Consolidated Sales Increase 15% in the Second
Quarter and 23% Year to Date
Net Income Increases $19.1 Million in the
Second Quarter and $12.2 Million Year to Date
Initial Benefits Recognized from Recent
Acquisitions
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading provider of educational products and services solutions for
higher education and K-12 institutions, today reported sales and
earnings for the second quarter for fiscal year 2018. The Company
has two reportable segments: Barnes & Noble College
Booksellers, LLC (“BNC”) and MBS Textbook Exchange, LLC
(“MBS”).
Financial highlights for the second quarter 2018 and fiscal
year to date 2018:
- Consolidated sales of $886.9 million
increased 15.1%, as compared to the prior year period; year to date
consolidated sales of $1,242.6 million increased 23.0% as compared
to the prior year period.
- Consolidated second quarter GAAP net
income of $48.4 million, as compared to $29.3 million in the prior
year period; year to date GAAP net income of $13.6 million, as
compared to $1.4 million in the prior year period.
- Consolidated second quarter non-GAAP
Adjusted EBITDA of $102.4 million, an increase of $32.0 million, as
compared to the prior year period; year to date non-GAAP Adjusted
EBITDA of $70.0 million, an increase of $36.1 million, as compared
to the prior year period.
- Consolidated second quarter non-GAAP
Adjusted Earnings of $49.9 million, as compared to $29.7 million in
the prior year period; year to date non-GAAP Adjusted Earnings of
$20.1 million, as compared to $3.8 million in the prior year
period.
Operational highlights for the second quarter 2018:
- Expanded reach of BNED Courseware,
offering Open Educational Resources (“OER”) content to
approximately 13,000 students at community colleges, four-year
public universities and four-year private universities.
- Continued to recognize benefits from
the MBS integration, as MBS contributed $134.9 million in sales and
$19.2 million of Adjusted EBITDA in the second quarter of fiscal
year 2018.
- Completed the acquisition of Student
Brands, LLC, a leading direct-to-student subscription-based writing
services business, on August 3, 2017 for $57.4 million. Student
Brands contributed $4.5 million in sales and $2.4 million of
Adjusted EBITDA to BNC’s results in the second quarter of fiscal
year 2018.
- Renewed partnership with Target
Corporation to promote its brand and college essentials to BNED
customer base for the Fall of 2018.
“Our substantially increased financial results in the second
quarter reflect the contributions of our recent acquisitions of MBS
and Student Brands. While both of these teams continue to perform
financially, we are even more encouraged by their respective
potential contributions to BNED’s longer term competitive
position,” said Michael P. Huseby, Chairman and Chief Executive
Officer, Barnes & Noble Education. “Given our evolving
industry, we remain focused on transforming our business to become
a leading aggregator and distributor of both physical and digital
educational content, and on developing expanded direct-to-student
digital services that we can offer both in and outside of our
managed stores footprint. With the addition of Student Brands and
our recently announced partnership with The Princeton Review, we
are building what we plan to offer as a full suite of such
services.”
Second Quarter 2018 and Year to Date
Results
Results for the 13 and 26 weeks of fiscal
2018 and fiscal 2017 are as follows:
$ in millions 13 and 26 Weeks
Selected Data (unaudited)
13 Weeks
13 Weeks
26 Weeks
26 Weeks
Q2 2018 Q2 2017
2018
2017
Total Sales $886.9 $770.7 $1,242.6 $1,009.9 Net Income $48.4
$29.3 $13.6 $1.4
Non-GAAP(1)
Adjusted EBITDA
$102.4
$70.4
$70.0
$33.9
Adjusted Earnings $49.9 $29.7 $20.1 $3.8 (1) 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 second quarter sales of $886.9 million increased
$116.2 million, or 15.1%, as compared to the prior year period.
This increase was primarily attributable to the contributions from
the MBS and Student Brands acquisitions, net new stores opened at
BNC, partially offset by the impact from declining comparable store
sales at BNC.
Comparable store sales at BNC decreased 4.4% for the quarter
representing approximately $33.8 million in revenue. The decrease
is primarily attributable to textbook sales, which were down 5.0%
compared with a decrease of 3.7% in the prior year period and a
decrease in general merchandise sales of 1.9% compared with a
decrease of 1.3% in the prior year period.
Second quarter net income was $48.4 million, or $1.03 per
diluted share, compared to net income of $29.3 million, or $0.63
per diluted share, in the prior year period. The current year’s
fiscal quarter has 47.0 million diluted shares outstanding, while
the prior year period had 46.6 million diluted shares outstanding.
The Company reported non-GAAP Adjusted Earnings of $49.9 million
during the quarter, compared with $29.7 million in the prior year
period.
The Company’s Adjusted EBITDA was $102.4 million for the
quarter, as compared to $70.4 million in the prior year period, an
increase due primarily to the contributions from the MBS and
Student Brands acquisitions, partially offset by the impact from
lower comparable store sales at BNC.
As a result of the acquisition of MBS on February 27, 2017 and
the acquisition of Student Brands on August 3, 2017, the condensed
consolidated financial statements for the 13 weeks and 26 weeks
ended October 28, 2017 include the financial results of MBS and
Student Brands. All material intercompany accounts and transactions
have been eliminated in consolidation. The condensed consolidated
financial statements for the 13 weeks and 26 weeks ended October
28, 2016 do not include any financial results of MBS and Student
Brands.
Outlook
For fiscal year 2018, the Company expects sales at BNC to be
relatively flat, while BNC comparable store sales are projected to
decline in the low-to mid-single digit percentage point range year
over year. In addition, the Company expects consolidated sales to
be in the range of $2.25 billion to $2.35 billion before
intercompany eliminations. The Company expects BNED’s consolidated
Adjusted EBITDA to be in a range of $105 million to $120 million.
Capital expenditures are expected to be approximately $50 million,
an increase from fiscal 2017 due to new store growth at BNC.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 10:00 a.m. Eastern Time on Tuesday,
December 5, 2017 and can be accessed at the Barnes & Noble
Education corporate website at www.bned.com.
Barnes & Noble Education expects to report fiscal 2018 third
quarter results on or about March 6, 2018.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading provider of educational products and services solutions for
higher education and K-12 institutions, enhances the academic and
social purpose of educational institutions. Through its Barnes
& Noble College and MBS subsidiaries, Barnes & Noble
Education operates 1,483 physical and virtual bookstores and serves
more than 6 million students and faculty, and offers a suite of
digital software, content and services including direct-to-student
study tools. The Company also operates one of the largest textbook
wholesale distribution channels in the United States. Barnes &
Noble Education acts as a strategic partner to drive student
success, provide value and support to students and faculty, and
create loyalty and improve retention, while supporting the
financial goals of our college and university partners.
BNED companies include: Barnes & Noble College Booksellers,
LLC, MBS Textbook Exchange, LLC, BNED LoudCloud, LLC, Student
Brands, LLC, and Promoversity, LLC. General information on Barnes
& Noble Education may be obtained by visiting the Company's
corporate website: www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us
or our management, identify forward-looking statements. Moreover,
we operate in a very competitive and rapidly changing environment.
New risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this press
release may not occur and actual results could differ materially
and adversely from those anticipated or implied in the
forward-looking statements. Such statements reflect our current
views with respect to future events, the outcome of which is
subject to certain risks, including, among others: general
competitive conditions, including actions our competitors and
content providers may take to grow their businesses; a decline in
college enrollment or decreased funding available for students;
decisions by colleges and universities to outsource their physical
and/or online bookstore operations or change the operation of their
bookstores; the general economic environment and consumer spending
patterns; decreased consumer demand for our products, low growth or
declining sales; our ability to continue to successfully integrate
the operations of MBS Textbook Exchange, LLC into our Company; the
strategic objectives, anticipated synergies, and/or other expected
potential benefits of various acquisitions 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; risks
associated with operation or performance of MBS Textbook Exchange,
LLC’s point-of-sales systems that are sold to college bookstore
customers; 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
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; 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; changes to
purchase or rental general terms, payment terms, return policies,
the discount or margin on products or other terms with our
suppliers; 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, obsolete or excessive inventory; product shortages,
including risks associated with merchandise sourced indirectly from
outside the United States; changes in law or regulation; 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 or tax-related proceedings
or audits; changes in accounting standards; and the other risks and
uncertainties detailed in the section titled “Risk Factors” in Part
I - Item 1A in our Annual Report on Form 10-K for the year ended
April 29, 2017. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described
as anticipated, believed, estimated, expected, intended or planned.
Subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements in this paragraph. We
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this press
release.
EXPLANATORY NOTE
Effective with the acquisition of MBS Textbook Exchange, LLC
("MBS") on February 27, 2017, we determined that we have two
reportable segments: Barnes & Noble College Booksellers, LLC
("BNC") and MBS, whereas BNC was previously our only reportable
segment prior to the acquisition. The condensed consolidated
financial statements for the 13 and 26 weeks ended October 28, 2017
include the financial results of MBS and all material intercompany
accounts and transactions have been eliminated in consolidation.
The condensed consolidated financial statements for the 13 and 26
weeks ended October 29, 2016 exclude the financial results of
MBS.
- BNC operates 777 physical campus
bookstores, the majority of which also have school-branded
e-commerce sites operated by BNC, and BNC also includes our digital
operations.
- MBS operates 706 virtual bookstores and
is the largest contract operator of virtual bookstores for college
and university campuses, and private/parochial K-12 schools. MBS is
also one of the largest textbook wholesalers in the country. MBS's
wholesale business centrally sources and sells new and used
textbooks to more than 3,700 physical college bookstores, including
BNC’s 777 campus bookstores.
On August 3, 2017, we acquired Student Brands, LLC ("Student
Brands"), a leading direct-to-student subscription-based writing
services business. The condensed consolidated financial statements
for the 13 and 26 weeks ended October 28, 2017 include the
financial results of Student Brands in the BNC segment from the
date of acquisition and all material intercompany accounts and
transactions have been eliminated in consolidation, The condensed
consolidated financial statements for the 13 and 26 weeks ended
October 29, 2016 exclude the financial results of Student
Brands.
BARNES & NOBLE EDUCATION, INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Operations
(In thousands, except per share
data)
(Unaudited)
13 weeks ended 26 weeks
ended October 28,2017 October 29,2016 October 28,2017 October
29,2016 Sales: Product sales and other $ 817,825 $ 697,927 $
1,152,327 $ 915,663 Rental income 69,036
72,744 90,245 94,245 Total sales
886,861 770,671 1,242,572
1,009,908 Cost of sales: (a) Product and other cost
of sales 628,839 554,498 906,580 732,492 Rental cost of sales
41,464 44,659 54,721
58,489 Total cost of sales 670,303
599,157 961,301 790,981
Gross profit 216,558 171,514
281,271 218,927 Selling and administrative
expenses 115,148 101,123 214,558 185,060 Depreciation and
amortization expense 16,704 12,987 31,721 25,908 Restructuring and
other charges (a) 193 — 5,429 1,790 Transaction costs (a)
1,257 644 1,846 2,171
Operating income 83,256 56,760 27,717 3,998 Interest
expense, net 1,836 630 4,874
1,296 Income before income taxes 81,420 56,130
22,843 2,702 Income tax expense 33,025 26,841
9,231 1,329 Net income $ 48,395
$ 29,289 $ 13,612 $ 1,373
Earnings per common share: Basic $ 1.04 $ 0.63 $ 0.29 $ 0.03
Diluted $ 1.03 $ 0.63 $ 0.29 $ 0.03 Weighted average common shares
outstanding: Basic 46,705 46,170 46,611 46,259 Diluted 47,006
46,593 47,144 46,652 (a) For additional information, see
Note (a) - (c) in the Non-GAAP disclosure information of this Press
Release. 13 weeks ended 26 weeks ended October 28,2017
October 29,2016 October 28,2017 October 29,2016
Percentage of
sales: Sales: Product sales and other 92.2 % 90.6 % 92.7 % 90.7
% Rental income 7.8 % 9.4 % 7.3 % 9.3 %
Total sales 100.0 % 100.0 % 100.0 %
100.0 % Cost of sales: Product and other cost of sales (a) 76.9 %
79.4 % 78.7 % 80.0 % Rental cost of sales (a) 60.1 %
61.4 % 60.6 % 62.1 % Total cost of sales 75.6
% 77.7 % 77.4 % 78.3 % Gross profit
24.4 % 22.3 % 22.6 % 21.7 % Selling and
administrative expenses 13.0 % 13.1 % 17.3 % 18.3 % Depreciation
and amortization expense 1.9 % 1.7 % 2.6 % 2.6 % Restructuring and
other charges — % — % 0.4 % 0.2 % Transaction costs 0.1 %
0.1 % 0.1 % 0.2 % Operating income 9.4 % 7.4 %
2.2 % 0.4 % Interest expense, net 0.2 % 0.1 %
0.4 % 0.1 % Income before income taxes 9.2 % 7.3 % 1.8 % 0.3
% Income tax expense 3.7 % 3.5 % 0.7 %
0.1 % Net income 5.5 % 3.8 % 1.1 % 0.2
% (a) Represents the percentage these costs bear to the
related sales, instead of total sales.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands, except per share
data)
(Unaudited)
October 28,2017 October 29,2016 ASSETS
Current assets: Cash and cash equivalents $ 17,494 $ 176,578
Receivables, net 153,646 93,250 Merchandise inventories, net
515,574 401,338 Textbook rental inventories 78,062 86,704 Prepaid
expenses and other current assets 13,352 8,083 Total
current assets 778,128 765,953 Property and
equipment, net 115,318 108,499 Intangible assets, net 229,498
194,562 Goodwill 362,412 281,350 Other noncurrent assets 41,885
38,226 Total assets $ 1,527,241 $ 1,388,590
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 458,833 $ 439,746 Accrued liabilities 184,283
140,779 Total current liabilities 643,116
580,525 Long-term deferred taxes, net 16,187 25,743 Other
long-term liabilities 96,294 75,962 Long-term borrowings 41,800
— Total liabilities 797,397 682,230
Commitments and contingencies — — Stockholders' equity: Preferred
stock, $0.01 par value; authorized, 5,000 shares; issued and
outstanding, none — —
Common stock, $0.01 par value; authorized,
200,000 shares; issued, 50,028 and 48,972 shares,
respectively; outstanding, 46,914 and 46,276 shares,
respectively
500 490 Additional paid-in-capital 713,018 703,966 Retained
earnings 45,975 28,375 Treasury stock, at cost (29,649 ) (26,471 )
Total stockholders' equity 729,844 706,360 Total
liabilities and stockholders' equity $ 1,527,241 $ 1,388,590
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Earnings Per Share
(In thousands, except per share
data)
(Unaudited)
13 weeks ended 26 weeks ended October
28,2017 October 29,2016 October 28,2017 October
29,2016
Numerator for basic earnings per share: Net income $
48,395 $ 29,289 $ 13,612 $ 1,373 Less allocation of earnings to
participating securities (16 ) (19 ) (4 ) (1 ) Net income available
to common shareholders $ 48,379 $ 29,270 $ 13,608
$ 1,372
Numerator for diluted earnings per
share: Net income $ 48,379 $ 29,270 $ 13,608 $ 1,372 Allocation
of earnings to participating securities 16 19 4 1 Less allocation
of earnings to participating securities (16 ) (19 ) (4 ) (1 ) Net
income available to common shareholders $ 48,379 $ 29,270
$ 13,608 $ 1,372
Denominator for
basic earnings per share: Basic weighted average common shares
46,705 46,170 46,611 46,259
Denominator for diluted earnings per share: Basic weighted
average common shares 46,705 46,170 46,611 46,259 Average dilutive
restricted stock units 162 364 389 339 Average dilutive performance
shares 113 35 127 24 Average dilutive restricted shares 7 24 8 30
Average dilutive performance share units 19 — 9 — Average dilutive
options — — — — Diluted weighted
average common shares 47,006 46,593 47,144
46,652
Earnings per common share: Basic $ 1.04
$ 0.63 $ 0.29 $ 0.03 Diluted $ 1.03 $ 0.63 $ 0.29 $ 0.03
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information
(a)
13 weeks ended 26 weeks ended
October 28,2017
October 29,2016
October 28,2017
October 29,2016
Sales BNC $ 761,787 $ 770,671 $ 1,011,764 $ 1,009,908 MBS 134,851 —
274,652 — Elimination (9,777 ) — (43,844 ) — Total $
886,861 $ 770,671 $ 1,242,572 $ 1,009,908
Gross profit BNC $ 171,725 171,514 $ 220,462 $
218,927 MBS (b) 34,200 — 64,037 — Elimination 11,658 —
45 — Total $ 217,583 $ 171,514 $
284,544 $ 218,927 Selling and administrative
expenses BNC $ 100,127 $ 101,123 $ 185,769 $ 185,060 MBS 15,021
— 28,789 — Total $ 115,148 $
101,123 $ 214,558 $ 185,060 Adjusted
EBITDA (c) (Non-GAAP) BNC $ 71,598 $ 70,391 $ 34,693 $ 33,867 MBS
(b) 19,179 — 35,248 — Elimination 11,658 — 45
— Total $ 102,435 $ 70,391 $ 69,986 $
33,867
Percentage of
Segment Sales
13 weeks ended 26 weeks ended
October 28,2017
October 29,2016
October 28,2017
October 29,2016
Gross margin BNC 22.5 % 22.3 % 21.8 % 21.7 % MBS (b) 25.4 % — %
23.3 % — % Elimination (119.2 )% — % (0.1 )% — % Total gross margin
24.5 % 22.3 % 22.9 % 21.7 % Selling and administrative
expenses BNC 13.1 % 13.1 % 18.4 % 18.3 % MBS 11.1 % — % 10.5 % — %
Total selling and administrative expenses 13.0 % 13.1 % 17.3 % 18.3
%
(a)
Effective with the acquisition of MBS
Textbook Exchange, LLC ("MBS") on February 27, 2017, we determined
that we have two reportable segments: Barnes & Noble College
Booksellers, LLC ("BNC") and MBS, whereas BNC was previously our
only reportable segment prior the acquisition. For more
information, see the Explanatory Note.
(b)
Excludes $1,025 and $3,273 of incremental
cost of sales related to inventory fair value amortization for the
13 and 26 weeks ended October 28, 2017, respectively.
(c)
For additional information, see Note (a)
in the Non-GAAP disclosure information of this Press Release.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings 13 weeks ended
26 weeks ended
October 28,2017
October 29,2016
October 28,2017
October 29,2016
Net income $ 48,395 $ 29,289 $ 13,612 $ 1,373 Reconciling items,
after-tax (below) 1,519 394 6,525 2,425
Adjusted Earnings (Non-GAAP) $ 49,914 $ 29,683 $
20,137 $ 3,798 Reconciling items, pre-tax Inventory
valuation amortization (MBS) (non-cash) (a) $ 1,025 $ — $ 3,273 $ —
Restructuring and other charges (b) 193 — 5,429 1,790 Transaction
costs (c) 1,257 644 1,846 2,171 Reconciling
items, pre-tax 2,475 644 10,548 3,961 Less: Pro forma income tax
impact (d) 956 250 4,023 1,536 Reconciling
items, after-tax $ 1,519 $ 394 $ 6,525 $ 2,425
Adjusted EBITDA 13 weeks ended 26 weeks ended
October 28,2017
October 29,2016
October 28,2017
October 29,2016
Net income $ 48,395 $ 29,289 $ 13,612 $ 1,373 Add: Depreciation and
amortization expense 16,704 12,987 31,721 25,908 Interest expense,
net 1,836 630 4,874 1,296 Income tax expense 33,025 26,841 9,231
1,329 Inventory valuation amortization (MBS) (non-cash) (a) 1,025 —
3,273 — Restructuring and other charges (b) 193 — 5,429 1,790
Transaction costs (c) 1,257 644 1,846 2,171
Adjusted EBITDA (Non-GAAP) $ 102,435 $ 70,391 $
69,986 $ 33,867
(a)
For the 13 and 26 weeks ended October 28,
2017, gross margin includes $1.0 million and $3.3 million of
incremental cost of sales related to amortization of the MBS
inventory fair value adjustment of $3.7 million recorded as of the
acquisition date, February 27, 2017. The non-cash fair value
inventory adjustment for MBS was recognized over six months from
the date of acquisition and was allocated based on monthly
sales.
(b)
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 26 weeks
ended October 28, 2017, 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.
(c)
Transaction costs are costs incurred for
business development and acquisitions.
(d)
Represents the income tax effects of the
non-GAAP items.
Use of Non-GAAP Financial Information - Adjusted
Earnings and Adjusted EBITDA To supplement the Company’s
condensed consolidated financial statements presented in accordance
with generally accepted accounting principles (“GAAP”), in the
Press Release attached hereto as Exhibit 99.1, the Company uses the
non-GAAP financial measures of Adjusted Earnings (defined as Net
Income adjusted for certain reconciling items) and Adjusted EBITDA
(defined by the Company as earnings before interest, taxes,
depreciation and amortization, as adjusted for additional items
subtracted from or added to net income). These non-GAAP
financial measures are not intended as substitutes for and should
not be considered superior to measures of financial performance
prepared in accordance with GAAP. In addition, the Company's use of
these non-GAAP financial measures may be different from similarly
named measures used by other companies, limiting their usefulness
for comparison purposes. These non-GAAP financial measures should
not be considered as alternatives to net income as an indicator of
the Company's performance or any other measures of performance
derived in accordance with GAAP. The Company's management
reviews these Non-GAAP financial measures as internal measures to
evaluate the Company's performance and manage the Company's
operations. The Company's management believes that these measures
are useful performance measures which are used by the Company to
facilitate a comparison of on-going operating performance on a
consistent basis from period-to-period. The Company's management
believes that these Non-GAAP financial measures provide for a more
complete understanding of factors and trends affecting the
Company's business than measures under GAAP can provide alone, as
it excludes certain items that do not reflect the ordinary earnings
of its operations. The Company's Board of Directors and management
also use Adjusted EBITDA as one of the primary methods for planning
and forecasting overall expected performance, for evaluating on a
quarterly and annual basis actual results against such
expectations, and as a measure for performance incentive plans. The
Company's management believes that the inclusion of Adjusted EBITDA
and Adjusted Earnings results provides investors useful and
important information regarding the Company's operating results.
The non-GAAP measures included in the Press Release attached
hereto as Exhibit 99.1 has been reconciled to the comparable GAAP
measures as required under Securities and Exchange Commission (the
“SEC”) rules regarding the use of non-GAAP financial measures. All
of the items included in the reconciliations below are either (i)
non-cash items or (ii) items that management does not consider in
assessing the Company's on-going operating performance. The Company
urges investors to carefully review the GAAP financial information
included as part of the Company’s Form 10-K dated April 29, 2017
filed with the SEC on July 12, 2017, which includes consolidated
financial statements for each of the three years for the period
ended April 29, 2017 (Fiscal 2017, Fiscal 2016, and Fiscal 2015)
and the Company's Quarterly Report on Form 10-Q for the period
ended July 29, 2017 filed with the SEC on August 30, 2017.
BARNES & NOBLE EDUCATION, INC.
AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 26 week periods are as follows:
Dollars in millions 13 weeks ended 26 weeks ended
October 28,2017
October 29,2016
October 28,2017
October 29,2016
MBS Sales (a) Wholesale $ 47.5 $ — $ 140.0 $ — Direct 87.4 —
134.7 —
MBS
total sales subtotal:
$ 134.9 $ — $ 274.7 $ — BNC Sales New stores (b) $ 26.3 $ 50.0 $
41.7 $ 58.5 Closed stores (b) (5.2 ) (10.7 ) (7.5 ) (12.5 )
Comparable stores (c) (33.8 ) (24.5 ) (38.6 ) (32.6 )
Textbook rental
deferral
2.2 (3.6 ) 3.6 (2.2 ) Service revenue (d) 4.5 2.3 6.4 2.4 Other (e)
(2.9 ) 1.3 (3.7 ) 1.5
BNC
total sales subtotal:
$ (8.9 ) $ 14.8 $ 1.9 $ 15.1 Eliminations (f) $ (9.8 ) $ — $
(43.9 ) $ —
Total
sales variance
$ 116.2 $ 14.8 $ 232.7 $ 15.1
(a) On February 27, 2017, we acquired MBS Textbook Exchange, LLC
("MBS"). The condensed consolidated financial statements for the 13
and 26 weeks ended October 28, 2017 include the financial results
of MBS and all material intercompany accounts and transactions have
been eliminated in consolidation. The condensed consolidated
financial statements for the 13 and 26 weeks ended October 29, 2016
exclude the financial results of MBS. Our retail business
(BNC and MBS Direct) is highly seasonal, with sales generally
highest in the second and third fiscal quarters, when college
students generally purchase textbooks for the upcoming semesters,
and lowest in the first and fourth fiscal quarters. Sales
attributable to our MBS wholesale business are generally highest in
our first, second and third quarter, as it sells textbooks for
retail distribution, which somewhat offsets the decreased first
quarter sales attributable to our retail business. (b) The
following is a store count summary for BNC physical stores and MBS
virtual stores: 13 weeks ended October
28, 2017 13 weeks ended October 29, 2016 BNC Stores MBS
Direct Stores BNC Stores Stores opened — 4 1 Stores closed 4 12 —
Number of stores open at end of period 777 706 771 26 weeks
ended October 28, 2017 26 weeks ended October 29, 2016 BNC Stores
MBS Direct Stores BNC Stores Stores opened 24 14 34 Stores closed
16 20 14 Number of stores open at end of period 777 706 771
(c) See below. (d) Service revenue includes Student Brands,
brand partnerships, Promoversity, LoudCloud, shipping and handling
and revenue from other programs. (e) Other includes certain
adjusting items related to return reserves and other deferred
items. (f) Eliminate MBS sales to BNED and BNED commissions
earned from MBS.
Comparable Sales - Barnes & Noble
College
Comparable store sales variances by
category for the 13 and 26 and week periods are as follows:
13 weeks ended 26 weeks ended October
28, 2017 October 29, 2016 October 28, 2017
October 29, 2016 Textbooks $ (28.9 ) (5.0 )% $ (21.2
) (3.7 )% $ (36.5 ) (5.5 )% $ (30.0 ) (4.4 )%
General Merchandise (3.4 ) (1.9 )% (2.3 ) (1.3 )% 0.2 0.1 % (0.7 )
(0.2 )% Trade Books (1.5 ) (11.2 )% (0.8 ) (5.6 )% (2.2 ) (8.3 )%
(1.5 ) (5.2 )% Other — — % (0.2 ) (88.0 )% (0.1 ) (88.2 )%
(0.4 ) (88.7 )% Total Comparable Store Sales $ (33.8 ) (4.4 )% $
(24.5 ) (3.2 )% $ (38.6 ) (3.9 )% $ (32.6 ) (3.3 )%
Effective for the first quarter of Fiscal 2017, comparable store
sales includes sales from stores that have been open for an entire
fiscal year period, does not include sales from closed stores for
all periods presented, and digital agency sales are included on a
gross basis. We believe the current comparable store sales
calculation method better reflects the manner in which management
views comparable sales, as well as the seasonal nature of our
business. Prior year comparable store sales have been updated to
exclude store inventory sales to MBS, which are reflected as
intercompany inventory transfers since the acquisition.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171205005366/en/
Barnes & Noble Education, Inc.Media:Carolyn J. Brown, 908-991-2967Vice
PresidentCorporate Communicationscbrown@bned.comorInvestors:Thomas Donohue, 908-991-2966Vice
PresidentTreasurer and Investor Relationstdonohue@bned.com
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