37,505 44,816 37,471 Average dilutive restricted stock units
355 - 178 - Average dilutive options - 39 29
33 Diluted weighted average common shares 48,562
37,544 45,023 37,504
Earnings
per common share: Basic $ 0.69 $ 0.95 $ 0.14 $ 0.26 Diluted $
0.69 $ 0.95 $ 0.14 $ 0.26
(a) Although the Company was in a net income position for all
period presented, the dilutive effect of the accretion of preferred
membership interests for fiscal year 2015 were excluded from the
calculation of earnings per share using the two-class method
because the effect would be antidilutive.
(b) 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 our
Common Stock for every one share of Barnes & Noble common stock
held on the record date for the Spin-Off.
(c) 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 our employees participated
based on the distribution ratio.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151208005887/en/
Barnes & Noble Education,
Inc.Media:Carolyn
Brown, 908-991-2967Vice PresidentCorporate
Communicationscbrown@bned.comorInvestors:Thomas Donohue, 908-991-2966Vice
PresidentTreasurer and Investor Relationstdonohue@bned.com
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