BARNES & NOBLE EDUCATION, INC. | ||||
(Exact name of registrant as specified in its charter) | ||||
Delaware | 1-37499 | 46-0599018 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
120 Mountain View Blvd., Basking Ridge, NJ | 07920 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (908) 991-2665 | ||||
Not Applicable | ||||
(Former name or former address, if changed since last report) |
□ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
□ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
□ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
□ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |
99.1 | Press Release of Barnes & Noble Education, Inc., dated September 8, 2016. |
Exhibit No. | Description | |
99.1 | Press Release of Barnes & Noble Education, Inc., dated September 8, 2016. |
Media Contact: | Investor Contact: | ||
Carolyn Brown | Thomas Donohue | ||
Vice President | Vice President | ||
Corporate Communications | Treasurer and Investor Relations | ||
Barnes & Noble Education, Inc. | Barnes & Noble Education, Inc. | ||
(908) 991-2967 | (908) 991-2966 | ||
cbrown@bned.com | tdonohue@bned.com |
• | Sales of $239.2 million increased 0.1%, as compared to prior year period. |
• | Comparable store sales decreased 2.8% for the quarter. |
• | Net loss of $(27.9) million included restructuring costs of $1.8 million, compared with a net loss of $(26.9) million in the prior year period. |
• | Non-GAAP Adjusted EBITDA of $(36.5) million, a decrease of $1.4 million, as compared to prior year period. |
• | Non-GAAP Adjusted Earnings of $(25.9) million, as compared to Adjusted Earnings of $(26.9) million in the prior year period. |
• | Opened 33 new stores with estimated annual sales of $110 million, bringing total stores operated to 770 locations as of July 30, 2016. The Company will be opening another two stores in fiscal 2017 based upon new contracts signed to date. |
• | Completed the acquisition of Promoversity, a custom merchandise supplier and e-commerce storefront solution serving the collegiate bookstore business and its customers. |
• | Established partnership with Instructure, Inc., a leading software-as-a-service (SaaS) technology company and creator of the Canvas learning management system (LMS), increasing capabilities to improve student outcomes and retention. |
$ in millions | 13 Weeks Selected Data (unaudited) | ||
Q1 2017 | Q1 2016(1) | ||
Total Sales | $239.2 | $239.0 | |
Net Loss | $(27.9) | $(26.9) | |
Non-GAAP(2) | |||
Adjusted EBITDA | $(36.5) | $(35.1) | |
Adjusted Earnings | $(25.9) | $(26.9) | |
(1) Financials for first quarter 2016 have been presented on a carve-out basis. | |||
(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. |
13 weeks ended | |||||||
July 30, 2016 | August 1, 2015 | ||||||
Sales: | |||||||
Product sales and other | $ | 217,736 | $ | 218,716 | |||
Rental income | 21,501 | 20,267 | |||||
Total sales | 239,237 | 238,983 | |||||
Cost of sales: | |||||||
Product and other cost of sales | 177,994 | 174,909 | |||||
Rental cost of sales | 13,830 | 12,530 | |||||
Total cost of sales | 191,824 | 187,439 | |||||
Gross profit | 47,413 | 51,544 | |||||
Selling and administrative expenses | 85,464 | 86,684 | |||||
Depreciation and amortization expense | 12,921 | 13,100 | |||||
Restructuring costs (a) | 1,790 | — | |||||
Operating loss | (52,762 | ) | (48,240 | ) | |||
Interest expense, net | 666 | 3 | |||||
Loss before income taxes | (53,428 | ) | (48,243 | ) | |||
Income tax benefit | (25,512 | ) | (21,325 | ) | |||
Net loss | $ | (27,916 | ) | $ | (26,918 | ) | |
Loss per common share: | |||||||
Basic | $ | (0.60 | ) | $ | (0.65 | ) | |
Diluted | $ | (0.60 | ) | $ | (0.65 | ) | |
Weighted average common shares outstanding: | |||||||
Basic | 46,349 | 41,426 | |||||
Diluted | 46,349 | 41,426 | |||||
(a) For additional information, see Note (a) in the Non-GAAP disclosure information of this Press Release. | |||||||
Non-GAAP Disclosures: (a) | |||||||
Adjusted Earnings | $ | (25,885 | ) | $ | (26,918 | ) | |
Adjusted EBITDA | $ | (36,524 | ) | $ | (35,140 | ) | |
(a) For additional information, see the Non-GAAP disclosure information of this Press Release. | |||||||
13 weeks ended | |||||
July 30, 2016 | August 1, 2015 | ||||
Percentage of sales: | |||||
Sales: | |||||
Product sales and other | 91.0 | % | 91.5 | % | |
Rental income | 9.0 | % | 8.5 | % | |
Total sales | 100.0 | % | 100.0 | % | |
Cost of sales: | |||||
Product and other cost of sales (a) | 81.7 | % | 80.0 | % | |
Rental cost of sales (a) | 64.3 | % | 61.8 | % | |
Total cost of sales | 80.2 | % | 78.4 | % | |
Gross profit | 19.8 | % | 21.6 | % | |
Selling and administrative expenses | 35.7 | % | 36.3 | % | |
Depreciation and amortization expense | 5.4 | % | 5.5 | % | |
Restructuring costs | 0.7 | % | — | % | |
Operating loss | (22.0 | )% | (20.2 | )% | |
Interest expense, net | 0.3 | % | — | % | |
Loss before income taxes | (22.3 | )% | (20.2 | )% | |
Income tax benefit | (10.7 | )% | (8.9 | )% | |
Net loss | (11.6 | )% | (11.3 | )% | |
(a) Represents the percentage these costs bear to the related sales, instead of total sales. |
July 30, 2016 | August 1, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 8,906 | $ | 8,887 | |||
Receivables, net | 38,898 | 35,461 | |||||
Merchandise inventories, net | 724,329 | 766,767 | |||||
Textbook rental inventories | 7,527 | 7,640 | |||||
Prepaid expenses and other current assets | 8,614 | 7,623 | |||||
Total current assets | 788,274 | 826,378 | |||||
Property and equipment, net | 107,347 | 108,783 | |||||
Intangible assets, net | 197,508 | 195,627 | |||||
Goodwill | 281,337 | 274,070 | |||||
Other noncurrent assets | 39,003 | 44,738 | |||||
Total assets | $ | 1,413,469 | $ | 1,449,596 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 560,163 | $ | 596,786 | |||
Accrued liabilities | 41,949 | 61,647 | |||||
Total current liabilities | 602,112 | 658,433 | |||||
Long-term deferred taxes, net | 35,636 | 49,772 | |||||
Credit Facility borrowings | 25,000 | — | |||||
Other long-term liabilities | 74,976 | 69,555 | |||||
Total liabilities | 737,724 | 777,760 | |||||
Commitments and contingencies | — | — | |||||
Stockholders' equity: | |||||||
Parent company investment | — | 671,836 | |||||
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, 48,655 and 0 shares, respectively; outstanding, 46,086 and 0 shares, respectively | 487 | — | |||||
Accumulated other comprehensive loss | (8 | ) | — | ||||
Additional paid-in-capital | 701,401 | — | |||||
Retained earnings | (914 | ) | — | ||||
Treasury stock, at cost | (25,221 | ) | — | ||||
Total stockholders' equity | 675,745 | 671,836 | |||||
Total liabilities and stockholders' equity | $ | 1,413,469 | $ | 1,449,596 |
Adjusted Earnings | 13 weeks ended | ||||||
July 30, 2016 | August 1, 2015 | ||||||
Net loss | $ | (27,916 | ) | $ | (26,918 | ) | |
Reconciling items, after-tax (below) | 2,031 | — | |||||
Adjusted Earnings (Non-GAAP) | $ | (25,885 | ) | $ | (26,918 | ) | |
Reconciling items, pre-tax | |||||||
Restructuring costs (a) | $ | 1,790 | $ | — | |||
Transaction costs (b) | 1,527 | — | |||||
Reconciling items, pre-tax | 3,317 | — | |||||
Less: Pro forma income tax impact (c) | 1,286 | — | |||||
Reconciling items, after-tax | $ | 2,031 | $ | — | |||
Adjusted EBITDA | 13 weeks ended | ||||||
April 30, 2016 | May 2, 2015 | ||||||
Net loss | $ | (27,916 | ) | $ | (26,918 | ) | |
Add: | |||||||
Depreciation and amortization expense | 12,921 | 13,100 | |||||
Interest expense, net | 666 | 3 | |||||
Income tax benefit | (25,512 | ) | (21,325 | ) | |||
Restructuring costs (a) | 1,790 | — | |||||
Transaction costs (b) | 1,527 | — | |||||
Adjusted EBITDA (Non-GAAP) | $ | (36,524 | ) | $ | (35,140 | ) | |
(a) In Fiscal 2016, the Company implemented a plan to restructure its digital operations and announced a reduction in staff and closure of the facilities in Mountain View, California, and Redmond, Washington, that support the Yuzu® eTextbook platform. The Company recorded restructuring costs of $8.8 million in Fiscal 2016 comprised of employee-related costs (including severance and retention) and facility exit costs. During the 13 weeks ended July 30, 2016, the Company recorded $1.8 million in additional restructuring costs primarily for employee related costs (including severance and retention). The majority of the restructuring related to employee matters was completed in the first quarter of Fiscal 2017. | |||||||
(b) Transaction costs are costs incurred for business development and acquisitions, and are included in selling and administrative expenses in the condensed consolidated statement of operations. | |||||||
(c) The amounts shown represent the projected reduction in income tax expense based on the Company's current combined federal and state aggregate income tax rate. | |||||||
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 30, 2016 filed with the SEC on June 29, 2016, which includes consolidated financial statements for each of the three years for the period ended April 30, 2016 (Fiscal 2016, Fiscal 2015, and Fiscal 2014). | |||||||
13 weeks ended | |||||||
July 30, 2016 | August 1, 2015 | ||||||
Numerator for basic and diluted earnings per share: | |||||||
Net loss available to common shareholders | $ | (27,916 | ) | $ | (26,918 | ) | |
Denominator for basic and diluted earnings per share: | |||||||
Basic and diluted weighted average common shares (a) (b) | 46,349 | 41,426 | |||||
Loss per common share: | |||||||
Basic | $ | (0.60 | ) | $ | (0.65 | ) | |
Diluted | $ | (0.60 | ) | $ | (0.65 | ) | |
(a) For periods prior to the Spin-Off from Barnes & Noble on August 2, 2015, Basic earnings per share and weighted-average basic shares outstanding are based on the number of shares of Barnes & Noble common stock outstanding as of the end of the period, adjusted for an assumed distribution ratio of 0.632 shares of the Company's Common Stock for every one share of Barnes & Noble common stock held on the record date for the Spin-Off. | |||||||
(b) For periods prior to the Spin-Off from Barnes & Noble on August 2, 2015, Diluted earnings per share and weighted-average diluted shares outstanding reflect potential common shares from Barnes & Noble equity plans in which the Company's employees participated based on the distribution ratio. | |||||||