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Barnes & Noble Education Reports Fourth Quarter and Fiscal Year 2019 Financial Results

NEW YORK--(BUSINESS WIRE)--

Fiscal Year 2019 GAAP Net Loss of $24.4 Million Reflecting Non-Cash Impairments; Non-GAAP Adjusted EBITDA of $104.9 Million in Line with Expectations

New Retail and Wholesale Reporting Segments Streamline Go-To-Market Strategy and Focus Product Development Efforts

Barnes & Noble Education, Inc. (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 fiscal year 2019, which ended on April 27, 2019.

Prior to the fourth quarter of fiscal 2019, the Company had three reportable segments: Barnes & Noble College (“BNC”), MBS Textbook Exchange (“MBS”) and Digital Student Solutions ("DSS"). During the fourth quarter of fiscal year 2019, in an effort to streamline its retail go-to-market strategy, reinforce company branding, and more efficiently focus product development efforts, the Company realigned its business and sales organization into the following three reportable segments:

  • Retail Segment: combines the operations of the former BNC segment with MBS Direct virtual bookstore operations (from the former MBS segment).
  • Wholesale Segment: comprised of the MBS wholesale business (from the former MBS segment).
  • DSS Segment: remains unchanged and is comprised of the operations of Student Brands, LLC and bartleby®, the Company’s subscription-based digital study offering.

Unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as Corporate Services.

Financial highlights for the fourth quarter 2019 and fiscal year 2019:

  • Consolidated fourth quarter sales of $334.4 million decreased 6.5%, as compared to the prior year period; fiscal year 2019 consolidated sales of $2,034.6 million decreased 7.7% as compared to the prior year.
  • Consolidated fourth quarter GAAP net loss of $(46.2) million, compared to net income of $17.1 million in the prior year period. The fourth quarter 2019 net loss includes a non-cash impairment loss of $(57.8) million and restructuring and other charges of $(4.7) million. Consolidated fiscal year 2019 GAAP net loss of $(24.4) million, compared to a net loss of $(252.6) million in the prior year. The fiscal year 2019 net loss includes a non-cash impairment loss of $(57.8) million and restructuring and other charges of $(7.2) million, compared to fiscal year 2018 net loss which included a non-cash impairment loss of $(313.1) million and restructuring and other charges of $(5.4) million.
  • Consolidated fourth quarter non-GAAP Adjusted EBITDA of $19.7 million, a decrease of $2.5 million, or 11.5%, as compared to the prior year period; fiscal year 2019 non-GAAP Adjusted EBITDA of $104.9 million, a decrease of $21.8 million, or 17.2%, as compared to the prior year.
  • Consolidated fourth quarter non-GAAP Adjusted Earnings of $0.5 million, compared to $17.2 million in the prior year period; fiscal year 2019 non-GAAP Adjusted Earnings of $25.4 million, compared to $56.9 million in the prior year.

Operational highlights for the fiscal year 2019:

  • Made substantial investments in technology, content and human capital to facilitate continued transformation of all businesses to digital platforms and offerings.
  • Demonstrated ability to leverage expansive store footprint to drive subscriptions of bartleby, the Company’s digital study offering, which gained more than 50,000 subscribers following its first major in-store sales push during Spring Rush.
  • Expanded catalogue of step-by-step textbook solutions available on bartleby to more than one million solutions. The Company continues to aggressively and strategically expand its catalogue.
  • In addition to growing the catalogue of step-by-step textbook solutions, enhanced bartleby offering by developing and implementing Q&A feature to better help students achieve success.
  • Demonstrated strong acceptance of BNC FirstDay™ inclusive access program, with revenue from BNC FirstDay increasing by 92% year over year.
  • Signed agreements with publishers including Oxford University Press, Wiley, Macmillan Learning, SAGE and Norton, to make the publishers’ digital content available through inclusive access programs offered on BNED campuses nationwide.
  • Ongoing integration of BNC and MBS operations, including a unified and expanded sales team to help drive new business growth with a dynamic, new go-to-market strategy.
  • Strengthened the value of BNED’s campus retail footprint with pilot testing of highly relevant and curated concept shops that drove improvements in sales trends and higher levels of customer engagement.

“We continue to rapidly implement necessary and profound change across BNED to ensure that we are serving the needs of the education market both today and in the future. Our fiscal year results were in line with our expectations, and we are beginning to establish positive momentum as we continue to pivot our platforms and offerings to digital delivery. In fiscal 2019 we made tremendous progress in positioning BNED for sustainable long-term success while still generating significant EBITDA and strong free cash flow,” said Michael P. Huseby, Chief Executive Officer and Chairman, BNED. “The value we can provide for our institutional partners and for individual students continues to grow as we strengthen offerings such as our inclusive access model, BNC FirstDay, and our digital study product, bartleby. Perhaps our greatest upside potential is with our direct-to-student business, where we are successfully leveraging our expansive store footprint and demonstrating our ability to grow and scale delivery of bartleby. We are now well positioned to unlock value for our shareholders as we scale our high-margin DSS business, win new college and university accounts and further strengthen our general merchandise business.”

Fourth Quarter and Fiscal Year Results for 2019

Results for the 13 and 52 weeks of fiscal 2019 and fiscal 2018 are as follows:

$ in millions

13 and 52 Weeks Selected Data (unaudited)

 

13 Weeks
Q4 2019

 

13 Weeks
Q4 2018

 

52 Weeks
2019

 

52 Weeks
2018

Total Sales

$

334.4

 

 

$

357.7

 

$

2,034.6

 

 

$

2,203.6

 

Net (Loss) Income (1)

$

(46.2

)

 

$

17.1

 

$

(24.4

)

 

$

(252.6

)

 

Non-GAAP(2)

Adjusted EBITDA

$

19.7

 

 

$

22.2

 

$

104.9

 

 

$

126.8

 

Adjusted Earnings

$

0.5

 

 

$

17.2

 

$

25.4

 

 

$

56.9

 

(1) The 52 weeks of fiscal year 2019 includes a pre-tax goodwill non-cash impairment charge of $49.3 million or $36.5 million after tax on a net tax basis, recorded in the fourth quarter, and a non-cash impairment charge of $8.5 million related to other long-lived assets. 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.

All material intercompany accounts and transactions have been eliminated in consolidation. Prior periods presented reflect the segment presentation noted above. The consolidated financial statements for the 13 and 52 weeks ended April 27, 2019 include the financial results of Student Brands, LLC (in the DSS segment) for the entire period and the consolidated financial statements for the 13 and 52 weeks ended April 28, 2018 include the financial results of Student Brands, LLC from the acquisition date on August 3, 2017 (the second quarter of fiscal year 2018).

Retail Segment Results

Retail sales in the fourth quarter of $319.9 million decreased by $15.2 million, or 4.5%, as compared to the prior year period. Comparable store sales increased 0.9% for the quarter representing approximately $2.1 million in revenue. Consistent with prior years, 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.

Retail sales for fiscal year 2019 of $1,889.0 million decreased by $135.6 million, or 6.7%, as compared to the prior year period, reflecting the declining comparable store sales and closed store sales, partially offset by new store openings. Comparable store sales in the Retail segment decreased 5.1% for fiscal year 2019, driven primarily by enrollment declines, especially at community colleges, and the overall decline in textbook average selling prices.

Retail non-GAAP Adjusted EBITDA for the quarter was $29.1 million, compared to $22.9 million in the prior year period. The increase in the quarter is primarily attributable to lower selling and administrative expenses and a higher margin rate, partially offset by lower sales. Retail non-GAAP Adjusted EBITDA was $89.1 million for fiscal year 2019, compared to $101.2 million in the prior year period. The decrease for the fiscal year 2019 was primarily attributable to lower sales, partially offset by lower selling and administrative expenses and a higher margin rate.

Wholesale Segment Results

Wholesale fourth quarter sales of $14.1 million decreased $5.8 million, or 29.3%, as compared to the prior year period. Wholesale sales for fiscal year 2019 of $223.4 million decreased $35.0 million, or 13.5%, as compared to the prior year period. Wholesale sales decreased primarily due to lower demand.

Wholesale non-GAAP Adjusted EBITDA for the quarter was $(5.3) million, compared to $(2.9) million in the prior year period. Wholesale non-GAAP Adjusted EBITDA for fiscal year 2019 was $35.0 million, compared to $40.8 million in the prior year period. The decreases were primarily due to lower sales.

DSS Segment Results

DSS fourth quarter sales of $5.5 million decreased $0.2 million, or 3.7%, as compared to the prior year period. DSS fiscal year 2019 sales of $21.3 million increased $5.6 million, or 35.4%, as compared to the prior year period.

DSS non-GAAP Adjusted EBITDA was $0.5 million for the quarter, compared to $2.5 million in the prior year period. DSS non-GAAP Adjusted EBITDA was $6.2 million for fiscal year 2019, compared to $7.6 million in the prior year period. The decreases were primarily due to increased selling and administrative costs related to the development of the Company’s bartleby digital product offering.

Other

During the fourth quarter of 2019, due to the change in its segment presentation and reporting units, the Company performed an interim goodwill impairment test and concluded that the carrying values of the Retail and Wholesale reporting units exceeded their respective fair values. As such, the Company recognized a goodwill impairment loss (non-cash) of $49.3 million (or $36.5 million after tax on a net tax basis), consisting of the carrying value of the goodwill allocated to each segment. Additionally, as a result of certain other operational changes, the Company recognized an $8.5 million impairment loss (non-cash) primarily related to certain other long-lived assets. The Company recognized a pre-tax goodwill non-cash impairment charge of $313.1 million, or $302.9 million after tax on a net tax basis, during the third quarter of fiscal year 2018.

The Company recognized $4.7 million and $7.2 million of restructuring and other charges during the fourth quarter and fiscal year 2019, respectively. During fiscal year 2018, the Company recognized $5.4 million of restructuring and other charges. Restructuring and other charges are primarily comprised of severance and transition payments related to senior management changes, employee termination costs and benefit costs.

Selling and administrative expenses for Corporate Services, which includes unallocated shared-service costs, such as various corporate level expenses and other governance functions, were $7.2 million for the quarter, compared to $5.3 million in the prior period. Selling and administrative expenses for Corporate Services for fiscal year 2019 were $24.9 million, compared to $22.2 million in the prior year period. The increases were primarily due to increased investments in digital products and delivery platforms.

Intercompany gross margin eliminations of $2.5 million for the quarter were reflected in Adjusted EBITDA, compared to $5.1 million in the prior year period. Intercompany gross margin eliminations of $(0.5) million for fiscal year 2019 were reflected in Adjusted EBITDA, compared to $(0.7) million in the prior year period.

Outlook

For fiscal year 2020, the Company expects consolidated Adjusted EBITDA to be between $90 million to $100 million. Due to the Company’s continued investments, capital expenditures are expected to increase from fiscal year 2019 by approximately $10 million, and are expected to be in a range of $50 million to $60 million. The Company expects free cash flow to be between $25 million to $40 million, as compared to $39.7 million in fiscal year 2019. The Company defines free cash flow as Adjusted EBITDA less capital expenditures, cash interest and cash taxes.

Conference Call

A conference call with Barnes & Noble Education, Inc. senior management will be webcast at 10:00 a.m. Eastern Time on Tuesday, June 25, 2019 and can be accessed at the BNED corporate website at www.bned.com.

Barnes & Noble Education expects to report fiscal 2020 first quarter results on or about August 27, 2019.

ABOUT BARNES & NOBLE EDUCATION, INC.

Barnes & Noble Education, Inc. (BNED) is a leading provider of higher education and K-12 educational products and solutions. Through its Retail segment, Barnes & Noble Education operates 1,448 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 direct-to-student products and services that help students study more effectively and improve academic performance, enabling them to gain the valuable skills necessary to succeed after college. Through its Wholesale segment, the Company 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, Promoversity, LLC, and PaperRater, 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; 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; the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin; 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 may not be fully realized or may take longer than expected; the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls being found ineffective; changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers; 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; 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; 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 decreases in the used textbook inventory supply associated with the implementation of publishers’ direct to student textbook consignment rental programs, as well as 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 or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, recurring billing or similar marketing and sales 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 27, 2019. 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

Prior to the fourth quarter of fiscal year 2019, the Company had three reportable segments: BNC, MBS, and DSS. During the fourth quarter of fiscal year 2019, in an effort to streamline our retail go-to-market strategy, reinforce our company branding, and more efficiently focus our product development efforts, the Company realigned its business and sales organization into the following three reportable segments: Retail, Wholesale and DSS. The Retail Segment combines the operations of the former BNC segment with MBS Direct (from the former MBS segment), the Wholesale Segment is comprised of the MBS Wholesale business (from the former MBS segment), and the DSS Segment remains unchanged.

Additional information regarding the operations of each segment is as follows:

• The Retail Segment operates 1,448 college, university, and K-12 school bookstores, comprised of 772 physical bookstores and 676 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce sites which we operate and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive access programs, in which course materials, including e-content, are offered at a reduced price through a course materials fee, and delivered to students on or before the first day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

• The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,500 physical bookstores, including our Retail Segment's 772 physical bookstores. Our Wholesale business also sources and distributes new and used textbooks to our 676 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 400 college bookstores.

• The Digital Student Solutions ("DSS") Segment includes direct-to-student products and services to assist students to study more effectively and improve academic performance. The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby®, a direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, tutoring and test prep services.

The consolidated financial statements for the 13 and 52 weeks ended April 27, 2019 include the financial results of Student Brands, LLC (in the DSS Segment) for the entire period and the consolidated financial statements for the 13 and 52 weeks ended April 28, 2018 include the financial results of Student Brands, LLC from the acquisition date on August 3, 2017 (the second quarter of fiscal year 2018).

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.

All material intercompany accounts and transactions have been eliminated in consolidation.

Prior periods presented reflect the segment presentation 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 27, 2019

 

April 28, 2018

 

April 27, 2019

 

April 28, 2018

Sales:

 

 

 

 

 

 

 

Product sales and other

$

272,753

 

 

$

286,703

 

 

$

1,838,760

 

 

$

1,984,472

 

Rental income

61,632

 

 

70,951

 

 

195,883

 

 

219,145

 

Total sales

334,385

 

 

357,654

 

 

2,034,643

 

 

2,203,617

 

Cost of sales:

 

 

 

 

 

 

 

Product and other cost of sales

185,663

 

 

194,334

 

 

1,395,339

 

 

1,522,687

 

Rental cost of sales

31,319

 

 

34,986

 

 

111,578

 

 

123,697

 

Total cost of sales

216,982

 

 

229,320

 

 

1,506,917

 

 

1,646,384

 

Gross profit

117,403

 

 

128,334

 

 

527,726

 

 

557,233

 

Selling and administrative expenses

98,472

 

 

106,121

 

 

423,880

 

 

433,746

 

Depreciation and amortization expense

16,532

 

 

16,858

 

 

65,865

 

 

65,586

 

Impairment loss (non-cash) (a)

57,748

 

 

 

 

57,748

 

 

313,130

 

Restructuring and other charges (a)

4,733

 

 

 

 

7,233

 

 

5,429

 

Transaction costs (a)

 

 

150

 

 

654

 

 

2,045

 

Operating (loss) income

(60,082

)

 

5,205

 

 

(27,654

)

 

(262,703

)

Interest expense, net

1,876

 

 

2,478

 

 

9,780

 

 

10,306

 

(Loss) income before income taxes

(61,958

)

 

2,727

 

 

(37,434

)

 

(273,009

)

Income tax benefit

(15,740

)

 

(14,330

)

 

(13,060

)

 

(20,443

)

Net (loss) income

$

(46,218

)

 

$

17,057

 

 

$

(24,374

)

 

$

(252,566

)

 

 

 

 

 

 

 

 

(Loss) Earnings per common share:

 

 

 

 

 

 

 

Basic

$

(0.97

)

 

$

0.36

 

 

$

(0.52

)

 

$

(5.40

)

Diluted

$

(0.97

)

 

$

0.36

 

 

$

(0.52

)

 

$

(5.40

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

47,562

 

 

46,915

 

 

47,306

 

 

46,763

 

Diluted

47,562

 

 

47,487

 

 

47,306

 

 

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 27, 2019

 

April 28, 2018

 

April 27, 2019

 

April 28, 2018

Percentage of sales:

 

 

 

 

 

 

 

Sales:

 

 

 

 

 

 

 

Product sales and other

81.6

%

 

80.2

%

 

90.4

%

 

90.1

%

Rental income

18.4

%

 

19.8

%

 

9.6

%

 

9.9

%

Total sales

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

Cost of sales:

 

 

 

 

 

 

 

Product and other cost of sales (a)

68.1

%

 

67.8

%

 

75.9

%

 

76.7

%

Rental cost of sales (a)

50.8

%

 

49.3

%

 

57.0

%

 

56.4

%

Total cost of sales

64.9

%

 

64.1

%

 

74.1

%

 

74.7

%

Gross profit

35.1

%

 

35.9

%

 

25.9

%

 

25.3

%

Selling and administrative expenses

29.4

%

 

29.7

%

 

20.8

%

 

19.7

%

Depreciation and amortization

4.9

%

 

4.7

%

 

3.2

%

 

3.0

%

Impairment loss (non-cash)

17.3

%

 

%

 

2.8

%

 

14.2

%

Restructuring and other charges

1.4

%

 

%

 

0.4

%

 

0.2

%

Transaction costs

%

 

%

 

%

 

0.1

%

Operating (loss) income

(18.0

)%

 

1.5

%

 

(1.4

)%

 

(11.9

)%

Interest expense, net

0.6

%

 

0.7

%

 

0.5

%

 

0.5

%

(Loss) income before income taxes

(18.5

)%

 

0.8

%

 

(1.8

)%

 

(12.4

)%

Income tax benefit

(4.7

)%

 

(4.0

)%

 

(0.6

)%

 

(0.9

)%

Net (loss) income

(13.8

)%

 

4.8

%

 

(1.2

)%

 

(11.5

)%

 

 

 

 

 

 

 

 

(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 27, 2019

 

April 28, 2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

14,013

 

 

$

16,126

 

Receivables, net

98,246

 

 

100,060

 

Merchandise inventories, net

420,322

 

 

443,559

 

Textbook rental inventories

47,001

 

 

47,779

 

Prepaid expenses and other current assets

11,778

 

 

11,847

 

Total current assets

591,360

 

 

619,371

 

Property and equipment, net

109,777

 

 

111,287

 

Intangible assets, net

194,978

 

 

219,129

 

Goodwill

4,700

 

 

49,282

 

Deferred tax assets, net

2,425

 

 

 

Other noncurrent assets

42,940

 

 

40,142

 

Total assets

$

946,180

 

 

$

1,039,211

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

186,818

 

 

$

187,909

 

Accrued liabilities

121,720

 

 

125,556

 

Short-term borrowings

100,000

 

 

100,000

 

Total current liabilities

408,538

 

 

413,465

 

Long-term deferred taxes, net

 

 

2,106

 

Other long-term liabilities

53,514

 

 

59,277

 

Long-term borrowings

33,500

 

 

96,400

 

Total liabilities

495,552

 

 

571,248

 

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, 51,030 and 50,032 shares, respectively; outstanding, 47,563 and 46,917 shares, respectively

510

 

 

501

 

Additional paid-in-capital

726,331

 

 

717,323

 

Accumulated deficit

(244,577

)

 

(220,203

)

Treasury stock, at cost

(31,636

)

 

(29,658

)

Total stockholders' equity

450,628

 

 

467,963

 

Total liabilities and stockholders' equity

$

946,180

 

 

$

1,039,211

 

 

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Sales 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 27, 2019

 

April 27, 2019

Retail Sales

 

 

 

 

New stores (a)

 

$

5.9

 

 

$

54.7

 

Closed stores (a)

 

(11.6

)

 

(83.8

)

Comparable stores (b)

 

2.1

 

 

(93.0

)

Textbook rental deferral

 

(8.5

)

 

0.2

 

Service revenue (c)

 

(3.1

)

 

(5.6

)

Other (d)

 

 

 

(8.1

)

Retail Sales subtotal:

 

$

(15.2

)

 

$

(135.6

)

Wholesale Sales

 

$

(5.8

)

 

$

(35.0

)

DSS Sales (e)

 

$

(0.2

)

 

$

5.6

 

Eliminations (f)

 

$

(2.1

)

 

$

(4.0

)

Total sales variance

 

$

(23.3

)

 

$

(169.0

)

(a) The following is a store count summary for physical stores and virtual stores:

 

13 weeks ended

 

52 weeks ended

 

April 27, 2019

 

April 28, 2018

 

April 27, 2019

 

April 28, 2018

Number of Stores:

Physical
Stores

 

Virtual
Stores

 

Physical
Stores

 

Virtual
Stores

 

Physical
Stores

 

Virtual
Stores

 

Physical
Stores

 

Virtual
Stores

Number of stores at beginning of period

773

 

680

 

782

 

698

 

768

 

676

 

769

 

712

Stores opened

 

1

 

3

 

2

 

35

 

33

 

33

 

21

Stores closed

1

 

5

 

17

 

24

 

31

 

33

 

34

 

57

Number of stores at

end of period

772

 

676

 

768

 

676

 

772

 

676

 

768

 

676

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b)

For Comparable Sales details, see below.

(c)

Service revenue includes Promoversity, brand partnerships, shipping and handling, digital content, software, services, and revenue from other programs.

(d)

Other includes inventory liquidation sales to third parties, marketplace sales and certain accounting adjusting items related to return reserves, agency sales and other deferred items.

(e)

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.

(f)

Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale.

Comparable Sales - Retail Segment

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 27, 2019

 

April 27, 2019

Textbooks (Course Materials)

 

$

0.9

 

 

0.9

%

 

$

(97.9

)

 

(8.0

)%

General Merchandise

 

2.4

 

 

1.7

%

 

8.7

 

 

1.5

%

Trade Books

 

(1.2

)

 

(11.1

)%

 

(3.8

)

 

(8.2

)%

Total Comparable Store Sales

 

$

2.1

 

 

0.9

%

 

$

(93.0

)

 

(5.1

)%

Comparable store sales includes sales from physical stores that have been open for an entire fiscal year period and virtual store sales for the 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 reflects the manner in which management views comparable sales, as well as the seasonal nature of our business.

null
 

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Non-GAAP Information

(In thousands)

(Unaudited)

 

Adjusted Earnings

13 weeks ended

 

52 weeks ended

 

April 27, 2019

 

April 28, 2018

 

April 27, 2019

 

April 28, 2018

Net (loss) income

$

(46,218

)

 

$

17,057

 

 

$

(24,374

)

 

$

(252,566

)

Reconciling items, after-tax (below)

46,701

 

 

111

 

 

49,786

 

 

309,515

 

Adjusted Earnings (Non-GAAP)

$

483

 

 

$

17,168

 

 

$

25,412

 

 

$

56,949

 

 

 

 

 

 

 

 

 

Reconciling items, pre-tax

 

 

 

 

 

 

 

Impairment loss (non-cash) (a)

$

57,748

 

 

$

 

 

$

57,748

 

 

$

313,130

 

Inventory valuation amortization (non-cash) (b)

 

 

 

 

 

 

3,273

 

Content amortization (non-cash) (c)

736

 

 

 

 

1,096

 

 

 

Restructuring and other charges (d)

4,733

 

 

 

 

7,233

 

 

5,429

 

Transaction costs (e)

 

 

150

 

 

654

 

 

2,045

 

Reconciling items, pre-tax

63,217

 

 

150

 

 

66,731

 

 

323,877

 

Less: Pro forma income tax impact (f)

16,516

 

 

39

 

 

16,945

 

 

14,362

 

Reconciling items, after-tax

$

46,701

 

 

$

111

 

 

$

49,786

 

 

$

309,515

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

13 weeks ended

 

52 weeks ended

 

April 27, 2019

 

April 28, 2018

 

April 27, 2019

 

April 28, 2018

Net (loss) income

$

(46,218

)

 

$

17,057

 

 

$

(24,374

)

 

$

(252,566

)

Add:

 

 

 

 

 

 

 

Depreciation and amortization expense

16,532

 

 

16,858

 

 

65,865

 

 

65,586

 

Interest expense, net

1,876

 

 

2,478

 

 

9,780

 

 

10,306

 

Income tax benefit

(15,740

)

 

(14,330

)

 

(13,060

)

 

(20,443

)

Impairment loss (non-cash) (a)

57,748

 

 

 

 

57,748

 

 

313,130

 

Inventory valuation amortization (non-cash) (b)

 

 

 

 

 

 

3,273

 

Content amortization (non-cash) (c)

736

 

 

 

 

1,096

 

 

 

Restructuring and other charges (d)

4,733

 

 

 

 

7,233

 

 

5,429

 

Transaction costs (e)

 

 

150

 

 

654

 

 

2,045

 

Adjusted EBITDA (Non-GAAP)

$

19,667

 

 

$

22,213