8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

February 9, 2016

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)

BLUE NILE, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE	000-50763	91-1963165
(STATE OR OTHER JURISDICTION OF INCORPORATION)	(COMMISSION FILE NUMBER)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

411 FIRST AVENUE SOUTH, SUITE 700, SEATTLE, WASHINGTON, 98104

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(206) 336-6700

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE

N/A

(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 11, 2016, Blue Nile, Inc. (“Blue Nile” or “the Company”) issued a press release announcing financial results for the fourth quarter ended January 3, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The press release should be read in conjunction with the note regarding forward-looking statements, which is included in the text of the press release.

The information in this Item 2.02 in this Form 8-K and the exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, unless expressly set forth by specific reference in such filing.

ITEM 5.02	DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

Executive Cash Bonus Plan for Fiscal Year 2016

On February 9, 2016, the Company's Compensation Committee of the Board of Directors (the “Committee”) approved the Executive Cash Bonus Plan for Fiscal Year 2016 (the “2016 Plan”). The 2016 Plan operates under, and is subject to the terms of, the Company’s 2013 Equity Incentive Plan (the “Plan”), which was approved by the Company’s stockholders at the Annual Meeting of Stockholders held on May 21, 2013. The 2016 Plan is intended to increase stockholder value and the success of the Company by motivating 2016 Plan participants to achieve the Company’s objectives through the payment of awards when those objectives are achieved.

Performance Period. The Performance Period for the 2016 Plan is the Company’s 2016 fiscal year, which is January 4, 2016 through January 1, 2017.

Eligibility. Each of the Company's executive officers, including the chief executive officer, and certain other key employees are eligible for participation in the 2016 Plan, subject to their continued employment through the end of the Performance Period. The Company may also pay discretionary bonuses or other types of incentive compensation outside the 2016 Plan.

Determination of Award. Pursuant to the 2016 Plan, each participant is eligible to earn an incentive bonus calculated as a percentage of the participant’s actual base salary (the “Target Award”). The Target Award is calculated by multiplying the participant’s base salary earned during the fiscal year by a Committee approved target bonus percentage. The 2016 Plan requires that the Company achieve an initial minimum level of adjusted EBITDA on the terms set forth in the 2016 Plan (the “Section 162(m) Performance Goal”). If the Section 162(m) Performance Goal is not achieved, no payments shall be earned under the 2016 Plan. If Section 162(m) Performance Goal is achieved, each participant is eligible to earn a maximum bonus equal to 200% of such participant’s annual Target Award, up to a maximum of $3 million (the “Maximum Award”).

Determination of Actual Award - Payout Formula:

On the Payout Determination Date (the date upon which the Committee determines the amounts payable under the 2016 Plan with respect to any previously completed Performance Period), the Committee will determine whether the Company has achieved the Section 162(m) Performance Goal. If the Company has achieved the Section 162(m) Performance Goal, each Participant will be credited with a Maximum Award. The Committee will then exercise negative discretion in respect of the Maximum Award in order to determine the actual award earned by that executive for the Performance Period (the “Actual Award”), with such negative discretion based on: (i) achievement against additional adjusted EBITDA goals selected by the Committee, as reflected by the calculation of the adjusted EBITDA Result (as described below), (ii) achievement against any individual performance goals selected by the Committee, as reflected by the calculation of the Individual Result (described below), and (iii) any other factors selected by the Committee in its sole discretion.

Specifically, the Actual Award is determined as follows:

1. The product of (i) the EBITDA Result, (ii), 80%, and (iii) the Target Award is the “EBITDA Award.”

2. The product of (i) the Individual Result, (ii), 20%, and (iii) the Target Award is the “Individual Award.”

3. The sum of the (i) EBITDA Award, and (ii) Individual Award, and subject to any other factors selected by the Committee in its sole discretion, is the Actual Award, and the Maximum Award is reduced by the difference between the Actual Award and the Maximum Award.

To determine the “EBITDA Result” and “Individual Result” the Compensation will determine a percentage, between 0% and 200%, based on the achievement during the Performance Period of the goals selected by the Committee for the Performance Period.

The foregoing description of the 2016 Plan is a summary of the material terms of the 2016 Plan, does not purport to be complete, and is qualified in its entirety by reference to the entire Executive Cash Bonus Plan for Fiscal Year 2016. A copy of the Executive Cash Bonus Plan for Fiscal Year 2016 is attached to this Current Report on Form 8-K as Exhibit 10.1.

ITEM 8.01 OTHER EVENTS

The Company also announced on February 11, 2016 that Blue Nile’s Board of Directors on February 9, 2016 declared a special cash dividend on the Company’s common stock. The dividend of $0.70 per share is payable on March 7, 2016 to shareholders of record at the close of business on February 22, 2016.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

EXHIBIT NUMBER	DESCRIPTION
10.1	Executive Cash Bonus Plan for Fiscal Year 2016
99.1	Press release dated February 11, 2016, issued by Blue Nile, Inc.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BLUE NILE, INC.
	Registrant
Dated: February 11, 2016	By: /s/ David Binder
	David Binder
	Chief Financial Officer and Chief Administrative Officer
	(Principal Financial Officer)

EX-10.1

Exhibit 10.1

BLUE NILE, INC.

PERFORMANCE BONUS PLAN

EXECUTIVE CASH BONUS PLAN FOR FISCAL YEAR 2016

Purpose:

Blue Nile, Inc. (“Blue Nile” or the “Company”) has designed this Executive Cash Bonus Plan for Fiscal Year 2016 (the “Bonus Plan”) for designated executive officers. The Bonus Plan is designed to motivate these executives to achieve the Company’s objectives by rewarding the executives with cash payments upon the achievement of the Company’s objectives for fiscal year 2016.

Subject to Performance Bonus Plan:

This Bonus Plan operates under, and is subject to the terms of, the Blue Nile’s 2013 Equity Incentive Plan (the “Plan”). The Plan was approved by Blue Nile’s Board of Directors and Blue Nile’s stockholders. Any capitalized terms not defined in this Bonus Plan have the meaning set forth in the Plan.

Performance Period:

The Performance Period for this Bonus Plan is the Company’s 2016 fiscal year, which is January 4, 2016 through January 1, 2017.

Eligibility:

On the Target Determination Date, the Committee will designate which executive officers and other key employees will be Participants. In order to earn any Bonus Award under the Bonus Plan, a designated executive must remain employed throughout the entire Performance Period. If the executive’s employment terminates before the end of the Performance Period, the executive will not be eligible to earn or be paid any Bonus Award, except as provided in an applicable severance plan or in an individual agreement with an executive and only to the extent such right does not disqualify such Bonus Award (or any other Bonus Award under this Bonus Plan) as Performance-Based Compensation. If an executive is on a leave of absence for a portion of the Performance Period, the executive will be eligible for a Bonus Award based on the actual salary he or she earned from the Company during the Performance Period for active service (that is, exclusive of any salary replacement benefits paid during the leave via insurance or otherwise). 

The Section 162(m) Performance Goal:

The “Section 162(m) Performance Goal” used to determine the Maximum Award that may be earned by the Participant for the Performance Period is adjusted EBITDA. On the Target Determination Date, the Committee will establish the level of achievement of adjusted EBITDA that will result in the crediting to the Participant of the Maximum Award. If the Company does not achieve this level of adjusted EBITDA during the Performance Period, no Bonus Award will be earned or paid to any Participant under this Bonus Plan for the Performance Period.

“adjusted EBITDA” means earnings before interest, and other income, taxes, depreciation and amortization adjusted as follows:

• to exclude restructuring;

• to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings;

• to exclude the effects of changes to generally accepted accounting principles required by the Financial Accounting Standards Board;

• to exclude the effects of any statutory adjustments to corporate tax rates;

• to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles;

• to exclude the effects of stock based compensation and/or the payment of the bonuses under this Plan and/or any other bonus plans of the Company;

• to exclude the dilutive effects of acquisitions or joint ventures;

• to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture;

• to exclude or include the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends;

• to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); and

• to reflect any partial or complete corporate liquidation.

Maximum Award:

On the Target Determination Date, the Committee will establish each the bonus percentage necessary to determine each Participant’s Maximum Award. A Participant’s “Maximum Award” is the lesser of (i) 200% of his or her Target Award and (ii) $3,000,000.

Target Award:

The “Target Award” equals the product of: (a) the actual base salary earned by the Participant in the Performance Period and (b) a bonus percentage between 0% and 100% designated by the Committee on the Target Determination Date. A Participant’s bonus percentage may not be increased during the Performance Period. If the Participant’s bonus percentage is decreased or salary amount is changed during the Performance Period, the Participant’s Target Award will be calculated based on the applicable bonus percentage in place at the time the Participant earned the applicable salary amount.

Determination of Actual Award - Payout Formula:

On the Payout Determination Date (the date upon which the Committee determines the amounts payable under the Bonus Plan with respect to any previously completed Performance Period), the Committee will determine whether the Company has achieved the Section 162(m) Performance Goal. If the Company has achieved the Section 162(m) Performance Goal, each Participant will be credited with a Maximum Award. The Committee will then exercise negative discretion in respect of the Maximum Award in order to determine the actual award earned by that executive for the Performance Period (the “Actual Award”), with such negative discretion based on: (i) achievement against additional adjusted EBITDA goals selected by the Committee, as reflected by the calculation of the adjusted EBITDA Result (as described below), (ii) achievement against any individual performance goals selected by the Committee, as reflected by the calculation of the Individual Result (described below), and (iii) any other factors selected by the Committee in its sole discretion.

Specifically, the Actual Award is determined as follows:

1.	The product of (i) the EBITDA Result, (ii), 80%, and (iii) the Target Award is the “EBITDA Award.”
2.	The product of (i) the Individual Result, (ii), 20%, and (iii) the Target Award is the “Individual Award.”
3.	The sum of (i) the EBITDA Award, and (ii) the Individual Award, and subject to any other factors selected by the Committee in its sole discretion, is the Actual Award, and the Maximum Award is reduced by the difference between the Actual Award and the Maximum Award.

To determine the “EBITDA Result” and “Individual Result” the Committee will determine a percentage, between 0% and 200%, based on the achievement during the Performance Period of the goals selected by the Committee for the Performance Period.

Administration:

Actual Awards will generally be paid within 60 days after the close of the Performance Period, but in all cases will be paid not later than March 15 of the year following the year in which they were earned, in compliance with the short term deferral exception from Section 409A of the Internal Revenue Code of 1986, as amended. The Company will withhold from any payments under the Bonus Plan and from any other amounts payable to a Participant by the Company any amount required to satisfy the income and employment tax withholding obligations arising under applicable federal and state laws in respect of a Bonus Award.

Participation in the Bonus Plan is at the discretion of the Committee. Designation as a Participant does not change the at-will nature of employment with the Company.

Except as otherwise provided in the Performance Bonus Plan, the Committee will have full power and authority to construe, interpret, and administer the Bonus Plan, including the power to amend or terminate the Bonus Plan at any time, without the consent of any adversely affected Participant. The Committee may at any time adopt such rules, regulations, policies, or practices as, in its sole discretion, it determines to be necessary or appropriate for the administration of, or the performance of its responsibilities under, the Bonus Plan. Any decision by the Committee that is not inconsistent with the provisions of the Performance Bonus Plan shall be conclusive and binding on all persons, and shall be given the maximum deference permitted by law.

EX-99.1

Exhibit 99.1

Blue Nile Announces Fourth Quarter and Full Year 2015 Financial Results; First-Ever Special Dividend

Special Cash Dividend of $0.70 per share

Fourth Quarter Net Sales of $150.0 million

Fourth Quarter Earnings Per Diluted Share Total $0.43

Full Year Net Sales of $480.1 million

Full Year Earnings Per Diluted Share Total $0.90

SEATTLE, FEBRUARY 11, 2016 -- Blue Nile, Inc. (Nasdaq: NILE), a leading online retailer of diamonds and fine jewelry, today reported financial results for its fourth quarter and fiscal year ended January 3, 2016.

Net sales decreased4.8% to $150.0 million for the fourth quarter ended January 3, 2016 compared to$157.4 million for the fourth quarter ended January 4, 2015. Operating income for the fourth quarter 2015 totaled $7.7 million, representing an operating margin of 5.1% of net sales compared to $6.9 million of operating income and 4.4% of operating margin for the fourth quarter of 2014. Net income for the fourth quarter 2015 totaled $5.0 million, or $0.43 per diluted share. Non-GAAP adjusted EBITDA for the fourth quarter 2015 totaled $10.0 million.

Blue Nile reported net sales of $480.1 million for the fiscal year ended January 3, 2016 compared to $473.5 million for the fiscal year ended January 4, 2015, an increase of 1.4%. Operating income for the fiscal year ended January 3, 2016 was $16.1 million compared to $14.2 million for the fiscal year ended January 4, 2015. Net income for the fiscal year ended January 3, 2016 was $10.5 million and earnings per diluted share totaled $0.90. Non-GAAP adjusted EBITDA for the fiscal year ended January 3, 2016 was $24.9 million.

Net cash provided by operating activities totaled $8.0 million for the fiscal year ended January 3, 2016 compared to $17.2 million for the fiscal year ended January 4, 2015. Non-GAAP free cash flow for the fiscal year ended January 3, 2016 was $4.3 million compared to $13.4 million for the fiscal year ended January 4, 2015.

“Today we announced our fourth quarter results, and while sales were disappointing, we delivered an eight year high in EPS. Revenue growth was challenged by continued weakness from high ticket purchases and foreign currencies, as well as lower selling prices for our core engagement products,” said Harvey Kanter, Blue Nile Chairman, CEO and President. “In spite of these challenges, we sold a record number of engagement rings, expanded gross margin rate, and drove success in our new Webroom. As we look out on 2016, we will push harder on elements that are working: engagement ring units, wedding band attach rates, continued expansion of margin, and the Webroom concept.”

Highlights

• Blue Nile announces its first ever dividend. This special cash dividend is equal to $0.70 per share. The dividend will be payable on March 7, 2016 to shareholders of record at the close of business on February 22, 2016. The Company determined the value of the dividend based on the level of earnings in fiscal year 2015. On an annual basis, the Company will reassess its use of capital, including investments in operations, strategic alternatives, share repurchases, and cash dividends.

• Blue Nile reports fiscal results on a 52/53-week format. Each fiscal year consists of four 13-week quarters, with one extra week added in the fourth quarter every five to six years. The Company's fiscal year 2014 reporting period included 53 weeks, with the additional week falling in the fourth quarter.

• Net sales for the additional week in fiscal year 2014 was estimated at $5.9 million. Taking into account the impact of the additional week in fiscal year 2014, net sales decreased by 1.0% for the fourth quarter 2015 and increased by 2.7% for the fiscal year 2015 compared to the same periods last year.

• U.S. engagement net sales for the fourth quarter 2015decreased7.7% to $78.4 million, compared to $85.0 million for the fourth quarter of 2014. U.S. engagement net sales for the fiscal year ended January 3, 2016 increased 1.3% to $269.9 million, compared to $266.4 million for the fiscal year ended January 4, 2015.

• U.S. non-engagement net sales for the fourth quarter 2015decreased0.3% to $48.7 million, compared to $48.8 million for the fourth quarter of 2014. U.S. non-engagement net sales for the fiscal year ended January 3, 2016increased1.8% to $128.3 million, compared to $126.0 million for the fiscal year ended January 4, 2015.

• International net sales for the fourth quarter 2015 were $22.9 million, compared to $23.6 million for the fourth quarter 2014, a decrease of 3.2%. International net sales for the fiscal year ended January 3, 2016increased1.0% to $81.9 million, compared to $81.1 million for the fiscal year ended January 4, 2015. Excluding the impact from changes in foreign exchange rates, international net sales increased 5.4% and 9.9% for the fourth quarter 2015 and fiscal year ended January 3, 2016, respectively.

• Gross profit for the fourth quarter 2015 totaled $29.1 million. As a percent of net sales, gross profit for the fourth quarter 2015 was 19.4% compared to 18.1% for the fourth quarter of 2014. Gross profit for the fiscal year ended January 3, 2016 totaled $92.3 million and represents 19.2% of sales compared to 18.3% for fiscal year 2014.

• Selling, general and administrative expenses for the fourth quarter 2015 were $21.4 million, compared to $21.6 million in the fourth quarter of 2014. Selling, general and administrative expenses for the fiscal year ended January 3, 2016 were $76.3 million, compared to $72.4 million for the fiscal year ended January 4, 2015.

• Net income for the additional week in fiscal year 2014 was estimated at $0.2 million or $0.02 per diluted share.

• Earnings per diluted share included stock-based compensation expense of $0.06 for the fourth quarter of 2015 and $0.04 for the fourth quarter of 2014.

• Cash and cash equivalents at the end of fiscal year 2015 totaled $86.5 million, compared to $91.2 million at the end of fiscal year 2014.

• During the fiscal year ended January 3, 2016, Blue Nile repurchased a total of 0.4 million shares for $10.8 million.

Financial Guidance

The following forward-looking statements reflect Blue Nile's expectations as ofFebruary 11, 2016. Actual results may be materially affected by many factors, such as consumer spending, economic conditions, product assortment and the various factors detailed below.

Expectations for the first quarter of 2016 (Quarter Ending April 3, 2016):

• Net sales are expected to be between $103 million and $106 million.

• Earnings per diluted share are projected at $0.08 to $0.11.

Expectations for the fiscal year 2016 (Year Ending January 1, 2017):

• Net sales are expected to be between $465 million and $495 million.

• Earnings per diluted share are projected at $0.88 to $0.95.

Forward-Looking Statements

This press release contains forward-looking statements that include risks and uncertainties, including, without limitation, all statements related to future financial and business performance, market opportunity and plans to grow our business. Words such as “expect,” “anticipate,” “believe,” “project,” “will,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to commodity prices, general economic conditions, consumer spending (particularly spending by high-end consumers), product assortment, our fluctuating operating results, currency fluctuations, seasonality in our business, our ability to acquire products on reasonable terms, our online business model, demand for our products, our ability to attract customers in a cost effective manner, the strength of our brand, competition, fraud, system interruptions, our ability to fulfill orders and other risks detailed in our filings with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q and our Annual Report on Form 10-K for the year ended January 4, 2015. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended January 3, 2016, which we expect to file with the Securities and Exchange Commission on or before March 18, 2016. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and Blue Nile undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.

Conference Call

Blue Nile will host a conference call to discuss its fourth quarter financial results today at 5:30 a.m. PT/8:30 a.m. ET. A live webcast of the conference call may be accessed at http://investor.bluenile.com. Following the completion of the call, a recorded replay of the webcast will be available for 30 days at the same Internet address. This call will contain forward-looking statements and other material information regarding Blue Nile's financial and operating results. In the event that any non-GAAP financial measure is discussed on the conference call that is not described in this release, related complementary information will be made available at http://investor.bluenile.com as soon as practicable after the conclusion of the conference call.

Non-GAAP Financial Measures

To supplement Blue Nile's consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), Blue Nile uses non-GAAP adjusted EBITDA and non-GAAP free cash flow as measures of certain components of financial performance. Blue Nile defines non-GAAP adjusted EBITDA as earnings before interest and other income, taxes, depreciation and amortization, adjusted to exclude the effects of stock-based compensation expense. Blue Nile defines non-GAAP free cash flow as net cash provided by (used in) operating activities less cash outflows for purchases of fixed assets, including internal use software and website development. Blue Nile reports sales information in accordance with GAAP. Internally, management monitors its sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating international sales into U.S. dollars (the “constant exchange rate basis”). Blue Nile's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that the non-GAAP financial measures used by Blue Nile may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. Whenever Blue Nile uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measures. Investors are encouraged to review the related GAAP financial

measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Blue Nile's management believes that non-GAAP adjusted EBITDA and non-GAAP free cash flow, as defined, as well as international sales on a constant exchange rate basis provide meaningful supplemental information to the company and to investors. Blue Nile believes that both management and investors benefit from referring to these non-GAAP measures in assessing the performance of Blue Nile and when planning and forecasting future periods. Further, management believes that the inclusion of the non-GAAP adjusted EBITDA and non-GAAP free cash flow calculations provide consistency in Blue Nile's financial reporting and comparability with similar companies in Blue Nile's industry. Management believes the constant exchange rate measurement provides a more representative assessment of the sales performance and provides better comparability between reporting periods.

A reconciliation of non-GAAP adjusted EBITDA to net income is as follows (in thousands):

	13 Weeks Ended			14 Weeks Ended
	January 3, 2016			January 4, 2015
Net Income	$	5,039		$	4,831
Income tax expense	2,609			2,389
Other loss (income), net	14			(363		)
Depreciation and amortization	1,089			864
Stock-based compensation	1,240			1,096
Non-GAAP Adjusted EBITDA	$	9,991		$	8,817
	52 Weeks Ended			53 Weeks Ended
	January 3, 2016			January 4, 2015
Net Income	$	10,534		$	9,731
Income tax expense	5,578			4,888
Other income, net	(62		)	(407		)
Depreciation and amortization	3,858			3,607
Stock-based compensation	5,041			4,281
Non-GAAP Adjusted EBITDA	$	24,949		$	22,100

A reconciliation of differences of non-GAAP free cash flow from the comparable GAAP measure of net cash provided by operating activities is as follows (in thousands):

	13 Weeks Ended			14 Weeks Ended
	January 3, 2016			January 4, 2015
Net cash provided by operating activities	$	53,042		$	59,733
Purchases of fixed assets, including internal-use software and website development	(815		)	(951		)
Non-GAAP free cash flow	$	52,227		$	58,782
	52 Weeks Ended			53 Weeks Ended
	January 3, 2016			January 4, 2015
Net cash provided by operating activities	$	8,036		$	17,208
Purchases of fixed assets, including internal-use software and website development	(3,755		)	(3,771		)
Non-GAAP free cash flow	$	4,281		$	13,437

The following table reconciles year-over-year total company sales as well as international net sales percentage increases from the GAAP sales measures to the non-GAAP constant exchange rate basis:

13 Weeks Ended January 3, 2016	Year over year growth	Effect of foreign exchange movements	Year over year growth on constant exchange rate basis
International net sales	(3.2)%	(8.6)%	5.4%
14 Weeks Ended January 4, 2015	Year over year growth	Effect of foreign exchange movements	Year over year growth on constant exchange rate basis
International net sales	10.9%	(5.5)%	16.4%
52 Weeks Ended January 3, 2016	Year over year growth	Effect of foreign exchange movements	Year over year growth on constant exchange rate basis
International net sales	1.0%	(8.9)%	9.9%
53 Weeks Ended January 4, 2015	Year over year growth	Effect of foreign exchange movements	Year over year growth on constant exchange rate basis
International net sales	10.8%	(3.2)%	14.0%

About Blue Nile, Inc.

Blue Nile, Inc. is the original online jeweler. The company offers a smarter way to buy engagement rings, wedding rings, and fine jewelry by providing in-depth educational materials and unique online tools that place consumers in control of the jewelry shopping process. Blue Nile has some of the highest quality standards in the industry and offers thousands of independently certified diamonds and fine jewelry at prices significantly below traditional retail. Blue Nile can be found online at www.bluenile.com. Blue Nile's shares are traded on the Nasdaq Stock Market LLC under the symbol NILE.

Contact:

Blue Nile, Inc.

Nancy Shipp, 206.388.3626 (Investors)

nancys@bluenile.com

or

Josh Holland, 206.336.6773 (Media)

joshh@bluenile.com

BLUE NILE, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)

	January 3, 2016			January 4, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	86,542		$	91,186
Trade accounts receivable	3,339			2,137
Other accounts receivable	706			1,571
Note receivable	600			—
Inventories	46,376			41,668
Prepaids and other current assets	1,585			1,524
Total current assets	139,148			138,086
Property and equipment, net	10,530			10,422
Intangible assets, net	82			103
Deferred income taxes(1)	5,089			4,187
Note receivable	—			2,000
Other investments	2,280			2,280
Other assets	285			256
Total assets	$	157,414		$	157,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	121,917		$	128,675
Accrued liabilities	12,336			11,992
Current portion of long-term financing obligation	33			32
Current portion of deferred rent	290			292
Total current liabilities	134,576			140,991
Long-term financing obligation, less current portion	455			489
Deferred rent, less current portion	1,697			1,982
Unearned income	1,988			—
Other long-term liabilities	242			169
Commitments and contingencies
Stockholders’ equity:
Common stock	22			22
Additional paid-in capital	232,148			227,146
Accumulated other comprehensive loss	(239		)	(236		)
Retained earnings	114,023			103,489
Treasury stock	(327,498		)	(316,718		)
Total stockholders’ equity	18,456			13,703
Total liabilities and stockholders’ equity	$	157,414		$	157,334
(1) In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. We early adopted this standard retrospectively and reclassified our current deferred income tax assets to noncurrent deferred income tax assets as of January 4, 2015.

BLUE NILE, INC.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	13 Weeks Ended			14 Weeks Ended		52 Weeks Ended			53 Weeks Ended
	January 3, 2016			January 4, 2015		January 3, 2016			January 4, 2015
Net sales	$	149,974		$	157,459	$	480,057		$	473,516
Cost of sales	120,921			128,959		387,711			386,874
Gross profit	29,053			28,500		92,346			86,642
Selling, general and administrative expenses	21,391			21,643		76,296			72,430
Operating income	7,662			6,857		16,050			14,212
Other (loss) income, net
Interest income, net	10			26		86			117
Other (loss) income, net	(24		)	337		(24		)	290
Total other (loss) income, net	(14		)	363		62			407
Income before income taxes	7,648			7,220		16,112			14,619
Income tax expense	2,609			2,389		5,578			4,888
Net income	$	5,039		$	4,831	$	10,534		$	9,731
Basic net income per share	$	0.44		$	0.41	$	0.90		$	0.80
Diluted net income per share	$	0.43		$	0.41	$	0.90		$	0.80
Shares used for computation (in thousands):
Basic	11,553			11,853		11,668			12,144
Diluted	11,701			11,907		11,759			12,209

BLUE NILE, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	52 Weeks Ended			53 Weeks Ended
	January 3, 2016			January 4, 2015
Operating activities:
Net income	$	10,534		$	9,731
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,858			3,607
Stock-based compensation	5,081			4,361
Deferred income taxes	(902		)	2,321
Tax deficiency from share-based awards	(735		)	(2,713		)
Excess tax benefit from share-based awards	(66		)	(195		)
Changes in assets and liabilities:
Receivables	(311		)	(182		)
Inventories	(4,708		)	(7,138		)
Prepaid income taxes	—			247
Prepaid expenses and other assets	(90		)	(216		)
Accounts payable	(6,743		)	6,323
Accrued liabilities	344			1,241
Unearned income	1,988			—
Deferred rent and other	(214		)	(179		)
Net cash provided by operating activities	8,036			17,208
Investing activities:
Purchases of property and equipment	(3,755		)	(3,771		)
Payments received on note receivable	1,400			—
Net cash used in investing activities	(2,355		)	(3,771		)
Financing activities:
Repurchase of common stock	(10,780		)	(40,308		)
Proceeds from stock option exercises	1,078			2,413
Taxes paid for net share settlement of share-based awards	(558		)	(282		)
Excess tax benefit from share-based awards	66			195
Principal payments under long-term financing obligation	(33		)	(104		)
Net cash used in financing activities	(10,227		)	(38,086		)
Effect of exchange rate changes on cash and cash equivalents	(98		)	(107		)
Net decrease in cash and cash equivalents	(4,644		)	(24,756		)
Cash and cash equivalents, beginning of period	91,186			115,942
Cash and cash equivalents, end of period	$	86,542		$	91,186

	52 Weeks Ended		53 Weeks Ended
	January 3, 2016		January 4, 2015
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	6,736	$	3,675