Consolidated Sales Increase 15.7% in the Third
Quarter and 20.5% Year to Date
Continued Benefits Recognized from Recent
Acquisitions
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading provider of educational products and services solutions for
higher education and K-12 institutions, today reported sales and
earnings for the third quarter for fiscal year 2018. The Company
has two reportable segments: Barnes & Noble College
Booksellers, LLC (“BNC”) and MBS Textbook Exchange, LLC
(“MBS”).
Financial highlights for the third quarter 2018 and fiscal
year to date 2018:
- Consolidated sales of $603.4 million
increased 15.7%, as compared to the prior year period; year to date
consolidated sales of $1,846.0 million increased 20.5% as compared
to the prior year period.
- Consolidated third quarter GAAP net
loss of $(283.2) million, as compared to net income of $3.8 million
in the prior year period; year to date GAAP net loss of $(269.6)
million, as compared to net income of $5.1 million in the prior
year period. The third quarter and year to date net loss includes a
non-cash goodwill impairment charge of $313.1 million in the BNC
segment.
- Consolidated third quarter non-GAAP
Adjusted Earnings of $19.6 million, as compared to $4.0 million in
the prior year period; year to date non-GAAP Adjusted Earnings of
$39.8 million, as compared to $7.8 million in the prior year
period.
- Consolidated third quarter non-GAAP
Adjusted EBITDA of $34.6 million, an increase of $15.8 million, or
83.7%, as compared to the prior year period; year to date non-GAAP
Adjusted EBITDA of $104.6 million, an increase of $51.9 million, or
98.4%, as compared to the prior year period.
Operational highlights for the third quarter 2018:
- Continued to expand and enhance the
Company’s First Day™ inclusive access systems solutions, with
adoptions doubling compared to the prior year.
- Increased BNC e-commerce sales by 5.8%
in the quarter, with approximately 68% of online orders picked up
in-store.
- Partnership announced with The
Princeton Review to offer its products and services to the
Company’s network of more than six million students and through its
more than 780 physical bookstores; launched joint landing page for
e-commerce sales.
- Continued to recognize benefits of the
synergies and integration of MBS, with $138.9 million of sales in
the third quarter and $20.8 million of Adjusted EBITDA.
- Student Brands continued to increase
its number of subscribers, with $5.6 million of sales in the third
quarter and $3.4 million of Adjusted EBITDA.
- Expanded BNED Courseware offering this
spring semester to extend to approximately 16,000 students through
18 courses.
“We remain focused on strengthening our position as a leading
aggregator and distributor of physical and digital educational
content, and on developing expanded direct-to-student digital
services that we can offer both in and outside our managed stores
footprint,” said Michael P. Huseby, Chairman and Chief Executive
Officer, Barnes & Noble Education. “Our acquisitions of MBS and
Student Brands, which both performed extremely well in the quarter,
as well as our newly expanded digital distribution relationships
with leading publishers, are just a few examples of how we are
evolving our business model to effectively compete and provide
sustainable value to the students, faculty and institutions we
serve.”
Third Quarter 2018 and Year to Date Results
Results for the 13 and 39 weeks of fiscal 2018 and fiscal 2017
are as follows:
$ in millions 13 and 39 Weeks Selected
Data (unaudited)
13 Weeks
13 Weeks
39 Weeks
39 Weeks
Q3 2018
Q3 2017 2018 2017 Total Sales $603.4 $521.6 $1,846.0 $1,531.5 Net
(Loss) Income(1) $(283.2) $3.8 $(269.6) $5.1
Non-GAAP(2)
Adjusted EBITDA $34.6 $18.8 $104.6 $52.7 Adjusted Earnings $19.6
$4.0 $39.8 $7.8 (1) Includes a pre-tax goodwill non-cash
impairment charge of $313.1 million at BNC, or $302.9 million after
tax on a net tax basis, recorded in the third quarter. (2) 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.
Consolidated third quarter sales of $603.4 million increased
$81.7 million, or 15.7%, as compared to the prior year period. This
increase was primarily attributable to the contributions from the
MBS and Student Brands acquisitions and net new stores opened at
BNC, partially offset by the impact from declining comparable store
sales at BNC.
Comparable store sales at BNC decreased 6.2% for the quarter
representing approximately $31.3 million in revenue. Consistent
with prior years, the Spring Rush period extended beyond the
quarter due to later school openings and the continued pattern of
students buying course materials later in the semester. Factoring
in the month of February, comparable store sales at BNC decreased
4.2% on a year to date basis.
In the third quarter, the Company completed its annual goodwill
impairment test required by GAAP, and determined that the carrying
amount of goodwill at BNC exceeded its estimated fair value, due to
the reduction in BNED’s market capitalization. As a result, the
Company recorded a pre-tax goodwill non-cash impairment charge of
$313.1 million at BNC or $302.9 million on a net tax basis.
Third quarter net loss was $(283.2) million, or $(6.04) per
diluted share, compared to net income of $3.8 million, or $0.08 per
diluted share, in the prior year period. The current year’s fiscal
quarter has 46.9 million diluted shares outstanding, while the
prior year period had 46.8 million diluted shares outstanding. The
Company reported non-GAAP Adjusted Earnings of $19.6 million during
the quarter, compared with $4.0 million in the prior year
period.
The Company’s Adjusted EBITDA was $34.6 million for the quarter,
as compared to $18.8 million in the prior year period, an increase
due primarily to the contributions from the MBS and Student Brands
acquisitions of $20.8 million and $3.4 million, respectively,
partially offset by the Adjusted EBITDA impact from lower
comparable store sales at BNC.
As a result of the acquisition of MBS on February 27, 2017 and
the acquisition of Student Brands on August 3, 2017, the condensed
consolidated financial statements for the 13 weeks and 39 weeks
ended January 27, 2018 include the financial results of MBS for the
entire year and Student Brands from the acquisition date. All
material intercompany accounts and transactions have been
eliminated in consolidation. The condensed consolidated financial
statements for the 13 weeks and 39 weeks ended January 28, 2017 do
not include any financial results of MBS and Student Brands.
Outlook
For fiscal year 2018, the Company continues to expect sales at
BNC to be relatively flat, while BNC comparable store sales are now
projected to decline in the mid-single digit percentage point range
year over year. The Company continues to expect consolidated sales
to be in the range of $2.25 billion to $2.35 billion before
intercompany eliminations. The Company is raising its consolidated
Adjusted EBITDA guidance, and now expects to achieve consolidated
Adjusted EBITDA of $115 million to $125 million for fiscal year
2018, up from the previous range of $105 million to $120 million.
Capital expenditures are now expected to be approximately $45
million (down from prior guidance of $50 million), which represents
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 9:00 a.m. Eastern Time on Thursday,
March 1, 2018 and can be accessed at the Barnes & Noble
Education corporate website at www.bned.com.
Barnes & Noble Education expects to report fiscal 2018
fourth quarter results on or about June 26, 2018.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading provider of educational products and services solutions for
higher education and K-12 institutions, enhances the academic and
social purpose of educational institutions. Through its Barnes
& Noble College and MBS subsidiaries, Barnes & Noble
Education operates 1,480 physical and virtual bookstores and serves
more than 6 million students and faculty, and offers a suite of
digital software, content and services including direct-to-student
study tools. The Company also operates one of the largest textbook
wholesale distribution channels in the United States. 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, while supporting the
financial goals of our college and university partners.
BNED companies include: Barnes & Noble College Booksellers,
LLC, MBS Textbook Exchange, LLC, BNED LoudCloud, LLC, Student
Brands, LLC, and Promoversity, LLC. General information on Barnes
& Noble Education may 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 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; 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, including MBS Textbook Exchange, LLC and
Student Brands, LLC, 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; 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; 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; changes to purchase or rental general terms, payment
terms, return policies, the discount or margin on products or other
terms with our suppliers; 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; the risk of price
reduction or change in format of course materials by publishers,
which could negatively impact revenues and margin; 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 risks associated with merchandise sourced
indirectly from outside 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 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, 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 April 29,
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
Effective with the acquisition of MBS Textbook Exchange, LLC
("MBS") on February 27, 2017, 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 to the acquisition. The condensed consolidated
financial statements for the 13 and 39 weeks ended January 27, 2018
include the financial results of MBS and all material intercompany
accounts and transactions have been eliminated in consolidation.
The condensed consolidated financial statements for the 13 and 39
weeks ended January 28, 2017 exclude the financial results of
MBS.
- BNC operates 782 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 698 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 782 campus bookstores.
On August 3, 2017, we acquired Student Brands, LLC ("Student
Brands"), a leading direct-to-student subscription-based writing
services business. The condensed consolidated financial statements
for the 13 and 39 weeks ended January 27, 2018 include the
financial results of Student Brands in the BNC segment from the
date of acquisition and all material intercompany accounts and
transactions have been eliminated in consolidation, The condensed
consolidated financial statements for the 13 and 39 weeks ended
January 28, 2017 exclude the financial results of Student
Brands.
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIESCondensed Consolidated Statements of
Operations(In thousands, except per share
data)(Unaudited)
13 weeks ended 39 weeks ended
January 27,2018
January 28,2017
January 27,2018
January 28,2017
Sales: Product sales and other $ 540,903 $ 457,147 $ 1,693,230 $
1,372,810 Rental income 62,488 64,477 152,733
158,722 Total sales 603,391 521,624 1,845,963
1,531,532 Cost of sales: (a) Product and other cost of sales
419,641 366,190 1,326,221 1,098,682 Rental cost of sales 37,215
39,509 91,936 97,998 Total cost of sales
456,856 405,699 1,418,157 1,196,680 Gross
profit 146,535 115,925 427,806 334,852 Selling
and administrative expenses 111,974 97,111 326,532 282,171
Depreciation and amortization expense 17,007 13,149
48,728
39,057 Impairment loss (non-cash) (a) 313,130 — 313,130 —
Restructuring and other charges (a) — — 5,429 1,790 Transaction
costs (a) 49 467 1,895 2,638 Operating (loss)
income (295,625 ) 5,198 (267,908 ) 9,196 Interest expense, net
2,954 679 7,828 1,975 Loss (income) before
income taxes (298,579 ) 4,519 (275,736 ) 7,221 Income tax (benefit)
expense (15,344 ) 758 (6,113 ) 2,087 Net (loss) income $
(283,235 ) $ 3,761 $ (269,623 ) $ 5,134 (Loss)
Earnings per common share: Basic $ (6.04 ) $ 0.08 $ (5.77 ) $ 0.11
Diluted $ (6.04 ) $ 0.08 $ (5.77 ) $ 0.11 Weighted average common
shares outstanding: Basic 46,914 46,276 46,712 46,265 Diluted
46,914 46,844 46,712 46,716
(a) For additional information, see Note
(a) - (c) in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
39 weeks ended
January 27,2018
January 28,2017
January 27,2018
January 28,2017
Percentage of sales: Sales: Product sales and other 89.6%
87.6% 91.7% 89.6% Rental income 10.4% 12.4% 8.3% 10.4% Total sales
100.0% 100.0% 100.0% 100.0% Cost of sales: Product and other cost
of sales (a) 77.6% 80.1% 78.3% 80.0% Rental cost of sales (a) 59.6%
61.3% 60.2% 61.7% Total cost of sales 75.7% 77.8% 76.8% 78.1% Gross
profit 24.3% 22.2% 23.2% 21.9% Selling and administrative expenses
18.6% 18.6% 17.7% 18.4% Depreciation and amortization expense 2.8%
2.5% 2.6% 2.6% Impairment loss (non-cash) 51.9% —% 17.0% —%
Restructuring and other charges —% —% 0.3% 0.1% Transaction costs
—% 0.1% 0.1% 0.2% Operating (loss) income (49.0)% 1.0% (14.5)% 0.6%
Interest expense, net 0.5% 0.1% 0.4% 0.1% (Loss) income before
income taxes (49.5)% 0.9% (14.9)% 0.5% Income tax (benefit) expense
(2.5)% 0.1% (0.3)% 0.1% Net (loss) income (47.0)% 0.8% (14.6)% 0.4%
(a) Represents the percentage these costs bear to the related
sales, instead of total sales.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands, except per share
data)
(Unaudited)
January 27,2018 January 28,2017 ASSETS Current assets: Cash
and cash equivalents $ 22,373 $ 132,061 Receivables, net 243,434
178,825 Merchandise inventories, net 614,499 494,032 Textbook
rental inventories 61,427 67,372 Prepaid expenses and other current
assets 12,274 8,134 Total current assets 954,007
880,424 Property and equipment, net 110,987 107,272
Intangible assets, net 224,314 191,628 Goodwill 49,282 281,346
Other noncurrent assets 41,990 39,233 Total assets $
1,380,580 $ 1,499,903 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $ 488,954 $ 480,378
Accrued liabilities 252,202 207,731 Total current
liabilities 741,156 688,109 Long-term deferred taxes,
net 4,278 22,709 Other long-term liabilities 73,468 76,196
Long-term borrowings 113,000 — Total liabilities
931,902 787,014 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, 50,028 and 48,972
shares, respectively; outstanding, 46,914 and 46,276 shares,
respectively 500 490 Additional paid-in-capital 715,088 706,736
(Accumulated deficit) Retained earnings (237,260 ) 32,136 Treasury
stock, at cost (29,650 ) (26,473 ) Total stockholders' equity
448,678 712,889 Total liabilities and stockholders'
equity $ 1,380,580 $ 1,499,903
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Earnings Per Share
(In thousands, except per share
data)
(Unaudited)
13 weeks ended 39 weeks ended January 27,2018
January 28,2017 January 27,2018 January 28,2017
Numerator
for basic earnings per share: Net (loss) income $ (283,235 ) $
3,761 $ (269,623 ) $ 5,134 Less allocation of earnings to
participating securities — (1 ) — (3 ) Net (loss)
income available to common shareholders $ (283,235 ) $ 3,760
$ (269,623 ) $ 5,131
Numerator for diluted
earnings per share: Net (loss) income $ (283,235 ) $ 3,760 $
(269,623 ) $ 5,131 Allocation of earnings to participating
securities — 1 — 3 Less allocation of earnings to participating
securities — (1 ) — (3 ) Net (loss) income available
to common shareholders $ (283,235 ) $ 3,760 $ (269,623 ) $
5,131
Denominator for basic earnings per
share: Basic weighted average common shares 46,914
46,276 46,712 46,265
Denominator for
diluted earnings per share: Basic weighted average common
shares 46,914 46,276 46,712 46,265 Average dilutive restricted
stock units — 512 — 397 Average dilutive performance shares — 52 —
33 Average dilutive restricted shares — 4 — 21 Average dilutive
performance share units — — — — Average dilutive options — —
— — Diluted weighted average common shares
46,914 46,844 46,712 46,716
(Loss) Earnings per common share: Basic $ (6.04 ) $ 0.08 $
(5.77 ) $ 0.11 Diluted $ (6.04 ) $ 0.08 $ (5.77 ) $ 0.11
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information
(a)
13 weeks ended 39 weeks ended January 27, 2018 January 28,
2017 January 27, 2018 January 28, 2017 Sales BNC $ 506,460 $
521,624 $ 1,518,224 $ 1,531,532 MBS 138,927 — 413,579 — Elimination
(41,996 ) — (85,840 ) — Total $ 603,391 $
521,624 $ 1,845,963 $ 1,531,532 Gross
profit BNC $ 117,413 115,925 $ 337,875 $ 334,852 MBS (b) 34,949 —
98,986 — Elimination (5,827 ) — (5,782 ) — Total $
146,535 $ 115,925 $ 431,079 $ 334,852
Selling and administrative expenses BNC $ 97,777 $ 97,111 $
283,546 $ 282,171 MBS 14,197 — 42,986 —
Total $ 111,974 $ 97,111 $ 326,532 $ 282,171
Adjusted EBITDA (Non-GAAP) (c) BNC $ 19,636 $ 18,814
$ 54,329 $ 52,681 MBS (b) 20,752 — 56,000 — Elimination (5,827 ) —
(5,782 ) — Total $ 34,561 $ 18,814 $
104,547 $ 52,681
Percentage of
Segment Sales
13 weeks ended 39 weeks ended January 27, 2018 January 28, 2017
January 27, 2018 January 28, 2017 Gross margin BNC 23.2 % 22.2 %
22.3 % 21.9 % MBS (b) 25.2 % — % 23.9 % — % Elimination 13.9 % — %
6.7 % — % Total gross margin 24.3 % 22.2 % 23.4 % 21.9 %
Selling and administrative expenses BNC 19.3 % 18.6 % 18.7 % 18.4 %
MBS 10.2 % — % 10.4 % — % Total selling and administrative expenses
18.6 % 18.6 % 17.7 % 18.4 % (a) Effective with the
acquisition of MBS Textbook Exchange, LLC ("MBS") on February 27,
2017, 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 the Explanatory Note. (b) Excludes
$3,273 of incremental cost of sales related to inventory fair value
amortization for the 39 weeks ended January 27, 2018. (c)
For additional information, see "Use of Non-GAAP Financial
Information" in the Non-GAAP disclosure information of this Press
Release.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings 13 weeks ended 39 weeks ended
January 27, 2018 January 28, 2017 January 27, 2018
January 28, 2017 Net (loss) income $ (283,235 ) $ 3,761 $ (269,623
) $ 5,134 Reconciling items, after-tax (below) 302,879 286
309,404 2,714 Adjusted Earnings (Non-GAAP) $ 19,644
$ 4,047 $ 39,781 $ 7,848 Reconciling
items, pre-tax Impairment loss (non-cash) (a) $ 313,130 $ — $
313,130 $ — Inventory valuation amortization (MBS) (non-cash) (b) —
— 3,273 — Restructuring and other charges (c) — — 5,429 1,790
Transaction costs (d) 49 467 1,895 2,638
Reconciling items, pre-tax 313,179 467 323,727 4,428 Less: Pro
forma income tax impact (e) 10,300 181 14,323
1,714 Reconciling items, after-tax $ 302,879 $ 286 $
309,404 $ 2,714
Adjusted EBITDA 13 weeks ended
39 weeks ended January 27, 2018 January 28, 2017 January 27, 2018
January 28, 2017 Net (loss) income $ (283,235 ) $ 3,761 $ (269,623
) $ 5,134 Add: Depreciation and amortization expense 17,007 13,149
48,728 39,057 Interest expense, net 2,954 679 7,828 1,975 Income
tax expense (15,344 ) 758 (6,113 ) 2,087 Impairment loss (non-cash)
(a) 313,130 — 313,130 — Inventory valuation amortization (MBS)
(non-cash) (b) — — 3,273 — Restructuring and other charges (c) — —
5,429 1,790 Transaction costs (d) 49 467 1,895
2,638 Adjusted EBITDA (Non-GAAP) $ 34,561 $ 18,814 $
104,547 $ 52,681 (a) During the 13 weeks ended
January 27, 2018, we completed our annual goodwill impairment test.
In performing the valuation, we used cash flows that reflected
management’s forecasts and discount rates that included risk
adjustments consistent with the current market conditions. Based on
the results of the impairment test, the carrying value of the BNC
reporting unit exceeded its fair value and we recorded a goodwill
impairment (non-cash impairment loss) of $313.1 million for the BNC
segment. For additional information, see Form 10-Q for the quarter
ended January 27, 2018 which is expected to be filed on March 1,
2018. (b) For the 39 weeks ended January 27, 2018, gross
margin includes $3.3 million of incremental cost of sales related
to amortization of the MBS inventory fair value adjustment of $3.7
million recorded as of the acquisition date, February 27, 2017. The
non-cash fair value inventory adjustment for MBS was recognized
over six months from the date of acquisition and was allocated
based on monthly sales. (c) On July 19, 2017, Mr. Max J.
Roberts resigned as Chief Executive Officer of the Company and Mr.
Michael P. Huseby was appointed to the position of Chief Executive
Officer and Chairman of the Board, both effective as of September
19, 2017. Pursuant to the terms of the Retirement Letter Agreement,
Mr. Roberts received an aggregate payment of approximately $4.4
million, comprised of salary, bonus and benefits. In addition, the
Company paid Mr. Roberts and Mr. Huseby a one-time cash transition
payment of approximately $0.5 million and $0.3 million,
respectively, at the time of the transition. During the 39 weeks
ended January 27, 2018, we recognized restructuring and other
charges of approximately $5.4 million, which is comprised of the
termination and transition payments. For additional information,
see Form 8-K dated July 19, 2017, filed with the SEC on July 20,
2017. In Fiscal 2016, we implemented a plan to restructure
our digital operations which was completed in the first quarter of
Fiscal 2017, and was primarily comprised of costs related to
employee matters. (d) Transaction costs are costs incurred
for business development and acquisitions. (e) 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
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 29, 2017 filed with the SEC on August 30, 2017 and the
Company's Quarterly Report on Form 10-Q for the period ended
October 28, 2017 filed with the SEC on December 5, 2017.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 39 week periods are as follows:
Dollars in millions 13 weeks ended 39 weeks ended January
27, 2018 January 28, 2017 January 27, 2018 January
28, 2017 MBS Sales (a) Wholesale $ 92.2 $ — $ 232.2 $ — Direct 46.7
— 181.4 —
MBS
total sales subtotal:
$ 138.9 $ — $ 413.6 $ — BNC Sales New stores (b) $ 14.1 $ 34.2 $
55.8 $ 92.7 Closed stores (b) (2.2 ) (8.0 ) (9.7 ) (20.6 )
Comparable stores (c) (31.3 ) (27.3 ) (69.9 ) (59.8 ) Textbook
rental deferral 2.6 2.3 6.2 0.1 Service revenue (d) 6.7 0.9 13.1
3.3 Other (e) (5.1 ) 1.1 (8.8 ) 2.5 BNC total sales
subtotal: $ (15.2 ) $ 3.2 $ (13.3 ) $ 18.2 Eliminations (f) $ (42.0
) — $ (85.9 ) — Total sales variance $ 81.7 $
3.2 $ 314.4 $ 18.2 (a) On February 27,
2017, we acquired MBS Textbook Exchange, LLC ("MBS"). The condensed
consolidated financial statements for the 13 and 39 weeks ended
January 27, 2018 include the financial results of MBS and all
material intercompany accounts and transactions have been
eliminated in consolidation. The condensed consolidated financial
statements for the 13 and 39 weeks ended January 28, 2017 exclude
the financial results of MBS. 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) The following is a store count
summary for BNC physical stores and MBS virtual stores:
13 weeks ended January 27, 2018 13 weeks ended
January 28, 2017 BNC Stores MBS Direct Stores BNC Stores
Stores opened 6 5 2 Stores closed 1 13 3 Number of stores open at
end of period 782 698 770 39 weeks ended January 27, 2018 39
weeks ended January 28, 2017 BNC Stores MBS Direct Stores BNC
Stores Stores opened 30 19 36 Stores closed 17 33 17 Number of
stores open at end of period 782 698 770 (c) See below.
(d) Service revenue includes Student Brands, brand
partnerships, Promoversity, LoudCloud, 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 39
and week periods are as follows:
13 weeks ended 39 weeks ended January 27, 2018
January 28, 2017 January 27, 2018 January 28, 2017 Textbooks
$ (26.3 ) (7.2 )% $ (25.4 ) (6.7 )% $ (62.8 )
(6.1 )% $ (55.3 ) (5.3 )% General Merchandise (3.5 ) (2.8 )%
(0.5 ) (0.5 )% (3.3 ) (0.8 )% (1.2 ) (0.3 )% Trade Books (1.5 )
(11.9 )% (1.2 ) (8.3 )% (3.8 ) (9.5 )% (2.7 ) (6.2 )% Other —
— % (0.2 ) (86.7 )% — — % (0.6 ) (88.3 )% Total
Comparable Store Sales $ (31.3 ) (6.2 )% $ (27.3 ) (5.3 )% $ (69.9
) (4.7 )% $ (59.8 ) (4.0 )%
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. Prior year comparable store sales have been updated to
exclude store inventory sales to MBS, which are reflected as
intercompany inventory transfers since the acquisition.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180301005323/en/
Media:Barnes & Noble
Education, Inc.Carolyn J. Brown, 908-991-2967Vice
PresidentCorporate Communicationscbrown@bned.comorInvestors:Barnes & Noble Education,
Inc.Thomas Donohue, 908-991-2966Vice PresidentTreasurer and
Investor Relationstdonohue@bned.com
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