2018 Full Year Consolidated Sales Increase
17.6% and Fourth Quarter Consolidated Sales Increase 4.3%
New “Digital Student Solutions” Reporting
Segment
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading provider of educational products and services solutions for
higher education and K-12, today reported sales and earnings for
the fourth quarter and full year for fiscal year 2018.
Prior to the fourth quarter of fiscal year 2018, the Company had
two reportable segments: Barnes & Noble College Booksellers,
LLC (“BNC”) and MBS Textbook Exchange, LLC (“MBS”). In connection
with the Company’s focus on developing digital solutions, during
the fourth quarter of fiscal year 2018, the Company realigned its
business into the following three reportable segments: BNC, MBS,
and Digital Student Solutions, or DSS, as defined and described in
the Explanatory Note section of this press release. Additionally,
unallocated shared-service costs, which include various corporate
level expenses and other governance functions, are presented as
Corporate Services. All periods presented have been reclassified to
conform to the current format of the three reportable segments.
As a result of the acquisitions of MBS on February 27, 2017 and
Student Brands, LLC (“Student Brands”) on August 3, 2017:
- the consolidated financial statements
for the fiscal year 2018 include the financial results of MBS for
the entire year and include the financial results of Student Brands
from the August 3, 2017 acquisition date to April 28, 2018;
and
- the consolidated financial statements
for fiscal year 2017 include the financial results of MBS from the
acquisition date, February 27, 2017 to April 29, 2017, and do not
include the financial results of Student Brands since it was
acquired subsequent to the end of fiscal year 2017.
Financial highlights for the fourth quarter and fiscal year
2018:
- Consolidated fourth quarter sales of
$357.7 million increased 4.3%, as compared to the prior year
period; fiscal 2018 full year consolidated sales of $2,203.6
million increased 17.6%, as compared to last year.
- Consolidated fourth quarter GAAP net
income of $17.1 million, as compared to net income of $0.2 million
in the prior year period; fiscal 2018 full year GAAP net loss of
$(252.6) million, as compared to net income of $5.4 million last
year. The fiscal full year net loss includes the pre-tax non-cash
goodwill impairment charge of $313.1 million, or $302.9 million
after-tax, recorded in the third quarter of fiscal year 2018.
- Consolidated fourth quarter non-GAAP
Adjusted Earnings of $17.2 million, as compared to $4.5 million in
the prior year period; fiscal year 2018 non-GAAP Adjusted Earnings
of $56.9 million, as compared to $12.3 million last year.
- Consolidated fourth quarter non-GAAP
Adjusted EBITDA of $22.2 million, a decrease of $3.4 million, or
13.2%, as compared to the prior year period; fiscal year 2018
non-GAAP Adjusted EBITDA of $126.8 million, an increase of $48.5
million, or 62.0%, as compared to last year.
Fiscal year 2018 highlights:
- Acquired Student Brands in August of
2017, which added $15.8 million of sales and $8.6 million of
non-GAAP Adjusted EBITDA for the fiscal year 2018.
- Recognized benefits of the synergies
and integration of MBS, with MBS delivering $459.5 million of sales
in the fiscal year and $54.6 million of non-GAAP Adjusted
EBITDA.
- Expanded and enhanced the Company’s
First Day™ inclusive access solution through agreements with major
publishers to offer their content through inclusive access models
at BNC and MBS stores nationwide.
- Strengthened partnerships with
publishing partners McGraw-Hill Education and Pearson through two
separate and significant strategic initiatives: the distribution of
their e-content through inclusive access models on campuses served
by BNED, and, also the distribution of their designated rental
titles through BNED channels.
- Announced a strategic partnership with
Portland State University to co-develop a degree planning solution
to help more students graduate on time with better pathways to
employment.
- Partnered with The Princeton Review to
offer its tutoring and test prep products and services to the
Company’s network of more than six million students and through its
bookstores offerings; launched joint landing page for e-commerce
sales.
- Expanded available LoudCloud
Courseware™ to 32 course offerings and significantly reduced
pricing consistent with the Company’s ongoing mission to drive
affordability and accessibility on campuses nationwide.
Michael P. Huseby, Chairman and Chief Executive Officer, Barnes
& Noble Education said:
“We delivered very solid operating performance this year. We
also began in earnest to transform the Company and develop scalable
digital solutions that will help us better serve our institutional
partners and students. We are confident that we are making the
investments and taking the actions necessary for BNED to
effectively compete and win in an evolving educational services
market place.
The creation of our new Digital Student Solutions, or DSS,
reporting segment is an important step in further positioning BNED
as a leader in high-value direct-to student offerings. We intend to
use all channels—ongoing internal development, partnering and
acquisitions—to grow DSS as rapidly as we can. Our acquisitions and
partnerships to date have provided us with both the cash flow and
the operating foundation necessary to focus our efforts on a
significant expansion of DSS offerings, both within and outside of
our large footprint of managed physical and virtual stores.
We are energized and confident in our strategy, operational
readiness, and the ability of our people to deliver the products
and solutions our existing and future customers demand. BNED is
rapidly transforming into a leading provider of both institutional
and direct-to-student offerings, which we expect to result in
substantial additional value for all our stakeholders.”
Fourth Quarter and Fiscal Full Year Results for 2018
Results for the 13 and 52 weeks of fiscal 2018 and fiscal 2017
are as follows:
$ in millions 13 and 52 Weeks Selected Data
(unaudited)
13 Weeks
Q4 2018
13 Weeks
Q4 2017
52 Weeks
2018
52 Weeks
2017
Total Sales $357.7 $342.8 $2,203.6 $1,874.4 Net Income (Loss)(1)
$17.1 $0.2 $(252.6) $5.4
Non-GAAP(2)
Adjusted EBITDA
$22.2 $25.6 $126.8 $78.3 Adjusted Earnings $17.2 $4.5 $56.9 $12.3
(1) The 52 weeks of fiscal year 2018
includes a pre-tax goodwill non-cash impairment charge of $313.1
million 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 Results
Consolidated fourth quarter sales of
$357.7 million increased $14.8 million, or 4.3%, as compared to the
prior year period and fiscal full year consolidated sales were
$2,203.6 million, an increase of $329.3 million, or 17.6%, as
compared with the prior year period. These sales increases were
primarily attributable to contributions from the MBS and Student
Brands acquisitions and partially offset by the impact from
declining sales at BNC. Our Student Brands business is now included
in the DSS segment.
The Company’s non-GAAP Adjusted
EBITDA was $126.8 million for the fiscal full year, as compared to
$78.3 million in the prior year period. The increase was primarily
attributable to the full year contributions from MBS and Student
Brands and lower Corporate Services, partially offset by the
decreases at BNC.
BNC Results
BNC sales in the fourth quarter decreased by
2.0%. Comparable store sales at BNC increased 0.1% for the quarter
representing approximately $0.1 million in revenue. As disclosed in
the Company’s third quarter fiscal 2018 earnings release, the
Spring Rush period extended into the fourth quarter due to later
school openings and the continued pattern of students buying course
materials later in the semester.
BNC sales for the full fiscal year decreased
by 1.6%, reflecting the declining comparable store sales partially
offset by new store openings. Comparable store sales at BNC
decreased 4.1% for fiscal year 2018, driven primarily by enrollment
declines, especially at community colleges, and the overall decline
in textbook average sales prices. Comparable store sales at BNC
excluding two-year community colleges decreased 2.8% for fiscal
year 2018. The impact of declining average textbook prices
represents approximately 40% of the comparable store sales decline
for the fiscal year.
BNC non-GAAP Adjusted EBITDA for the quarter
was $26.5 million, as compared to $35.8 million in the prior year
period. BNC non-GAAP Adjusted EBITDA was $87.5 million for the
fiscal full year, as compared to $107.8 million in the prior year
period. Decreases in the quarter and full fiscal year were
primarily attributable to lower sales, lower margin and higher
selling and administrative expenses at BNC.
MBS Results
MBS fourth quarter sales of $46.0 million
increased $11.9 million or 34.8%, as compared with the prior year
period. The fourth quarter sales period for MBS is a seasonally low
period. MBS sales for the fourth quarter of 2017 include financial
results for a partial quarter, as the acquisition closed on
February 27, 2017. For the fiscal 2018 full year, MBS sales were
$459.5 million, as compared to $34.1 million in the prior year
period.
MBS non-GAAP Adjusted EBITDA for the quarter
was $(6.5) million for the quarter, as compared to $(3.6) million
in the prior year period. MBS non-GAAP Adjusted EBITDA for the full
fiscal year was $54.6 million, as compared to $(3.6) million in the
prior year period. The quarterly and full year comparisons for MBS
in 2017 include financial results for a partial period of
approximately two months, as the acquisition closed on February 27,
2017.
DSS Results
Effective in the fourth quarter of fiscal
year 2018, the Company added DSS as the Company’s third reporting
segment. Such results were previously included in the BNC segment.
The DSS segment was created in anticipation of the Company’s intent
to expand the DSS operations.
Currently, DSS primarily reflects the
operating results of Student Brands, which generates sales through
subscriptions to its digital properties. DSS fourth quarter sales
were $5.7 million. DSS fiscal full year sales were $15.8 million.
DSS also reflects costs associated with the Company’s development
of new DSS offerings and, in future periods, the Company expects
DSS to reflect the operating results of such additional
offerings.
DSS non-GAAP Adjusted EBITDA was $2.5 million
for the quarter, and $7.6 million for the full fiscal year. There
are no quarterly or full year comparisons, as Student Brands was
acquired subsequent to the end of fiscal year 2017.
Outlook
For fiscal year 2019, the Company expects consolidated sales to
be in the range of $2.2 billion to $2.3 billion before intercompany
eliminations. This sales guidance reflects the expected comparable
store decline at BNC to be in the mid-single digit percentage point
range year over year. The Company expects consolidated fiscal year
2019 Adjusted EBITDA to be relatively comparable to fiscal year
2018, in a range of $110 million to $125 million, reflecting the
expected comparable store sales decline at BNC and increasing costs
associated with developing new DSS and other digital offerings.
Capital expenditures are expected to be approximately $60 million,
increasing over fiscal year 2018 primarily due to our anticipated
investments in digital content required to offer new planned DSS
product offerings.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 4:30 p.m. Eastern Time on Wednesday,
June 20, 2018 and can be accessed at the Barnes & Noble
Education corporate website at www.bned.com.
Barnes & Noble Education expects to report fiscal 2019 first
quarter results on or about August 30, 2018.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a
leading provider of higher education and K-12 educational products
and solutions. Through its Barnes & Noble College and MBS
Textbook Exchange segments, Barnes & Noble Education operates
1,444 physical and virtual bookstores across the U.S., serving more
than 6 million students and faculty. Through its Digital Student
Solutions segment, the Company offers a suite of digital software,
content and services including direct-to-student study tools,
serving approximately 100,000 subscribers in more than 15 different
countries and receiving more than 20 million unique monthly
visitors to its sites. The Company also operates one of the largest
textbook wholesale distribution channels in the United States. For
more information please visit www.bned.com.
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 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 28,
2018. 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
The consolidated financial statements for the 13 and 52 weeks
ended April 28, 2018 include the financial results of MBS Textbook
Exchange, LLC ("MBS") for the entire period and include the
financial results of Student Brands, LLC from the date of
acquisition, August 3, 2017. The consolidated financial statements
for the 13 and 52 weeks ended April 29, 2017 include the financial
results of MBS from the acquisition date, February 27, 2017, and
exclude the financial results of Student Brands, LLC. All material
intercompany accounts and transactions have been eliminated in
consolidation.
Prior to the fourth quarter of fiscal year 2018, we had two
reportable segments: BNC and MBS. In connection with our focus on
developing digital solutions, during the fourth quarter of fiscal
year 2018, the Company realigned its business into the following
three reportable segments: BNC, MBS and DSS. Additionally,
unallocated shared-service costs, which include various corporate
level expenses and other governance functions, are presented as
“Corporate Services”.
- The BNC Segment is comprised of the
operations of Barnes & Noble College Booksellers, LLC ("BNC")
which operates 768 physical campus bookstores, the majority of
which also have school-branded e-commerce sites operated by BNC and
which offer students access to affordable course materials and
affinity products, including emblematic apparel and gifts. BNC also
offers its First Day™ inclusive access program, in which course
materials, including e-content, are offered at a reduced price
through a course materials fee, and delivered to students digitally
on or before the first day of class. Additionally, the BNC segment
offers a suite of digital content, software, and services to
colleges and universities through our LoudCloud platform, such as
predictive analytics, a variety of open educational resources
courseware, and a competency-based learning platform.
- The MBS Segment is comprised of MBS
Textbook Exchange, LLC's ("MBS") two highly integrated businesses:
MBS Direct which operates 676 virtual bookstores for college and
university campuses, and K-12 schools, and MBS Wholesale which is
one of the largest textbook wholesalers in the country. MBS
Wholesale's business centrally sources and sells new and used
textbooks to more than 3,500 physical college bookstores, including
BNC’s 768 campus bookstores. MBS Wholesale sells hardware and a
software suite of applications that provides inventory management
and point-of-sale solutions to approximately 430 college
bookstores.
- The Digital Student Solutions ("DSS")
Segment includes direct-to-student product and service offerings to
assist students to study more effectively and improve academic
performance, thus enabling them to gain the valuable skills
necessary to succeed after college. DSS is comprised of the
operations of Student Brands, LLC, a leading direct-to-student
subscription-based writing services business, with approximately
100,000 subscribers across its digital properties, as well as
tutoring and test prep services offered through our partnership
with The Princeton Review. We currently offer these online student
services directly to students, and increasingly will be leveraging
our BNC and MBS physical and virtual bookstore footprint to market
directly to students where we serve as the campus bookstore. We
continue to aggressively expand our ecosystem of products and
services through our own internal development, as well as by
partnering with other companies to provide a complete hub of
products and services designed to improve student success and
outcomes.
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.
Shared corporate overhead costs previously allocated to MBS prior
to the fourth quarter of fiscal year 2018 have been reclassified
and are included in selling and administrative expenses in the BNC
segment or Corporate Services.
To enable comparisons with prior period performance, historical
segment information for quarterly and full year periods of Fiscal
Year 2018 and Fiscal Year 2017 are contained in this release.
Our consolidated financial statements reflect the following
reclassifications for consistency with the current year
presentation:
- Cost of Sales expenses primarily
related to facility costs and insurance for the Corporate Services
category have been reclassified to Selling and Administrative
Expenses.
- For our digital rental products, we
have reclassified Rental Income to Product Sales and Other, and
have reclassified Rental Cost of Sales to Product and Other Cost of
Sales, with no impact to Gross Margin. Digital rental revenue and
digital rental cost of sales are recognized at the time of delivery
and are not deferred over the rental period.
Prior periods presented reflect the segment presentation and
reclassifications noted above.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Statements of
Operations
(In thousands, except per share
data)
(Unaudited)
13 weeks ended 52 weeks ended April 28, 2018
April 29, 2017 April 28, 2018 April 29, 2017 Sales: Product
sales and other $ 286,703 $ 266,437 $ 1,984,472 $ 1,641,881 Rental
income 70,951 76,393 219,145 232,481 Total
sales 357,654 342,830 2,203,617 1,874,362 Cost
of sales: (a) Product and other cost of sales 194,334 181,587
1,522,687 1,281,043 Rental cost of sales 34,986 38,218
123,697 134,258 Total cost of sales 229,320
219,805 1,646,384 1,415,301 Gross profit 128,334
123,025 557,233 459,061 Selling and
administrative expenses 106,121 97,438 433,746 380,793 Depreciation
and amortization expense 16,858 14,261 65,586 53,318 Impairment
loss (non-cash) (a) — — 313,130 — Restructuring and other charges
(a) — — 5,429 1,790 Transaction costs (a) 150 6,967
2,045 9,605 Operating income (loss) 5,205 4,359 (262,703 )
13,555 Interest expense, net 2,478 1,489 10,306
3,464 Income (loss) before income taxes 2,727 2,870 (273,009
) 10,091 Income tax (benefit) expense (14,330 ) 2,643
(20,443 ) 4,730 Net income (loss) $ 17,057 $ 227 $
(252,566 ) $ 5,361 Earnings (Loss) per common share: Basic $
0.36 $ — $ (5.40 ) $ 0.12 Diluted $ 0.36 $ — $ (5.40 ) $ 0.11
Weighted average common shares outstanding: Basic 46,915 46,472
46,763 46,317 Diluted 47,487 46,903 46,763 46,763 (a) For
additional information, see Note (a) - (c) in the Non-GAAP
disclosure information of this Press Release. 13 weeks ended
52 weeks ended April 28, 2018 April 29, 2017 April
28, 2018 April 29, 2017
Percentage of sales: Sales:
Product sales and other 80.2 % 77.7 % 90.1 % 87.6 % Rental income
19.8 % 22.3 % 9.9 % 12.4 % Total sales 100.0 % 100.0 % 100.0 %
100.0 % Cost of sales: Product and other cost of sales (a) 67.8 %
68.2 % 76.7 % 78.0 % Rental cost of sales (a) 49.3 % 50.0 % 56.4 %
57.8 % Total cost of sales 64.1 % 64.1 % 74.7 % 75.5 % Gross profit
35.9 % 35.9 % 25.3 % 24.5 % Selling and administrative expenses
29.7 % 28.4 % 19.7 % 20.3 % Depreciation and amortization 4.7 % 4.2
% 3.0 % 2.8 % Impairment loss (non-cash) — % — % 14.2 % — %
Restructuring and other charges — % — % 0.2 % 0.1 % Transaction
costs — % 2.0 % 0.1 % 0.5 % Operating income (loss) 1.5 % 1.2 %
(11.9)
%
0.7 % Interest expense, net 0.7 % 0.4 % 0.5 % 0.2 % Income (loss)
before income taxes 0.8 % 0.8 %
(12.4)
%
0.5 % Income tax (benefit) expense
(4.0)
%
0.8 %
(0.9)
%
0.2 % Net income (loss) 4.8 % — %
(11.5)
%
0.3 % (a) Represents the percentage these costs bear to the
related sales, instead of total sales.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share
data)
(Unaudited)
April 28, 2018 April 29, 2017 ASSETS Current
assets: Cash and cash equivalents $ 16,126 $ 19,003 Receivables,
net 100,060 86,040 Merchandise inventories, net 446,169 434,064
Textbook rental inventories 47,779 52,826 Prepaid expenses and
other current assets 9,237 10,698 Total current
assets 619,371 602,631 Property and equipment, net
111,287 116,613 Intangible assets, net 219,129 209,885 Goodwill
49,282 329,467 Other noncurrent assets 40,142 41,236
Total assets $ 1,039,211 $ 1,299,832 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $
187,909 $ 192,742 Accrued liabilities 125,556 120,478 Short-term
borrowings 100,000 100,000 Total current liabilities
413,465 413,220 Long-term deferred taxes, net 2,106
16,871 Other long-term liabilities 59,277 96,433 Long-term
borrowings 96,400 59,600 Total liabilities 571,248
586,124 Commitments and contingencies — — Stockholders' equity:
Parent company investment — — Preferred stock, $0.01 par value;
authorized, 5,000 shares; issued and outstanding, none — —
Common stock, $0.01 par value; authorized,
200,000 shares; issued, 50,032 and 49,372 shares, respectively;
outstanding, 46,917 and 46,517 shares, respectively
501 494 Additional paid-in-capital 717,323 708,871 (Accumulated
deficit) Retained earnings (220,203 ) 32,363 Treasury stock, at
cost (29,658 ) (28,020 ) Total stockholders' equity 467,963
713,708 Total liabilities and stockholders' equity $
1,039,211 $ 1,299,832
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Earnings Per Share
(In thousands, except per share
data)
(Unaudited)
13 weeks ended 52 weeks ended April 28, 2018
April 29, 2017 April 28, 2018 April 29, 2017
Numerator
for basic earnings per share: Net income (loss) $ 17,057 $ 227
$ (252,566 ) $ 5,361 Less allocation of earnings to participating
securities (7 ) — — (3 ) Net income (loss) available
to common shareholders $ 17,050 $ 227 $ (252,566 ) $
5,358
Numerator for diluted earnings per
share: Net income (loss) available to common shareholders $
17,050 $ 227 $ (252,566 ) $ 5,358 Allocation of earnings to
participating securities 7 — — 3 Less diluted allocation of
earnings to participating securities (7 ) — — (3 )
Net income (loss) available to common shareholders $ 17,050
$ 227 $ (252,566 ) $ 5,358
Denominator for
basic earnings (loss) per share: Basic weighted average common
shares 46,915 46,472 46,763 46,317
Denominator for diluted earnings (loss) per share:
Basic weighted average common shares 46,915 46,472 46,763 46,317
Average dilutive restricted stock units 521 366 — 389 Average
dilutive performance shares 31 59 — 40 Average dilutive restricted
shares 11 6 — 17 Average dilutive performance share units 9
— — — Diluted weighted average common shares
47,487 46,903 46,763 46,763
Earnings (loss) per common share: Basic $ 0.36 $ —
$ (5.40 ) $ 0.12 Diluted $ 0.36 $ — $
(5.40 ) $ 0.11
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIESSales Information(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 52 week periods are as follows:
Dollars in millions 13 weeks ended 52
weeks ended April 28, 2018 April 29, 2017 April 28, 2018
April 29, 2017 MBS Sales (a) Wholesale $ 4.7 $
14.1 $ 236.9 $ 14.1 Direct(b) 7.1 20.0 188.5
20.0 MBS total sales subtotal: $ 11.8 $ 34.1 $ 425.4 $ 34.1
BNC Sales New stores (b) $ 8.5 $ 16.8 $ 64.4 $ 109.5 Closed stores
(b) (2.4 ) (3.2 ) (12.1 ) (23.8 ) Comparable stores (c) 0.1 (0.5 )
(69.8 ) (60.2 ) Textbook rental deferral (4.9 ) 0.5 1.3 0.6 Service
revenue (d) (0.1 ) 2.5 2.9 5.8 Other (e) (7.3 ) 3.2 (16.2 )
5.6 BNC total sales subtotal: $ (6.1 ) $ 19.3 $ (29.5 ) $
37.5 DSS Sales (f) $ 5.7 $ — $ 15.8 $ — Eliminations
(g) $ 3.4 $ (5.3 ) $ (82.4 ) $ (5.3 ) Total sales variance $
14.8 $ 48.1 $ 329.3 $ 66.3
(a) On February 27, 2017, we acquired MBS Textbook Exchange, LLC
("MBS"). The consolidated financial statements for the 13 and 52
weeks ended April 28, 2018 include the financial results of MBS and
the consolidated financial statements for the 13 and 52 weeks ended
April 29, 2017 include the financial results of MBS from the date
of acquisition, February 27, 2017. All material intercompany
accounts and transactions have been eliminated in
consolidation.
(b) The following is a store count summary for BNC physical
stores and MBS Direct virtual stores:
13 weeks ended April 28, 2018 13 weeks
ended April 29, 2017 BNC Stores MBS Direct Stores (a) BNC
Stores MBS Direct Stores (a) Number of stores at beginning
of period 782 698 770 700 Stores opened 3 2 2 15 Stores closed 17
24 3 3 Number of stores at end of period 768 676 769 712 52
weeks ended April 28, 2018 52 weeks ended April 29, 2017 BNC Stores
MBS Direct Stores BNC Stores MBS Direct Stores Number of stores at
beginning of period 769 712 751 700 Stores opened 33 21 38 15
Stores closed 34 57 20 3 Number of stores at end of period 768 676
769 712
(c) For Comparable Sales details, see below.
(d) Service revenue includes Promoversity, brand partnerships,
shipping and handling, LoudCloud digital content, software, and
services, and revenue from other programs.
(e) Other includes inventory liquidation sales to third parties,
and certain accounting adjusting items related to return reserves,
agency sales and other deferred items.
(f) DSS segment revenue includes Student Brands, LLC
subscription-based writing services business. The consolidated
financial statements for the 13 and 52 weeks ended April 28, 2018
include the financial results of Student Brands, LLC from the date
of acquisition, August 3, 2017. All material intercompany accounts
and transactions have been eliminated in consolidation.
(g) Eliminates MBS sales to BNED and BNED commissions earned
from MBS.
Comparable Sales - Barnes & Noble College
Comparable store sales variances by category for the 13 and 52
week periods are as follows:
Dollars in millions 13 weeks ended
52 weeks ended April 28, 2018
April 29, 2017 April 28, 2018
April 29, 2017 Textbooks $ (2.9 ) (3.5
)% $ (0.5 ) (0.6 )% $ (65.6 )
(5.9 )% $ (55.7 )
(4.9 )% General Merchandise 4.5 3.6 % 0.6 0.5 % 1.2 0.2 % (0.7 )
(0.1 )% Trade Books (1.5 ) (12.6 )% (0.5 ) (4.1 )% (5.3 ) (10.2 )%
(3.2 ) (5.8 )% Other — — %
(0.1
) (94.4 )% (0.1 ) (78.3 )% (0.6 ) (88.9 )% Total Comparable Store
Sales $ 0.1 0.1 % $ (0.5 ) (0.2 )% $ (69.8 ) (4.1 )% $ (60.2
) (3.5 )%
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.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings 13 weeks ended 52 weeks ended April
28, 2018 April 29, 2017 April 28, 2018 April 29, 2017
Net income (loss) $ 17,057 $ 227 $ (252,566 ) $ 5,361 Reconciling
items, after-tax (below) 111 4,272 309,515
6,986 Adjusted Earnings (Non-GAAP) $ 17,168 $ 4,499 $
56,949 $ 12,347 Reconciling items, pre-tax Impairment
loss (non-cash) (a) $ — $ — $ 313,130 $ — Inventory valuation
amortization (MBS) (non-cash) (b) — — 3,273 — Restructuring and
other charges (c) — — 5,429 1,790 Transaction costs (d) 150
6,967 2,045 9,605 Reconciling items, pre-tax 150
6,967 323,877 11,395 Less: Pro forma income tax impact (e) 39
2,695 14,362 4,409 Reconciling items,
after-tax $ 111 $ 4,272 $ 309,515 $ 6,986
Adjusted EBITDA 13 weeks ended 52 weeks ended April
28, 2018 April 29, 2017 April 28, 2018 April 29, 2017 Net income
(loss) $ 17,057 $ 227 $ (252,566 ) $ 5,361 Add: Depreciation and
amortization expense 16,858 14,261 65,586 53,318 Interest expense,
net 2,478 1,489 10,306 3,464 Income tax (benefit) expense (14,330 )
2,643 (20,443 ) 4,730 Impairment loss (non-cash) (a) — — 313,130 —
Inventory valuation amortization (MBS) (non-cash) (b) — — 3,273 —
Restructuring and other charges (c) — — 5,429 1,790 Transaction
costs (d) 150 6,967 2,045 9,605 Adjusted
EBITDA (Non-GAAP) $ 22,213 $ 25,587 $ 126,760
$ 78,268
(a) During the 52 weeks ended April 28, 2018, we completed our
annual goodwill impairment test. Based on the results of the
impairment test, the carrying value of goodwill exceeded its fair
value and we recorded a goodwill impairment (non-cash impairment
loss) of $313.1 million. For additional information, see Form 10-K
for the year ended April 28, 2018.
(b) For the 52 weeks ended April 28, 2018, gross margin includes
$3.3 million of incremental cost of sales related to amortization
of the MBS inventory fair value adjustment recorded as of the
acquisition date, February 27, 2017, and amortized over six
months.
(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 52 weeks ended April 28, 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.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information (a) 13 weeks ended 52
weeks ended April 28, 2018 April 29, 2017 April 28, 2018
April 29, 2017 Sales BNC $ 307,917 $ 314,029 $ 1,816,083 $
1,845,561 MBS (b) 45,950 34,091 459,529 34,091 DSS 5,704 — 15,762 —
Elimination (1,917 ) (5,290 ) (87,757 ) (5,290 ) Total $ 357,654
$ 342,830 $ 2,203,617 $ 1,874,362
Gross profit BNC $ 112,082 $ 118,914 $ 441,209 $ 454,950 MBS
(b) 5,632 4,748 104,618 4,748 DSS 5,562 — 15,403 — Elimination
5,058 (637 ) (724 ) (637 ) Total $ 128,334 $ 123,025
$ 560,506 $ 459,061 Selling and
administrative expenses BNC $ 85,586 $ 83,110 $ 353,716 $ 347,103
MBS 12,110 8,317 50,020 8,317 DSS 3,083 — 7,844 — Corporate and
Other 5,342 6,011 22,166 25,373 Total $
106,121 $ 97,438 $ 433,746 $ 380,793
Adjusted EBITDA (Non-GAAP) (c) BNC $ 26,496 $ 35,804 $
87,493 $ 107,847 MBS (b) (6,478 ) (3,569 ) 54,598 (3,569 ) DSS
2,479 — 7,559 — Corporate and Other (5,342 ) (6,011 ) (22,166 )
(25,373 ) Elimination 5,058 (637 ) (724 ) (637 ) Total $
22,213 $ 25,587 $ 126,760 $ 78,268
(a) See Explanatory Note in this Press Release for Segment
descriptions and consolidation information.
(b) For the 52 weeks ended April 28, 2018, gross margin excludes
$3.3 million of incremental cost of sales related to amortization
of the MBS inventory fair value adjustment recorded as of the
acquisition date, February 27, 2017, and amortized over six
months.
(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 13 weeks ended 52
weeks ended April 28, 2018 April 29, 2017 April 28,
2018 April 29, 2017 Gross margin BNC 36.4 % 37.9 %
24.3 % 24.7 % MBS 12.3 % 13.9 % 22.8 % 13.9 % DSS 97.5 % — % 97.7 %
— % Elimination
(263.8)
%
12.0 % 0.8 % 12.0 % Total gross margin 35.9 % 35.9 % 25.4 % 24.5 %
Selling and administrative expenses BNC 27.8 % 26.5 % 19.5 %
18.8 % MBS 26.4 % 24.4 % 10.9 % 24.4 % DSS 54.0 % — % 49.8 % — %
Corporate and Other 100.0 % 100.0 % 100.0 % 100.0 % Total selling
and administrative expenses 29.7 % 28.4 % 19.7 % 20.3 %
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Historical Segment Information
(In thousands)
(Unaudited)
Segment Information (a) Fiscal Year
2018 Q1 Q2 Q3
Q4 Total Sales BNC $ 249,977 $ 757,301 $
500,888 $ 307,917 $ 1,816,083 MBS 139,801 134,851 138,927 45,950
459,529 DSS (b) — 4,486 5,572 5,704 15,762 Elimination (34,067 )
(9,777 ) (41,996 ) (1,917 ) (87,757 )
Total $ 355,711 $ 886,861 $ 603,391 $ 357,654
$ 2,203,617 Gross profit BNC $ 49,224 $
167,523 $ 112,380 $ 112,082 $ 441,209 MBS (c) 29,837 34,200 34,949
5,632 104,618 DSS (b) — 4,344 5,497 5,562 15,403 Elimination
(11,613 ) 11,658 (5,827 ) 5,058 (724 ) Total $ 67,448
$ 217,725 $ 146,999 $ 128,334 $ 560,506
Selling and administrative expenses BNC $ 81,181 $
95,041 $ 91,908 $ 85,586 $ 353,716 MBS 12,076 13,329 12,505 12,110
50,020 DSS (b) 223 2,176 2,362 3,083 7,844 Corporate and Other
6,417 4,744 5,663 5,342 22,166
Total $ 99,897 $ 115,290 $ 112,438 $
106,121 $ 433,746 Adjusted EBITDA (Non-GAAP)
(d) BNC $ (31,957 ) $ 72,482 $ 20,472 $ 26,496 $ 87,493 MBS (c)
17,761 20,871 22,444 (6,478 ) 54,598 DSS (b) (223 ) 2,168 3,135
2,479 7,559 Corporate and Other (6,417 ) (4,744 ) (5,663 ) (5,342 )
(22,166 ) Elimination (11,613 ) 11,658 (5,827 ) 5,058
(724 ) Total $ (32,449 ) $ 102,435 $ 34,561 $ 22,213
$ 126,760
(a) See Explanatory Note in this Press Release for Segment
descriptions and consolidation information.
(b) The consolidated financial statements for Fiscal Year 2018
include the financial results of Student Brands, LLC in the DSS
Segment from the date of acquisition, August 3, 2017.
(c) For Q1, Q2 and FY18, gross margin excludes $2,248 and
$1,025, for a total of $3,273, respectively, of incremental cost of
sales related to amortization of the MBS inventory fair value
adjustment recorded as of the acquisition date, February 27, 2017,
and amortized over six months.
(d) For additional information, see "Use of Non-GAAP Financial
Information" in the Non-GAAP disclosure information of this Press
Release.
Segment Information (a) Fiscal Year
2017 Q1 Q2 Q3
Q4 Total Sales BNC $ 239,237 $ 770,671 $
521,624 $ 314,029 $ 1,845,561 MBS (b) — — — 34,091 34,091 DSS — — —
— — Elimination — — — (5,290 ) (5,290 ) Total
$ 239,237 $ 770,671 $ 521,624 $ 342,830
$ 1,874,362 Gross profit BNC $ 47,833 $ 171,954 $
116,249 $ 118,914 $ 454,950 MBS (b) — — — 4,748 4,748 DSS — — — — —
Elimination — — — (637 ) (637 ) Total $ 47,833
$ 171,954 $ 116,249 $ 123,025 $ 459,061
Selling and administrative expenses BNC $ 77,806 $
95,047 $ 91,140 $ 83,110 $ 347,103 MBS (b) — — — 8,317 8,317 DSS —
— — — — Corporate and Other 6,551 6,516 6,295
6,011 25,373 Total $ 84,357 $ 101,563 $
97,435 $ 97,438 $ 380,793 Adjusted
EBITDA (Non-GAAP) (c) BNC $ (29,973 ) $ 76,907 $ 25,109 $ 35,804 $
107,847 MBS (b) — — — (3,569 ) (3,569 ) DSS — — — — — Corporate and
Other (6,551 ) (6,516 ) (6,295 ) (6,011 ) (25,373 ) Elimination —
— — (637 ) (637 ) Total $ (36,524 ) $ 70,391
$ 18,814 $ 25,587 $ 78,268
(a) See Explanatory Note in this Press Release for Segment
descriptions and consolidation information.
(b) The consolidated financial statements for Fiscal Year 2017
include the financial results of MBS Textbook Exchange, LLC in the
MBS Segment from the date of acquisition, February 27, 2017.
(c) For additional information, see "Use of Non-GAAP Financial
Information" in the Non-GAAP disclosure information of this Press
Release.
Use of Non-GAAP Financial Information - Adjusted Earnings and
Adjusted EBITDA
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 items that
are subtracted from or added to net income) and Adjusted EBITDA
(defined by the Company as earnings before interest, taxes,
depreciation and amortization, as adjusted for items that are
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 28, 2018, which includes
consolidated financial statements for each of the three years for
the period ended April 28, 2018 (fiscal 2018, fiscal 2017, and
fiscal 2016), the Company's Quarterly Report on Form 10-Q for the
period ended July 29, 2017 filed with the SEC on August 30, 2017,
the Company's Quarterly Report on Form 10-Q for the period ended
October 28, 2017 filed with the SEC on December 5, 2017, and the
Company's Quarterly Report on Form 10-Q for the period ended
January 29, 2018 filed with the SEC on March 1, 2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180620006206/en/
Media:Barnes & Noble
Education, Inc.Carolyn J. Brown, 908-991-2967Vice
PresidentCorporate Communicationscbrown@bned.comorInvestor:Barnes & Noble Education,
Inc.Thomas Donohue, 908-991-2966Vice PresidentTreasurer and
Investor Relationstdonohue@bned.com
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