Completed Acquisition of MBS Textbook Exchange,
LLC
For the Full Year, Total Sales Increased 3.7%
while Comparable Stores Sales Decreased 3.0%
Adjusted EBITDA Increased $2.0 Million for the
Full Year for Barnes & Noble College
Barnes & Noble Education, Inc. (NYSE: BNED), one of
the largest contract operators of physical and virtual bookstores
for higher education and K-12 institutions across the United
States, one of the largest textbook wholesalers, and a leading
provider of digital education services, today reported sales and
earnings for the fourth quarter and full year for fiscal 2017.
Fourth quarter 2017 results include 9 weeks of operations from
MBS Textbook Exchange, LLC (“MBS”), which BNED acquired on February
27, 2017. As a result of the consummation of the acquisition, the
Company will now report financial information for two reportable
segments: Barnes & Noble College Booksellers, LLC (“BNC”) and
MBS.
Financial highlights for the fourth quarter and fiscal year
2017:
- Consolidated fourth quarter sales of
$342.8 million increased 16.3%, as compared to the prior year
period; fiscal full year sales of $1,874.4 million increased 3.7%,
as compared to the prior year period.
- Fourth quarter comparable store sales
increased 1.4% for BNC, as compared to the prior year period;
fiscal full year comparable store sales decreased 3.0% for BNC, as
compared to the prior year period, and decreased by 1.8% when
excluding community colleges.
- Consolidated fourth quarter GAAP net
income of $0.2 million, as compared to a net loss of $2.8 million
in the prior year period; full year net income of $5.4 million, as
compared to $0.1 million in the prior year period.
- Consolidated fourth quarter non-GAAP
Adjusted EBITDA of $25.6 million, an increase of $6.8 million, as
compared to the prior year period; full year non-GAAP Adjusted
EBITDA of $78.3 million, a decrease of $2.2 million, as compared to
the prior year period. The Adjusted EBITDA is $82.5 million for the
full fiscal year, an increase of $2.0 million, excluding MBS and
intercompany eliminations.
- BNC fourth quarter non-GAAP Adjusted
EBITDA was $29.8 million, an increase of $11.0 million, as compared
with the prior year period; full year non-GAAP Adjusted EBITDA was
$82.5 million, an increase of $2.0 million, as compared with the
prior year period.
- MBS fourth quarter and full year
non-GAAP Adjusted EBITDA was $(3.6) million.
- Consolidated fourth quarter non-GAAP
Adjusted Earnings of $4.5 million, as compared to Adjusted Earnings
of $3.0 million in the prior year period; full year non-GAAP
Adjusted Earnings of $12.3 million, as compared to $15.5 million in
the prior year period.
Operational highlights for fiscal year 2017:
- BNC opened 38 new stores with estimated
annual sales of $118 million, bringing the total stores operated to
769 locations as of April 30, 2017. The Company currently has
contracts to open 23 new stores with estimated annual sales of $50
million in fiscal 2018.
- Completed the acquisition of MBS
Textbook Exchange, the largest contract operator of virtual
bookstores, one of the largest used college textbook wholesalers,
bookstore system providers and distributors of direct-to-student
course materials in the nation. The acquisition expands the
Company’s addressable market to include higher education
institutions and K-12 schools that need virtual bookstore
solutions, enables BNED to optimize its textbook sourcing and
expands its customer base for digital courseware and analytics.
BNED now operates 1,481 physical and virtual bookstores, including
712 MBS stores, and serves more than 6 million students enrolled in
higher education and K-12 institutions.
- MBS opened 80 virtual stores with
estimated annual sales of $17 million in fiscal 2017 and has
contracts to open 46 virtual stores with estimated annual sales of
$8 million in fiscal 2018.
- Announced partnership with Unizin, a
nonprofit consortium focused on promoting affordability, access,
and student success in digital education, to provide Unizin’s 22
member universities with BNED LoudCloud's predictive analytics
solution, LoudSight.
“In fiscal 2017, we successfully executed upon our strategy to
expand our distribution and content platform. As a result, we
continue to improve our competitive position to deliver value for
shareholders and partners with our comprehensive solution for
education institutions -- flexible physical or virtual store
operations, including our acquisition of MBS; the most robust,
affordable textbook inventory; and a sophisticated learning
management solution comprised of LoudSight learning analytics,
advanced OER courseware, and competency learning solutions,” said
Max J. Roberts, Chief Executive Officer, Barnes & Noble
Education, Inc. “Our complete end-to-end platform makes us the
ideal partner for schools as they seek to meet student success and
close the affordability and accessibility gap for students with
increasingly personalized learning solutions. Our strong market
position continues to be built with new business wins, textbook
sales and rentals, analytic platform adoptions and OER content
adoptions. Existing and prospective customers alike are responding
positively to our enhanced offerings, and we expect new store
contracts and digital business wins to make important contributions
as we continue to navigate challenging near-term enrollment trends
in an increasingly competitive market.”
Consolidated fourth quarter sales of $342.8 million increased
$48.0 million, or 16.3%, as compared to the prior year period. The
Company reported consolidated net income of $0.2 million.
Fiscal full year consolidated sales were $1,874.4 million, an
increase of $66.4 million, or 3.7%, as compared to the prior year
period. The Company reported consolidated net income of $5.4
million, which includes transaction costs of $9.6 million and
restructuring costs of $1.8 million. Non-GAAP Adjusted Earnings
were $12.3 million compared to $15.5 million for the prior year
period.
Comparable store sales increased 1.4% for BNC for the quarter.
As disclosed in the Company’s third quarter fiscal 2017 earnings
release, the Spring Rush period extended into the fourth quarter
due to later school openings and a continued pattern of students
buying course materials later in the semester.
Comparable store sales decreased 3.0% for BNC for fiscal year
2017, driven by the enrollment declines at community colleges,
increased consumer purchases directly with publishers and other
online providers, and overall unfavorable retail trends. The 3.0%
decline in comparable store sales was approximately $50.6 million
of sales for BNC, of which $27.4 million is attributable to
two-year community colleges. Comparable store sales excluding
two-year community colleges decreased by 1.8% year to date.
BNC opened 38 new stores with estimated annual sales of $118
million in fiscal 2017, bringing the total stores operated by BNC
to 769 locations as of April 29, 2017.
MBS sales for the two months following the acquisition, a
seasonally low period, were $34.1 million, with approximately $14.1
million for Wholesale sales and $20.0 million for Direct sales.
The Company’s non-GAAP Adjusted EBITDA was $25.6 million for the
quarter, as compared to $18.8 million in the prior year period, due
primarily to increased sales and expense leveraging. The Company’s
non-GAAP Adjusted EBITDA was $78.3 million for the full year as
compared with $80.5 million in the prior year period.
Fourth quarter consolidated net income was $0.2 million, or $0.0
per diluted share, compared to net loss of $(2.8) million, or
$(0.06) per diluted share, in the prior year period. The current
year’s fiscal fourth quarter has 46.9 million diluted shares
outstanding, while the prior year period had 47.2 million diluted
shares outstanding. The Company reported non-GAAP Adjusted Earnings
of $4.5 million during the quarter, compared with non-GAAP Adjusted
Earnings of $3.0 million in the prior year period.
Outlook
For fiscal year 2018, the Company expects sales at BNC to be
relatively flat, while BNC comparable store sales are projected to
decline in the low- to mid-single digit percentage point range year
over year. In addition, the Company expects consolidated sales to
be in the range of $2.25 billion to $2.35 billion before
intercompany eliminations. Capital expenditures are expected
to be approximately $50 million, an increase from fiscal 2017 due
to new store growth at BNC.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 10:00 a.m. Eastern Time on Wednesday,
July 12, 2017 and can be accessed at the Barnes & Noble
Education, Inc. corporate website at www.bned.com.
Barnes & Noble Education, Inc. expects to report fiscal 2018
first quarter results on or about September 6, 2017.
About Barnes & Noble Education, Inc.
Barnes & Noble Education, Inc. (NYSE: BNED), one of the
largest contract operators of physical and virtual bookstores for
higher education and K-12 institutions across the United States,
one of the largest textbook wholesalers, and a leading provider of
digital education services, enhances the academic and social
purpose of educational institutions. Through its Barnes & Noble
College and MBS subsidiaries, Barnes & Noble Education operates
1,481 physical and virtual bookstores and serves more than 6
million students, delivering essential educational content and
tools within a dynamic retail environment. Through LoudCloud, its
digital education platform, Barnes & Noble Education offers a
suite of digital software, content and services that include
predictive analytics, OER courseware, competency-based solutions
and a learning management system. Barnes & Noble Education acts
as a strategic partner to drive student success; provide value and
support to students and faculty; and create loyalty and improve
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 us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us
or our management, identify forward-looking statements. Moreover,
we operate in a very competitive and rapidly changing environment.
New risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our 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
we 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 our current
views with respect to future events, the outcome of which is
subject to certain risks, including, among others: general
competitive conditions, including actions our 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 physical and/or online bookstore
operations or change the operation of their bookstores; the general
economic environment and consumer spending patterns; decreased
consumer demand for our products, low growth or declining sales;
our ability to continue to successfully integrate the operations of
MBS Textbook Exchange, LLC into our Company, while facing
competition from not only physical bookstore operations but also
virtual solutions; the strategic objectives, anticipated synergies,
and/or other expected potential benefits of the MBS Textbook
Exchange, LLC acquisition may not be fully realized or may take
longer than expected; the integration of MBS Textbook Exchange,
LLC’s operations into our own may also increase the risk of our
internal controls being found ineffective; risks associated with
operation or performance of MBS Textbook Exchange, LLC’s
point-of-sales systems that are sold to college bookstore
customers; implementation of our digital strategy may not result in
the expected growth in our digital sales and/or profitability; risk
that digital sales growth does not exceed the rate of investment
spend; the performance of our online, digital and other
initiatives, integration of and deployment of, additional products
and services, and enhancements higher education digital products,
and the inability to achieve the expected cost savings; our ability
to successfully implement our strategic initiatives including our
ability to identify, compete for and execute upon additional
acquisitions and strategic investments; technological changes;
risks associated with counterfeit and piracy of digital and print
materials; our international operations could result in additional
risks; our ability to attract and retain employees; changes to
purchase or rental general terms, payment terms, return policies,
the discount or margin on products or other terms with our
suppliers; risks associated with data privacy, information security
and intellectual property; trends and challenges to our business
and in the locations in which we have stores; non-renewal of
managed bookstore, physical and/or online store contracts and
higher-than-anticipated store closings; disruptions to our
information technology systems, infrastructure and data due to
computer malware, viruses, hacking and phishing attacks, resulting
in harm to our business and results of operations; disruption of or
interference with third party web service providers and our own
proprietary technology; work stoppages or increases in labor costs;
the risk of price reduction or change in format of course materials
by publishers, which could negatively impact revenues and margin;
possible increases in shipping rates or interruptions in shipping
service, obsolete or excessive inventory; product shortages,
including risks associated with merchandise sourced indirectly from
outside the United States; changes in law or regulation; enactment
of laws which may restrict or prohibit our use of emails or similar
marketing activities; the amount of our indebtedness and ability to
comply with covenants applicable to any future debt financing; our
ability to satisfy future capital and liquidity requirements; our
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; and the other risks and
uncertainties detailed in the section titled “Risk Factors” in Part
I - Item 1A of the Form 10-K for the 52 weeks ended April 29, 2017,
which is expected to be filed on or about July 12, 2017. 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 us or persons
acting on our behalf are expressly qualified in their entirety by
the cautionary statements in this paragraph. We undertake 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 August 2, 2015, we completed the legal separation from
Barnes & Noble, Inc., at which time we began to operate as an
independent publicly-traded company.
For the results of operations for the 13
weeks ended August 1, 2015 (first quarter of fiscal 2016), our
consolidated financial statements are presented on a stand-alone
basis since we were still part of Barnes & Noble, Inc. until
the consummation of the Spin-Off on August 2, 2015, and the results
of operations for the 39 weeks ended April 30, 2016 (remainder of
fiscal 2016) in our consolidated financial statements are presented
on a consolidated basis as we became a separate consolidated
entity.
For fiscal 2017, the results of operations for the entire 52
weeks ended April 29, 2017 reflected in our consolidated financial
statements are presented on a consolidated basis. On
February 27, 2017, we acquired MBS Textbook Exchange, LLC ("MBS").
The consolidated financial statements for the 13 weeks and 52 weeks
ended April 29, 2017 include the financial results of MBS from the
acquisition date, February 27, 2017, to April 29, 2017. Subsequent
to the acquisition, the consolidated financial statements include
the accounts of MBS and all material intercompany accounts and
transactions have been eliminated in consolidation. For additional
information on MBS acquisition, see Form 8-K filed on February 28,
2017 and Form 8K/A pro forma information filed on May 8, 2017.
Additionally, effective with the MBS
acquisition, we determined that we have two reportable segments:
Barnes & Noble College Booksellers, LLC ("BNC") and MBS,
whereas BNC was previously our only reportable segment prior the
acquisition.
- BNC operates 769 physical campus
bookstores, the majority of which also have school-branded
e-commerce sites operated by BNC, and BNC also includes our digital
operations.
- MBS operates 712 virtual bookstores and
is the largest contract operator of virtual bookstores for college
and university campuses, and private/parochial K-12 schools. MBS is
also one of the largest textbook wholesalers in the country. MBS's
wholesale business centrally sources and sells new and used
textbooks to more than 3,700 physical college bookstores, including
BNC’s 769 campus bookstores.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Statements of
Operations
(In thousands, except per share
data)
(Unaudited)
13 weeks ended 52 weeks ended April 29, 2017
April 30, 2016 April 29, 2017 April 30, 2016 Sales:
Product sales and other $ 266,124 $ 219,769 $ 1,638,934 $ 1,579,617
Rental income 76,706 74,990 235,428 228,412
Total sales 342,830 294,759 1,874,362
1,808,029 Cost of sales: Product and other cost of sales 181,692
151,636 1,280,374 1,224,955 Rental cost of sales 38,627
37,079 136,625 129,725 Total cost of sales 220,319
188,715 1,416,999 1,354,680 Gross profit
122,511 106,044 457,363 453,349 Selling and
administrative expenses 96,924 87,264 379,095 372,821 Depreciation
and amortization 14,261 13,340 53,318 52,690 Transaction costs
6,967 1,596 9,605 2,398 Restructuring costs (a) — 8,056 1,790 8,830
Impairment loss (non-cash) (a) — — — 11,987
Operating income (loss) 4,359 (4,212 ) 13,555 4,623 Interest
expense, net 1,489 604 3,464 1,872 Income
(loss) before income taxes 2,870 (4,816 ) 10,091 2,751 Income tax
expense (benefit) 2,643 (2,020 ) 4,730 2,667 Net
income (loss) $ 227 $ (2,796 ) $ 5,361 $ 84
Earnings (Loss) per common share: Basic $ — $ (0.06 ) $ 0.12 $ —
Diluted $ — $ (0.06 ) $ 0.11 $ — Weighted average common shares
outstanding: Basic 46,472 47,230 46,317 46,238 Diluted 46,903
47,230 46,763 46,479 (a) For additional information, see
Note (a) in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended 52 weeks ended April 29, 2017
April 30, 2016 April 29, 2017 April 30, 2016
Percentage
of sales: Sales: Product sales and other 77.6 % 74.6 % 87.4 %
87.4 % Rental income 22.4 % 25.4 % 12.6 % 12.6 % Total sales 100.0
% 100.0 % 100.0 % 100.0 % Cost of sales: Product and other cost of
sales (a) 68.3 % 69.0 % 78.1 % 77.5 % Rental cost of sales (a) 50.4
% 49.4 % 58.0 % 56.8 % Total cost of sales 64.3 % 64.0 % 75.6 %
74.9 % Gross profit 35.7 % 36.0 % 24.4 % 25.1 % Selling and
administrative expenses 28.3 % 29.6 % 20.2 % 20.6 % Depreciation
and amortization 4.2 % 4.5 % 2.8 % 2.9 % Transaction costs 2.0 %
0.5 % 0.5 % 0.1 %
Restructuring costs
— % 2.7 % 0.1 % 0.5 % Impairment loss (non-cash) — % — % — % 0.7 %
Operating income (loss) 1.3 % (1.4 )% 0.7 % 0.2 % Interest expense,
net 0.4 % 0.2 % 0.2 % 0.1 % Income (loss) before income taxes 0.8 %
(1.6 )% 0.5 % 0.1 % Income tax expense (benefit) 0.8 % (0.7 )% 0.2
% 0.1 % Net income (loss) — % (0.9 )% 0.3 % — % (a)
Represents the percentage these costs bear to the related sales,
instead of total sales.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share
data)
(Unaudited)
April 29, 2017 April 30, 2016 ASSETS Current
assets: Cash and cash equivalents $ 19,003 $ 28,568 Receivables,
net 86,040 50,924 Merchandise inventories, net 434,064 312,747
Textbook rental inventories 52,826 47,760 Prepaid expenses and
other current assets 10,698 6,453 Total current
assets 602,631 446,452 Property and equipment,
net 116,613 111,185 Goodwill 329,467 280,911 Intangible assets, net
209,885 199,663 Other noncurrent assets 41,236 33,472
Total assets $ 1,299,832 $ 1,071,683 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $
192,742 $ 152,175 Accrued liabilities 120,478 105,877 Short-term
borrowings 100,000 — Total current liabilities
413,220 258,052 Long-term deferred taxes, net 16,871
29,865 Other long-term liabilities 96,433 75,380 Long-term
borrowings 59,600 — Total liabilities 586,124
363,297 Commitments and contingencies — —
Stockholders' equity: Parent company investment — —
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, 49,372 and 48,645 shares,
respectively; outstanding, 46,517 and 46,755 shares,
respectively
494 486 Additional paid-in-capital 708,871 699,513 Retained
earnings 32,363 27,002 Treasury stock, at cost (28,020 ) (18,615 )
Total stockholders' equity 713,708 708,386 Total
liabilities and stockholders' equity $ 1,299,832 $ 1,071,683
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Earnings Per Share
(In thousands, except per share
data)
(Unaudited)
13 weeks ended 52 weeks ended April 29, 2017
April 30, 2016 April 29, 2017 April 30, 2016
Numerator for basic earnings per share: Net income (loss) $
227 $ (2,796 ) $ 5,361 $ 84 Less allocation of earnings to
participating securities — — (3 ) — Net income (loss)
available to common shareholders $ 227 $ (2,796 ) $ 5,358
$ 84
Numerator for diluted earnings per share:
Net income (loss) available to common shareholders $ 227 $ (2,796 )
$ 5,358 $ 84 Allocation of earnings to participating securities — —
3 — Less diluted allocation of earnings to participating securities
— — (3 ) — Net income (loss) available to common
shareholders $ 227 $ (2,796 ) $ 5,358 $ 84
Denominator for basic earnings (loss) per share: Basic
weighted average common shares (a) 46,472 47,230
46,317 46,238
Denominator for diluted earnings
(loss) per share: (a)(b) Basic weighted average common
shares 46,472 47,230 46,317 46,238 Average dilutive restricted
stock units 366 — 389 227 Average dilutive performance shares 59 —
40 — Average dilutive restricted shares 6 — 17 — Average dilutive
options — — — 14 Diluted weighted average
common shares 46,903 47,230 46,763 46,479
Earnings (loss) per common share: Basic $ — $
(0.06 ) $ 0.12 $ — Diluted $ — $ (0.06 ) $ 0.11
$ —
(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 our 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 our
employees participated based on the distribution ratio.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
(In thousands)
(Unaudited)
Segment
Information (a) 13 weeks ended 52 weeks ended April 29,
2017 April 30, 2016 April 29, 2017 April 30, 2016
Sales BNC $ 314,029 $ 294,759 $ 1,845,561 $ 1,808,029 MBS (a)
34,091 — 34,091 — Elimination (5,290 ) — (5,290 ) — Total $
342,830 $ 294,759 $ 1,874,362 $ 1,808,029
Gross profit BNC $ 118,400 $ 106,044 $ 453,252 $ 453,349 MBS
(a) 4,748 — 4,748 — Elimination (637 ) — (637 ) — Total $
122,511 $ 106,044 $ 457,363 $ 453,349
Selling and administrative expenses BNC $ 88,607 $ 87,264 $ 370,778
$ 372,821 MBS (a) 8,317 — 8,317 — Total $
96,924 $ 87,264 $ 379,095 $ 372,821
Adjusted EBITDA
BNC $ 29,793 $ 18,780 $ 82,474 $ 80,528 MBS (a) (3,569 ) — (3,569 )
— Elimination (637 ) — (637 ) — Total $ 25,587 $
18,780 $ 78,268 $ 80,528 (a) On February 27,
2017, we acquired MBS Textbook Exchange, LLC ("MBS"). The
consolidated financial statements for the 13 weeks and 52 weeks
ended April 29, 2017 include the financial results of MBS from the
acquisition date (February 27, 2017) to April 29, 2017.
Additionally, effective with the acquisition, we determined that we
have two reportable segments: Barnes & Noble College
Booksellers, LLC ("BNC") and MBS, whereas BNC was previously our
only reportable segment prior the acquisition. For more
information, see Explanatory Note.
Percentage of Segment Sales 13 weeks ended 52 weeks ended
April 29, 2017 April 30, 2016 April 29, 2017 April
30, 2016 Gross margin BNC 37.7 % 36.0 % 24.6 % 25.1 % MBS (a) 13.9
% — % 13.9 % — % Elimination 12.0 % — % 12.0 % — % Total gross
margin 35.7 % 36.0 % 24.4 % 25.1 % Selling and
administrative expenses BNC 28.2 % 29.6 % 20.1 % 20.6 % MBS (a)
24.4 % — % 24.4 % — % Total selling and administrative expenses
28.3 % 29.6 % 20.2 % 20.6 %
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings 13 weeks ended
52 weeks ended April 29, 2017 April 30, 2016 April 29, 2017
April 30, 2016 Net income (loss) $ 227 $ (2,796 ) $ 5,361 $
84 Reconciling items, after-tax (below) 4,272 5,818
6,986 15,378 Adjusted Earnings (Non-GAAP) $ 4,499 $
3,022 $ 12,347 $ 15,462 Reconciling items,
pre-tax Transaction costs (a) $ 6,967 $ 1,596 $ 9,605 $ 2,398
Restructuring costs (b) — 8,056 1,790 8,830 Impairment loss
(non-cash) (b) — — — 11,987 Reconciling items,
pre-tax 6,967 9,652 11,395 23,215 Less: Pro forma income tax impact
(c) 2,695 3,834 4,409 7,837 Reconciling items,
after-tax $ 4,272 $ 5,818 $ 6,986 $ 15,378
Adjusted EBITDA 13 weeks ended 52 weeks ended
April 29, 2017 April 30, 2016 April 29, 2017 April 30, 2016 Net
income (loss) $ 227 $ (2,796 ) $ 5,361 $ 84 Add: Depreciation and
amortization expense 14,261 13,340 53,318 52,690 Interest expense,
net 1,489 604 3,464 1,872 Income tax expense (benefit) 2,643 (2,020
) 4,730 2,667 Transaction costs (a) 6,967 1,596 9,605 2,398
Restructuring costs (b) — 8,056 1,790 8,830 Impairment loss
(non-cash) (b) — — — 11,987 Adjusted EBITDA
(Non-GAAP) $ 25,587 $ 18,780 $ 78,268 $ 80,528
(a) Transaction costs are costs incurred for business
development and acquisitions. (b) In fiscal 2016, we
implemented a plan to restructure our digital operations. As a
result of this restructuring, we recorded a non-cash impairment
loss of $12 million related to all of the capitalized content costs
for the Yuzu® eTextbook platform ($9 million), and recorded a
non-recurring other than temporary loss related to an investment
held at cost ($3 million). Additionally, we announced a
reduction in staff and closure of the facilities in Mountain View,
California, and Redmond, Washington that support the Yuzu®
eTextbook platform. The cost of severance, retention, and other
restructuring costs (i.e. subleasing facilities) of $8.8 million
and $1.8 million in fiscal 2016 and fiscal 2017, respectively. The
restructuring was completed in fiscal 2017. (c) Represents
the income tax effects of the non-GAAP items.
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 29, 2017 and expected to be
filed with the SEC on July 12, 2017, which includes consolidated
financial statements for each of the three years for the period
ended April 29, 2017 (fiscal 2017, fiscal 2016, and fiscal 2015),
the Company's Quarterly Report on Form 10-Q for the period ended
July 30, 2016 filed with the SEC on September 8, 2016, the
Company's Quarterly Report on Form 10-Q for the period ended
October 29, 2016 filed with the SEC on December 6, 2016, and the
Company's Quarterly Report on Form 10-Q for the period ended
January 28, 2017 filed with the SEC on February 28, 2017.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Sales Information
(In millions)
(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 52 week periods of April 29, 2017 are as follows:
13 weeks ended 52 weeks ended MBS Sales (a)
Wholesale $ 14.1 $ 14.1 Direct 20.0 20.0 MBS total
sales subtotal: $ 34.1 $ 34.1 BNC Sales New stores (b) $ 16.8 $
109.5 Closed stores (b) (3.2 ) (23.8 ) Comparable stores (c) 2.9
(50.6 ) Textbook rental deferral 0.5 0.6 Service revenue (d) 2.5
5.8 Other (e) (0.2 ) (4.0 ) BNC total sales subtotal: $ 19.3 $ 37.5
Eliminations (f) $ (5.3 ) $ (5.3 ) Total sales variance $ 48.1
$ 66.3 (a) Represents sales for MBS from the
acquisition date, February 27, 2017, to April 29, 2017. Our retail
business (BNC and MBS Direct) is highly seasonal, with sales
generally highest in the second and third fiscal quarters, when
college students generally purchase textbooks for the upcoming
semesters, and lowest in the first and fourth fiscal quarters.
Sales attributable to our MBS wholesale business are generally
highest in our first, second and third quarter, as it sells
textbooks for retail distribution, which somewhat offsets the
decreased first quarter sales attributable to our retail business.
(b) We added 38 new stores and closed 20 stores during the 52 weeks
ended April 29, 2017, ending the period with a total of 769 stores.
(c) See below. (d) Service revenue includes Promoversity,
LoudCloud, brand partnerships, shipping and handling and revenue
from other programs. (e) Other includes certain adjusting items
related to return reserves and other deferred items. (f) Eliminate
MBS sales to BNED and BNED commissions earned from MBS.
Comparable Sales - Barnes & Noble
College
Comparable store sales variances by
category for the 13 and 52 week periods are as follows:
13 weeks ended 52 weeks ended April 29, 2017
April 30, 2016 April 29, 2017 April 30, 2016 Textbooks $ 2.9
3.6 % $ 5.4 7.4 % $ (46.1 ) (4.0 )% $ (43.9 )
(3.8 )% General Merchandise 0.6 0.5 % 3.5 2.9 % (0.7 ) (0.1
)% 13.3 2.6 % Trade Books (0.5 ) (4.1 )% 0.5 4.6 % (3.2 ) (5.8 )%
1.0 1.8 % Other (0.1 ) (94.4 )% (0.2 ) (72.5 )% (0.6 ) (88.9 )%
(2.1 ) (73.2 )% Total Comparable Store Sales $ 2.9 1.4 % $
9.2 4.5 % $ (50.6 ) (3.0 )% $ (31.7 ) (1.9 )%
Effective for the first quarter of Fiscal 2017, comparable store
sales includes sales from stores that have been open for an entire
fiscal year period, does not include sales from closed stores for
all periods presented, and digital agency sales are included on a
gross basis. We believe the current comparable store sales
calculation method better reflects the manner in which management
views comparable sales, as well as the seasonal nature of our
business. For Fiscal 2016, comparable store sales included sales
from stores that were open for at least 15 months, excluded sales
from closed stores for all periods presented, and included digital
agency sales on a net basis.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
MBS Historical Sales
Information
(Unaudited)
MBS Historical Sales Trend by
Quarter
Q1
Q2
Q3
Q4
Total
MBS Sales Wholesale 43 % 16 % 32 % 9 % 100 % Direct 25 % 39
% 21 % 15 % 100 % Total 35 % 26 % 28 % 11 % 100 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170712005318/en/
Barnes & Noble Education, Inc.Media:Carolyn J. Brown, 908-991-2967Vice
PresidentCorporate Communicationscbrown@bned.comorInvestors:Thomas Donohue, 908-991-2966Vice
PresidentTreasurer and Investor Relationstdonohue@bned.com
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