Completed Acquisition of
For the Full Year, Total Sales Increased 3.7% while Comparable Stores Sales Decreased 3.0%
Adjusted EBITDA Increased
Fourth quarter 2017 results include 9 weeks of operations from
Financial highlights for the fourth quarter and fiscal year 2017:
Operational highlights for fiscal year 2017:
"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
Consolidated fourth quarter sales of
Fiscal full year consolidated sales were
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
BNC opened 38 new stores with estimated annual sales of
MBS sales for the two months following the acquisition, a seasonally low
period, were
The Company's non-GAAP Adjusted EBITDA was
Fourth quarter consolidated net income was
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
Conference Call
A conference call with
About
General information on
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
EXPLANATORY NOTE |
On |
For the results of operations for the 13 weeks ended |
For fiscal 2017, the results of operations for the entire 52 weeks
ended |
On |
Additionally, effective with the MBS acquisition, we determined
that we have two reportable segments: |
|
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) |
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13 weeks ended | 52 weeks ended | |||||||||||||||
|
|
|
|
|||||||||||||
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 | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
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) |
|||||||||
|
|
||||||||
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 | |||||||
|
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, |
— | — | |||||||
Common stock, |
494 | 486 | |||||||
Additional paid-in-capital | 708,871 | 699,513 | |||||||
Retained earnings | 32,363 | 27,002 | |||||||
|
(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 | |||||||||||||||
|
|
|
|
|||||||||||||
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 |
||
(b) |
For periods prior to the Spin-Off from Barnes & Noble on |
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES (In thousands) (Unaudited) |
||||||||||||||||||||
Segment Information (a) | 13 weeks ended | 52 weeks ended | ||||||||||||||||||
|
|
|
|
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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 |
Percentage of Segment Sales | 13 weeks ended | 52 weeks ended | |||||||||||
|
|
|
|
||||||||||
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 | |||||||||||||||
|
|
|
|
||||||||||||||
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 | |||||||||||||||
|
|
|
|
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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 |
|
Additionally, we announced a reduction in staff and closure of the
facilities in |
|
(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 |
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 |
||||||||||
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, |
||
(b) |
We added 38 new stores and closed 20 stores during the 52 weeks
ended |
||
(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 - |
||||||||||||||||||||||||||||
Comparable store sales variances by category for the 13 and 52 week periods are as follows: |
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13 weeks ended | 52 weeks ended | |||||||||||||||||||||||||||
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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 | % | |||||||||||||||
|
(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/
Media:
Vice President
Corporate Communications
cbrown@bned.com
or
Investors:
Vice President
Treasurer and Investor
Relations
tdonohue@bned.com
Source:
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