Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the fourth quarter and fiscal year
2020. The fourth quarter and full year ended May 2, 2020, consisted
of 14 weeks and 53 weeks, respectively, as compared to 13 weeks and
52 weeks in the prior year. Comparable sales data in this release
exclude the impact of the additional week in fiscal year 2020.
The COVID-19 pandemic had a significant negative impact on the
Company’s results for the fourth quarter and full year of fiscal
year 2020. Beginning in early March 2020, BNED’s sales and
profitability began to decline rapidly as the Company began to
close its stores for the safety of its employees, customers and the
communities it serves. The Company also took immediate expense
reduction actions to mitigate the impact of closed stores and to
preserve liquidity. While its campus stores were closed, the
Company continued to serve institutions and students through its
campus websites. Additional information regarding the Company’s
actions in response to COVID-19 can be found in the COVID-19
section below, as well as the Company’s 10-K filing for fiscal year
2020.
Financial results for the fourth quarter and fiscal year
2020:
- Consolidated fourth quarter sales of $256.9 million decreased
23.2% as compared to the prior year period; fiscal year 2020
consolidated sales of $1,851.1 million decreased 9.0% as compared
to the prior year.
- Consolidated fourth quarter GAAP net loss was $(40.3) million,
compared to a net loss of $(46.2) million in the prior year period.
Consolidated fiscal year 2020 GAAP net loss was $(38.3) million,
compared to a net loss of $(24.4) million in the prior year.
- Consolidated fourth quarter non-GAAP Adjusted EBITDA loss was
$(20.7) million, compared to non-GAAP Adjusted EBITDA of $19.7
million in the prior year; fiscal year 2020 consolidated non-GAAP
Adjusted EBITDA was $42.2 million, compared to non-GAAP Adjusted
EBITDA of $104.9 million in the prior year.
- Consolidated fourth quarter non-GAAP Adjusted Earnings was
$(28.1) million, compared to non-GAAP Adjusted Earnings of $0.5
million in the prior year period; fiscal year 2020 consolidated
non-GAAP Adjusted Earnings was $(21.1) million, compared to
non-GAAP Adjusted Earnings of $25.4 million in the prior year.
Operational highlights for the fiscal year 2020:
- Progressed on the execution of a number of strategic
initiatives; all of which remained on target prior to the onset of
the COVID-19 pandemic, which has accelerated the demand and need to
scale such key initiatives.
- Continued to drive subscriptions for the Company’s bartleby®
suite of solutions, gaining more than 170,000 subscribers in fiscal
year 2020, representing over 200% growth over fiscal year 2019 new
subscribers.
- Achieved a six-fold increase in fiscal year 2020 bartleby
revenue versus prior year; bartleby peak Spring traffic increased
over 10x year-over-year and almost 3x versus peak Fall
traffic.
- Completed initial build of the Company’s next generation
eCommerce platform; recently executed selective launch with
expected further roll-out throughout fiscal year 2021 to grow
increased high-margin general merchandise sales.
- Continued to grow the BNC First Day® inclusive access programs,
with revenue increasing 91% year-over-year.
- Increased adoption of BNC First Day Complete, with eleven
campus partners utilizing the complete access model in the upcoming
Fall Term 2020, increasing from four in fiscal year 2020.
- Continued to win new business for both physical and virtual
bookstores, including the University of Nevada, Reno, Western
Kentucky University, Front Range Community College and The City
Colleges of Chicago.
- Provided valuable solutions to schools to help mitigate the
COVID-19 on-campus learning disruption utilizing BNED’s virtual
store offerings and course material fulfillment capabilities, its
BNC First Day offering, and its digital bartleby offerings to help
students continue to perform while studying remotely.
“As we entered the fourth quarter of fiscal year 2020, we had
achieved significant positive progress and market momentum on each
of our key strategic initiatives: winning new business to increase
our scale; First Day and First Day Complete inclusive access
courseware models; the imminent release of our new eCommerce
platform to grow general merchandise sales; and the increased
awareness and growth of bartleby, our digital self-study platform.
Beginning in the middle of the fourth quarter, COVID-19 blindsided
our nation and brought with it profound and unprecedented
challenges for our higher education partners. Campuses were forced
to close, and students and faculty transitioned to online learning
mid-semester to complete their coursework. In light of these
extraordinary challenges, we adapted our assets and offerings
rapidly to respond,” said Michael P. Huseby, CEO and Chairman,
BNED. “BNED was able to pivot quickly as a result of the unique
strengths of our different businesses, which are all working
together to ensure that our customers receive seamless,
uninterrupted service as we fight the challenges this pandemic has
presented.”
“The strategic decisions and related investments we have made in
our general merchandise business, eCommerce platform, virtual
fulfillment capabilities and digital solutions, have allowed us to
offer customized and increasingly valuable solutions during a
period of significant disruption to the traditional learning
model,” continued Mr. Huseby. “Our innovative and new solutions to
serve schools and students, coupled with our significantly reduced
and more flexible cost structure, provide us with the competitive
platform necessary to adapt and lead the profound and accelerated
change accompanying COVID-19, and to manage our liquidity to
weather this crisis of uncertainty. I am extremely proud of both
our people and the institutions we serve, who are working together
more closely than ever to continue to deliver the highest possible
education experience to our students.”
Fourth Quarter and Fiscal Year Results for 2020
Results for the 14 weeks and 53 weeks of fiscal year 2020 and
the 13 weeks and 52 weeks of fiscal year 2019 are as follows:
$ in millions
Selected Data (unaudited)
14
Weeks Q4 2020
13
Weeks Q4 2019
53
Weeks 2020
52
Weeks 2019
Total Sales
$256.9
$334.4
$1,851.1
$2,034.6
Net Loss
$(40.3)
$(46.2)
$(38.3)
$(24.4)
Non-GAAP(1)
Adjusted EBITDA
$(20.7)
$19.7
$42.2
$104.9
Adjusted Earnings
$(28.1)
$0.5
$(21.1)
$25.4
(1) 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.
The Company has three reportable segments: Retail, Wholesale and
Digital Student Solutions (DSS). Unallocated shared-service costs,
which include various corporate level expenses and other governance
functions, continue to be presented as Corporate Services. All
material intercompany accounts and transactions have been
eliminated in consolidation.
Retail Segment Results
Retail sales were $238.5 million for the quarter, declining
$81.4 million, or 25.4%, as compared to the prior year period, with
comparable store sales decreasing 34.7%. Retail non-GAAP Adjusted
EBITDA was $(13.0) million for the quarter, compared to $29.1
million in the prior year period. The decrease in sales and
non-GAAP Adjusted EBITDA are primarily attributable to the COVID-19
related store closures that occurred beginning in March. Although
the Spring rush sales period had already passed, the Company’s
high-margin general merchandise business was significantly impacted
by campus store closures and cancelled events, including NCAA
sports tournaments and graduation season.
Fiscal year 2020 retail sales were $1,712.9 million, declining
$176.1 million, or 9.3%, as compared to the prior year period, with
comparable store sales decreasing 9.9%. Retail non-GAAP Adjusted
EBITDA was $36.2 million for fiscal year 2020, compared to $89.1
million in the prior year period. The sales and non-GAAP Adjusted
EBITDA decline are due to lower textbook sales trends that began
earlier in the year, coupled with the impact of lower high-margin
general merchandise sales during the fourth quarter, somewhat
mitigated by the company cost reduction actions discussed in
further detail below.
Wholesale Segment Results
Wholesale fourth quarter sales of $18.8 million increased $4.7
million, or 33.7%, as compared to the prior year period. Wholesale
sales for fiscal year 2020 of $198.4 million decreased $25.0
million, or 11.2%, as compared to the prior year period, primarily
due to lower textbook sales in the retail segment.
Wholesale non-GAAP Adjusted EBITDA for the quarter was $(6.5)
million, compared to $(5.3) million in the prior year period.
Wholesale non-GAAP Adjusted EBITDA for fiscal year 2020 was $21.6
million, compared to $35.0 million in the prior year period,
primarily due to lower sales.
DSS Segment Results
DSS fourth quarter sales of $6.6 million increased $1.1 million,
or 20.9%, as compared to the prior year period. DSS fiscal year
2020 sales of $23.7 million increased $2.3 million, or 10.9%, as
compared to the prior year period.
DSS non-GAAP Adjusted EBITDA was $0.9 million for the quarter,
compared to $0.5 million in the prior year period. DSS non-GAAP
Adjusted EBITDA was $3.4 million for fiscal year 2020, compared to
$6.2 million in the prior year period. The non-GAAP Adjusted EBITDA
decrease was primarily due to increased selling and administrative
costs related to continued investments in the Company’s bartleby
digital product offerings.
Other
Selling and administrative expenses for Corporate Services,
which includes unallocated shared-service costs, such as various
corporate level expenses and other governance functions, were $3.6
million for the quarter, compared to $7.2 million in the prior
period. Selling and administrative expenses for Corporate Services
for fiscal year 2020 were $19.4 million, compared to $24.9 million
in the prior year period.
Intercompany gross margin eliminations of $1.4 million for the
quarter were reflected in non-GAAP Adjusted EBITDA, compared to
$2.5 million in the prior year period. Intercompany gross margin
eliminations of $0.4 million for fiscal year 2020 were reflected in
non-GAAP Adjusted EBITDA, compared to $(0.5) million in the prior
year period.
COVID-19 Impact and Update
To mitigate the impact of the COVID-19 related campus store
closures, the Company took a number of actions throughout the
fourth quarter to reduce expenses and preserve liquidity, including
furloughing the majority of its Retail workforce, reducing expenses
and capital expenditures, eliminating the 401-K match through the
calendar year, and deferring all non-essential spending. As a
result, management currently believes that the Company’s financial
resources, including ongoing access to its credit facility, provide
sufficient liquidity to alleviate any near-term need to obtain
additional financing to support its business operations.
To prepare for the safe reopening of its campus stores, BNED has
developed a comprehensive reentry program that incorporates social
distancing guidelines from the CDC and the WHO to best promote the
safety and well-being of staff and customers at each of its campus
store locations. This includes frequent sanitizing of high-touch
surfaces, implementing social distancing measures, including
reduced occupancy, and incorporating other preventive measures,
such as sneeze guards, contactless payment, and curbside pickup
areas. BNED is reopening its campus stores based on national, state
and local guidelines, in partnership with school administrations
and the protocols they implement.
Most importantly, as different schools consider the alternatives
between on-campus classes, remote learning or the implementation of
a hybrid model, BNED is well prepared to provide valuable solutions
and service their students through its campus bookstores, virtual
bookstores, individual school websites and digital offerings to
ensure students are well equipped to continue their learning
journey, whichever course it may take.
Strategic Review Update
The Board of Directors, with the assistance of its financial and
legal advisors, continues with its previously announced review of
strategic opportunities. As previously disclosed, the Board’s
review is designed to accelerate the execution of customer-focused
strategic initiatives and enhance value for BNED shareholders,
including, but not limited to, continued execution of the Company’s
current business plan, new partnerships, joint ventures and other
potential opportunities. There can be no assurance that the review
will result in a transaction or announcement of any kind. The
Company has not set a timetable for the conclusion of the review
and does not intend to comment further unless and until the Board
has approved a specific course of action or otherwise determined
that further disclosure is appropriate or required by law.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 10:00 a.m. Eastern Time on Tuesday,
July 14, 2020 and can be accessed at the BNED corporate website at
www.bned.com.
Barnes & Noble Education expects to report fiscal year 2021
first quarter results on or about September 4, 2020.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a
leading solutions provider for the education industry, driving
affordability, access and achievement at hundreds of academic
institutions nationwide and ensuring millions of students are
equipped for success in the classroom and beyond. Through its
family of brands, BNED offers campus retail services and academic
solutions, a digital direct-to-student learning ecosystem,
wholesale capabilities and more. BNED is a company serving all who
work to elevate their lives through education, supporting students,
faculty and institutions as they make tomorrow a better, more
inclusive and smarter world. For more information, visit
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, including any statements made in regards to our
response to the COVID-19 pandemic. 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: risks
associated with COVID-19 and the governmental responses to it,
including its impacts across our businesses on demand and
operations, as well as on the operations of our suppliers and other
business partners, and the effectiveness of our actions taken in
response to these risks; general competitive conditions, including
actions our competitors and content providers 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;
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 including new digital channels, and enhancements to
higher education digital products, and the inability to achieve the
expected cost savings; the risk of price reduction or change in
format of course materials by publishers, which could negatively
impact revenues and margin; the general economic environment and
consumer spending patterns; decreased consumer demand for our
products, low growth or declining sales; the strategic objectives,
successful integration, anticipated synergies, and/or other
expected potential benefits of various acquisitions may not be
fully realized or may take longer than expected; the integration of
the operations of various acquisitions into our own may also
increase the risk of our internal controls being found ineffective;
changes to purchase or rental terms, payment terms, return
policies, the discount or margin on products or other terms with
our suppliers; our ability to successfully implement our strategic
initiatives including our ability to identify, compete for and
execute upon additional acquisitions and strategic investments;
risks associated with operation or performance of MBS Textbook
Exchange, LLC’s point-of-sales systems that are sold to college
bookstore customers; 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; 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; possible increases in
shipping rates or interruptions in shipping service; product
shortages, including decreases in the used textbook inventory
supply associated with the implementation of publishers’ digital
offerings and direct to student textbook consignment rental
programs, as well as the risks associated with the impacts that
public health crises may have on the ability of our suppliers to
manufacture or source products, particularly from outside of the
United States; changes in domestic and international laws or
regulations, including U.S. tax reform, changes in tax rates, laws
and regulations, as well as related guidance; enactment of laws or
changes in enforcement practices which may restrict or prohibit our
use of texts, emails, interest based online advertising, recurring
billing or similar marketing and sales 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, 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
in our Annual Report on Form 10-K for the year ended May 2, 2020.
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
Basis of Consolidation and Segments
The results of operations for the fourth quarter and full-year
ended May 2, 2020 consisted of 14 weeks and 53 weeks, respectively,
as compared to 13 weeks and 52 weeks in the prior year. Comparable
sales data in this release exclude the impact of the additional
week. We have three reportable segments: Retail, Wholesale and DSS
as follows:
• The Retail Segment operates 1,419 college, university, and
K-12 school bookstores, comprised of 772 physical bookstores and
647 virtual bookstores. Our bookstores typically operate under
agreements with the college, university, or K-12 schools to be the
official bookstore and the exclusive seller of course materials and
supplies, including physical and digital products. The majority of
the physical campus bookstores have school-branded e-commerce sites
which we operate and which offer students access to affordable
course materials and affinity products, including emblematic
apparel and gifts. The Retail Segment also offers inclusive access
programs, in which course materials, including e-content, are
offered at a reduced price through a course materials fee, and
delivered to students on or before the first day of class.
Additionally, the Retail Segment offers a suite of digital content
and services to colleges and universities, including a variety of
open educational resource-based courseware.
• The Wholesale Segment is comprised of our wholesale textbook
business and is one of the largest textbook wholesalers in the
country. The Wholesale Segment centrally sources, sells, and
distributes new and used textbooks to approximately 3,400 physical
bookstores (including our Retail Segment's 772 physical bookstores)
and sources and distributes new and used textbooks to our 647
virtual bookstores. Additionally, the Wholesale Segment sells
hardware and a software suite of applications that provides
inventory management and point-of-sale solutions to approximately
400 college bookstores.
• The Digital Student Solutions ("DSS") Segment includes
direct-to-student products and services to assist students to study
more effectively and improve academic performance. The DSS Segment
is comprised of the operations of Student Brands, LLC, a leading
direct-to-student subscription-based writing services business, and
bartleby®, a direct-to-student subscription-based offering
providing textbook solutions, expert questions and answers,
tutoring and test prep services.
Corporate Services represents unallocated shared-service costs
which include corporate level expenses and other governance
functions, including executive functions, such as accounting,
legal, treasury, information technology, and human resources.
All material intercompany accounts and transactions have been
eliminated in consolidation.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Statements of
Operations
(In thousands, except per
share data)
(Unaudited)
14 weeks ended May 2, 2020
13 weeks ended April 27, 2019
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Sales:
Product sales and other
$
196,752
$
272,753
$
1,671,200
$
1,838,760
Rental income
60,134
61,632
179,863
195,883
Total sales
256,886
334,385
1,851,063
2,034,643
Cost of sales:
Product and other cost of sales
157,302
185,663
1,303,702
1,395,339
Rental cost of sales
34,177
31,319
104,812
111,578
Total cost of sales
191,479
216,982
1,408,514
1,506,917
Gross profit
65,407
117,403
442,549
527,726
Selling and administrative expenses
87,193
98,472
404,472
423,880
Depreciation and amortization expense
15,318
16,532
61,860
65,865
Impairment loss (non-cash) (a)
—
57,748
433
57,748
Restructuring and other charges (a)
15,327
4,733
18,567
7,233
Transaction costs (a)
—
—
—
654
Operating loss
(52,431
)
(60,082
)
(42,783
)
(27,654
)
Interest expense, net
1,563
1,876
7,445
9,780
Loss before income taxes
(53,994
)
(61,958
)
(50,228
)
(37,434
)
Income tax benefit
(13,661
)
(15,740
)
(11,978
)
(13,060
)
Net loss
$
(40,333
)
$
(46,218
)
$
(38,250
)
$
(24,374
)
Loss per common share:
Basic
$
(0.84
)
$
(0.97
)
$
(0.80
)
$
(0.52
)
Diluted
$
(0.84
)
$
(0.97
)
$
(0.80
)
$
(0.52
)
Weighted average common shares
outstanding:
Basic
48,298
47,562
48,013
47,306
Diluted
48,298
47,562
48,013
47,306
(a) For additional information, see Note
(a) - (c) in the Non-GAAP disclosure information of this Press
Release.
14 weeks ended May 2, 2020
13 weeks ended April 27, 2019
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Percentage of sales:
Sales:
Product sales and other
76.6
%
81.6
%
90.3
%
90.4
%
Rental income
23.4
%
18.4
%
9.7
%
9.6
%
Total sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales:
Product and other cost of sales (a)
79.9
%
68.1
%
78.0
%
75.9
%
Rental cost of sales (a)
56.8
%
50.8
%
58.3
%
57.0
%
Total cost of sales
74.5
%
64.9
%
76.1
%
74.1
%
Gross profit
25.5
%
35.1
%
23.9
%
25.9
%
Selling and administrative expenses
33.9
%
29.4
%
21.9
%
20.8
%
Depreciation and amortization
6.0
%
4.9
%
3.3
%
3.2
%
Impairment loss (non-cash)
—
%
17.3
%
—
%
2.8
%
Restructuring and other charges
6.0
%
1.4
%
1.0
%
0.4
%
Transaction costs
—
%
—
%
—
%
—
%
Operating loss
(20.4
)%
(18.0
)%
(2.3
)%
(1.4
)%
Interest expense, net
0.6
%
0.6
%
0.4
%
0.5
%
Loss before income taxes
(21.0
)%
(18.5
)%
(2.7
)%
(1.8
)%
Income tax benefit
(5.3
)%
(4.7
)%
(0.6
)%
(0.6
)%
Net loss
(15.7
)%
(13.8
)%
(2.1
)%
(1.2
)%
(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)
May 2, 2020
April 27, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
8,242
$
14,013
Receivables, net
90,851
98,246
Merchandise inventories, net
428,939
420,322
Textbook rental inventories
40,710
47,001
Prepaid expenses and other current
assets
16,177
11,778
Total current assets
584,919
591,360
Property and equipment, net
97,739
109,777
Operating lease right-of-use assets
250,837
—
Intangible assets, net
175,125
194,978
Goodwill
4,700
4,700
Deferred tax assets, net
7,805
2,425
Other noncurrent assets
35,307
42,940
Total assets
$
1,156,432
$
946,180
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
143,678
$
186,818
Accrued liabilities
95,420
121,720
Current operating lease liabilities
92,571
—
Short-term borrowings
75,000
100,000
Total current liabilities
406,669
408,538
Long-term operating lease liabilities
186,142
—
Other long-term liabilities
46,170
53,514
Long-term borrowings
99,700
33,500
Total liabilities
738,681
495,552
Commitments and contingencies
—
—
Stockholders' equity:
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, 52,140 and 51,030 shares, respectively;
outstanding, 48,298 and 47,563 shares, respectively
521
510
Additional paid-in-capital
732,958
726,331
Accumulated deficit
(282,827
)
(244,577
)
Treasury stock, at cost
(32,901
)
(31,636
)
Total stockholders' equity
417,751
450,628
Total liabilities and stockholders'
equity
$
1,156,432
$
946,180
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The results of operations for the fourth
quarter and full-year ended May 2, 2020 consisted of 14 weeks and
53 weeks, respectively, as compared to 13 weeks and 52 weeks in the
prior year. Comparable sales data in this release exclude the
impact of the additional week.
The components of the sales variances are
as follows:
Dollars in millions
May 2, 2020
14 weeks ended
53 weeks ended
Retail Sales
New stores (a)
$
5.3
$
68.0
Closed stores (a)
(9.2
)
(60.2
)
Comparable stores (b)
(77.9
)
(177.2
)
Textbook rental deferral
1.8
4.3
Service revenue (c)
(3.9
)
(7.8
)
Other (d)
2.5
(3.2
)
Retail Sales subtotal:
$
(81.4
)
$
(176.1
)
Wholesale Sales
$
4.7
$
(25.0
)
DSS Sales
$
1.2
$
2.3
Eliminations (e)
$
(2.0
)
$
15.2
Total sales variance
$
(77.5
)
$
(183.6
)
(a) The following is a store count summary
for physical stores and virtual stores:
14 weeks ended
13 weeks ended
53 weeks ended
52 weeks ended
May 2, 2020
April 27, 2019
May 2, 2020
April 27, 2019
Number of Stores:
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Number of stores at beginning of
period
772
664
773
680
772
676
768
676
Stores opened
5
9
—
1
50
71
35
33
Stores closed
5
26
1
5
50
100
31
33
Number of stores at
end of period
772
647
772
676
772
647
772
676
(b)
Comparable sales data in this release
exclude the impact of the additional week. For Comparable Sales
details, see below.
(c)
Service revenue includes brand
partnerships, shipping and handling, digital content, software,
services, and revenue from other programs.
(d)
Other includes inventory liquidation sales
to third parties, marketplace sales and certain accounting
adjusting items related to return reserves, and other deferred
items.
(e)
Eliminates Wholesale sales and service
fees to Retail and Retail commissions earned from Wholesale.
Comparable Sales - Retail Segment
Comparable store sales variances by category are as follows:
Dollars in millions
May 2, 2020
13 weeks ended (a)
52 weeks ended (a)
Textbooks (Course Materials)
$
(8.2
)
(8.3
)%
$
(93.8
)
(8.4
)%
General Merchandise
(72.7
)
(52.4
)%
(68.0
)
(11.9
)%
Trade Books
(4.6
)
(50.3
)%
(9.4
)
(22.3
)%
Total Comparable Store Sales
$
(85.5
)
(34.7
)%
$
(171.2
)
(9.9
)%
(a)
The results of operations for the fourth
quarter and full-year ended May 2, 2020 and consisted of 14 weeks
and 53 weeks, respectively, as compared to 13 weeks and 52 weeks in
the prior year. Comparable sales data in this release exclude the
impact of the additional week.
Comparable store sales includes sales from physical stores that
have been open for an entire fiscal year period and virtual store
sales for the 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 reflects the manner in which management views
comparable sales, as well as the seasonal nature of our
business.
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings
14 weeks ended May 2, 2020
13 weeks ended April 27, 2019
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Net loss
$
(40,333
)
$
(46,218
)
$
(38,250
)
$
(24,374
)
Reconciling items, after-tax (below)
12,196
46,701
17,124
49,786
Adjusted Earnings (Non-GAAP)
$
(28,137
)
$
483
$
(21,126
)
$
25,412
Reconciling items, pre-tax
Impairment loss (non-cash) (a)
$
—
$
57,748
$
433
$
57,748
Content amortization (non-cash) (b)
1,109
736
4,082
1,096
Restructuring and other charges (c)
15,327
4,733
18,567
7,233
Transaction costs (d)
—
—
—
654
Reconciling items, pre-tax
16,436
63,217
23,082
66,731
Less: Pro forma income tax impact (e)
4,240
16,516
5,958
16,945
Reconciling items, after-tax
$
12,196
$
46,701
$
17,124
$
49,786
Adjusted EBITDA
14 weeks ended May 2, 2020
13 weeks ended April 27, 2019
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Net loss
$
(40,333
)
$
(46,218
)
$
(38,250
)
$
(24,374
)
Add:
Depreciation and amortization expense
15,318
16,532
61,860
65,865
Interest expense, net
1,563
1,876
7,445
9,780
Income tax benefit
(13,661
)
(15,740
)
(11,978
)
(13,060
)
Impairment loss (non-cash) (a)
—
57,748
433
57,748
Content amortization (non-cash) (b)
1,109
736
4,082
1,096
Restructuring and other charges (c)
15,327
4,733
18,567
7,233
Transaction costs (d)
—
—
—
654
Adjusted EBITDA (Non-GAAP)
$
(20,677
)
$
19,667
$
42,159
$
104,942
(a)
During the 53 weeks ended May 2,
2020, we recognized an impairment loss (non-cash) of $433 in the
Retail Segment related to net capitalized development costs for a
project which are not recoverable.
During the 52 weeks ended April
27, 2019, we recorded an impairment loss (non-cash) of $57,748,
related to $49,282 of goodwill and $8,466 of intangible and
long-lived assets. For additional information, see the Form 10-K
for the year ended May 2, 2020.
(b)
Represents amortization of
content development costs (non-cash) recorded in cost of goods sold
in the consolidated financial statements.
(c)
During the 53 weeks ended May 2,
2020, we recognized restructuring and other charges totaling
$18,567, comprised primarily of severance and other employee
termination and benefit costs associated with several management
changes and the elimination of various positions as part of cost
reduction objectives, store impairment loss, and professional
service costs for restructuring, process improvements, and
shareholder activist activities.
During the 52 weeks ended April
27, 2019, we recorded restructuring and other charges of $7,233
comprised of severance and transition payments related to senior
management changes and other employee termination and benefit
costs. For additional information, see the Form 10-K for the year
ended May 2, 2020.
(d)
Transaction costs are costs
incurred for business development and acquisitions.
(e)
Represents the income tax effects
of the non-GAAP items.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Free Cash Flow (non-GAAP)
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Adjusted EBITDA (non-GAAP)
$
42,159
$
104,942
Less:
Capital expenditures (a)
36,192
46,420
Cash interest
6,796
8,589
Cash taxes
(4,141
)
10,277
Free Cash Flow (non-GAAP)
$
3,312
$
39,656
(a)
Purchases of property and
equipment are also referred to as capital expenditures. Our
investing activities consist principally of capital expenditures
for contractual capital investments associated with renewing
existing contracts, new store construction, digital initiatives and
enhancements to internal systems and our website. The following
table provides the components of total purchases of property and
equipment:
Capital Expenditures
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Physical store capital expenditures
$
13,926
$
19,362
Product and system development
15,710
13,581
Content development costs
4,335
11,509
Other
2,221
1,968
Total Capital Expenditures
$
36,192
$
46,420
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information (a)
14 weeks ended May 2, 2020
13 weeks ended April 27, 2019
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Sales
Retail
$
238,479
$
319,871
$
1,712,892
$
1,889,008
Wholesale
18,838
14,092
198,353
223,374
DSS
6,637
5,491
23,661
21,339
Eliminations
(7,068
)
(5,069
)
(83,843
)
(99,078
)
Total
$
256,886
$
334,385
$
1,851,063
$
2,034,643
Gross profit
Retail (b)
$
60,623
$
110,579
$
384,096
$
452,324
Wholesale
(1,883
)
(218
)
39,805
56,341
DSS (b)
6,374
5,280
22,581
20,673
Eliminations
1,402
2,498
149
(516
)
Total
$
66,516
$
118,139
$
446,631
$
528,822
Selling and administrative expenses
Retail
$
73,616
$
81,505
$
347,869
$
363,230
Wholesale
4,574
5,039
18,238
21,323
DSS
5,457
4,763
19,172
14,504
Corporate Services
3,574
7,167
19,403
24,873
Eliminations
(28
)
(2
)
(210
)
(50
)
Total
$
87,193
$
98,472
$
404,472
$
423,880
Adjusted EBITDA (Non-GAAP) (c)
Retail
$
(12,993
)
$
29,074
$
36,227
$
89,094
Wholesale
(6,457
)
(5,257
)
21,567
35,018
DSS
917
517
3,409
6,169
Corporate Services
(3,574
)
(7,167
)
(19,403
)
(24,873
)
Eliminations
1,430
2,500
359
(466
)
Total
$
(20,677
)
$
19,667
$
42,159
$
104,942
(a)
See Explanatory Note in this Press Release
for Segment descriptions and consolidation information.
(b)
Gross margin for the Retail Segment
excludes amortization expense (non-cash) related to content
development costs of $210 and $814 for the 14 and 53 weeks ended
May 2, 2020, respectively, and $174 and $453 for the 13 and 52
weeks ended April 27, 2019, respectively.
Gross margin for the DSS Segment excludes
amortization expense (non-cash) related to content development
costs of $899 and $3,268 for the 14 and 53 weeks ended May 2, 2020,
respectively, and $562 and $643 for the 13 and 52 weeks ended April
27, 2019, respectively.
(c)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
Percentage of Segment Sales
14 weeks ended May 2, 2020
13 weeks ended April 27, 2019
53 weeks ended May 2, 2020
52 weeks ended April 27, 2019
Gross margin
Retail
25.4
%
34.6
%
22.4
%
23.9
%
Wholesale
(10.0
)%
(1.5
)%
20.1
%
25.2
%
DSS
96.0
%
96.2
%
95.4
%
96.9
%
Eliminations
N/A
N/A
N/A
N/A
Total gross margin
25.9
%
35.3
%
24.1
%
26.0
%
Selling and administrative expenses
Retail
30.9
%
25.5
%
20.3
%
19.2
%
Wholesale
0.2
%
35.8
%
9.2
%
9.5
%
DSS
82.2
%
86.7
%
0.8
%
68.0
%
Corporate and Other
N/A
N/A
N/A
N/A
Total selling and administrative
expenses
33.9
%
29.4
%
0.2
%
20.8
%
Use of Non-GAAP Financial Information -
Adjusted Earnings, Adjusted EBITDA and Free Cash Flow
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 measures of Adjusted Earnings (defined as net income
adjusted for certain reconciling items), 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) and Free Cash Flow (defined by the Company as
Adjusted EBITDA less capital expenditures, cash interest and cash
taxes).
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.
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 Company believes that Free Cash Flow provides useful additional
information concerning cash flow available to meet future debt
service obligations and working capital requirements and assists
investors in their understanding of the Company’s operating
profitability and liquidity as the Company manages to the business
to maximize margin and cash flow.
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 May 2, 2020 filed with the SEC on
July 14, 2020, which includes consolidated financial statements for
each of the three years for the period ended May 2, 2020 (Fiscal
2020, Fiscal 2019, and Fiscal 2018) and the Company's Quarterly
Report on Form 10-Q for the period ended July 27, 2019 filed with
the SEC on August 27, 2019, the Company's Quarterly Report on Form
10-Q for the period ended October 26, 2019 filed with the SEC on
December 4, 2019, and the Company's Quarterly Report on Form 10-Q
for the period ended January 25, 2020 filed with the SEC on March
3, 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200714005249/en/
Media Contact: Carolyn J.
Brown Senior Vice President Corporate Communications & Public
Affairs 908-991-2967 cbrown@bned.com
Investor Contact: Andy
Milevoj Vice President Corporate Finance and Investor Relations
908-991-2776 amilevoj@bned.com
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