Barnes & Noble Education(BNED)2019-12-04 21:42Business Operations - The company operates 1,436 physical and virtual bookstores, serving over 6 million students[88]. - The company opened 95 new stores and closed 107 stores during the 26 weeks ended October 26, 2019, resulting in a total of 1,436 stores[114]. Financial Performance - Total sales for the 13 weeks ended October 26, 2019, were $772,228,000, a decrease of 5.2% from $814,766,000 for the same period in 2018[103]. - Net income for the 13 weeks ended October 26, 2019, was $35,931,000, down 39.8% from $59,697,000 in the prior year[103]. - Adjusted EBITDA for the 13 weeks ended October 26, 2019, was $74,544,000, a decrease of 22.0% compared to $95,541,000 for the same period in 2018[103]. - Total sales decreased by $60.4 million, or 5.2%, to $1,091.9 million during the 26 weeks ended October 26, 2019, from $1,152.3 million during the 26 weeks ended October 27, 2018[112]. - Net income for the 26 weeks ended October 26, 2019, was $3.8 million, a decline of 82.0% from $21.1 million in the prior year[141]. - Adjusted Earnings (non-GAAP) for the 26 weeks ended October 26, 2019, was $7.8 million, down from $21.6 million in the same period of 2018, a decrease of 63.9%[145]. Revenue and Sales Trends - Total revenue from the First Day inclusive access program increased by 93% compared to the prior year[88]. - Retail sales decreased by $42.1 million, or 5.4%, to $741.8 million for the 13 weeks ended October 26, 2019, compared to $783.9 million for the same period in 2018[114]. - Product sales and other for the 13 weeks ended October 26, 2019, were $718.5 million, a decrease of 5.0% compared to $756.2 million for the same period in 2018[110]. - Rental income for the 13 weeks ended October 26, 2019, was $53.7 million, down 8.4% from $58.6 million in the prior year[110]. Cost and Expenses - Total employee benefit expense for defined contribution plans was $2,839 for the 26 weeks ended October 26, 2019, down from $3,469 in the prior year[76]. - Stock-based compensation expense for the 26 weeks ended October 26, 2019, was $4,181, compared to $4,973 for the same period in the prior year[83]. - Selling and administrative expenses for the 13 weeks ended October 26, 2019, totaled $113.4 million, an increase from $115.3 million in the same period last year[110]. - Total cost of sales for the 13 weeks ended October 26, 2019, was $585.3 million, compared to $604.0 million for the same period in 2018[110]. Taxation - The effective income tax rate for the 26 weeks ended October 26, 2019, was 56.3%, significantly higher than the 12.4% rate for the same period in the prior year[84]. - Income tax expense for the 13 weeks ended October 26, 2019, was $19.1 million on pre-tax income of $55.0 million, resulting in an effective tax rate of 34.7%[141]. Market Conditions and Competition - The company experienced a decline in enrollment trends, particularly at community colleges, attributed to an improved economy and a dip in the U.S. birth rate[96]. - Price competition remains significant, with students being highly price-sensitive and able to shift spending easily among providers[95]. - The company is facing increasing competition from alternative media and sources for textbooks, including e-commerce outlets and digital platforms[95]. - The overall economic environment and funding levels at colleges and universities are impacting the company's business performance[96]. Future Outlook and Risks - The company anticipates continued growth in online degree program enrollments despite overall declining higher education enrollment[96]. - The company expects new bookstore contracts to drive future growth, with a trend towards outsourcing in the campus bookstore market[96]. - The company operates in a competitive environment with various risks including changes in college enrollment and funding availability[169]. - Digital sales growth may not exceed the rate of investment spend, impacting profitability[169]. - The company faces risks related to the integration of acquisitions and realization of anticipated synergies[169]. Cash Flow and Capital Management - Net cash flows provided by operating activities during the 26 weeks ended October 26, 2019, were $161.4 million, down from $236.6 million in the prior year, a decrease of 32%[153]. - Capital expenditures for the 26 weeks ended October 26, 2019, totaled $19.3 million, compared to $23.2 million in the same period of 2018[154]. - Cash, cash equivalents, and restricted cash at the end of the period were $25.4 million, compared to $20.8 million at the end of the previous year[151]. - The company had no outstanding borrowings under the Credit Agreement as of October 26, 2019, and had borrowed $150 million during the 26 weeks ended[156].