Barnes & Noble Education(BNED)2020-09-03 20:41Financial Performance - Total sales for the 13 weeks ended August 1, 2020, were $204,014,000, a decrease of 36.2% compared to $319,657,000 for the same period in 2019 [111]. - The net loss for the 13 weeks ended August 1, 2020, was $46,652,000, compared to a net loss of $32,155,000 for the same period in 2019 [111]. - Adjusted EBITDA for the 13 weeks ended August 1, 2020, was $(38,017,000), compared to $(25,123,000) for the same period in 2019 [111]. - Total sales decreased by $115.6 million, or 36.2%, to $204.0 million during the 13 weeks ended August 1, 2020, from $319.7 million during the same period in 2019 [118]. - Retail sales decreased by $115.9 million, or 42.2%, to $158.8 million during the 13 weeks ended August 1, 2020, compared to $274.7 million in the prior year [122]. - Wholesale sales increased by $8.0 million, or 11.0%, to $80.3 million during the 13 weeks ended August 1, 2020, from $72.3 million in the same period in 2019 [126]. - Rental income decreased by $6.6 million, or 38.0%, to $10.8 million during the 13 weeks ended August 1, 2020, from $17.4 million in the prior year [124]. - The operating loss increased to $(58.9) million, or (28.9)% of sales, during the 13 weeks ended August 1, 2020, compared to $(43.8) million (13.8%) in the same period of 2019 [142]. - The company recorded a net loss of $(46.7) million during the 13 weeks ended August 1, 2020, compared to a net loss of $(32.2) million in the same period of 2019 [146]. - Adjusted Earnings (non-GAAP) was $(41.7) million during the 13 weeks ended August 1, 2020, compared to $(30.1) million in the prior year [148]. Operational Changes - The company recognized restructuring and other charges totaling $5.67 million during the 13 weeks ended August 1, 2020, including $3.4 million for severance costs [79]. - The company has temporarily suspended employer matching contributions into its 401(k) plans through the end of December 2020 due to COVID-19 impacts [82]. - The company implemented a significant cost reduction program aimed at maximizing productivity and driving profitability, with expected annualized savings beginning in Fiscal 2021 [155]. - Total selling and administrative expenses decreased by $27.7 million, or 28.3%, to $70.0 million during the 13 weeks ended August 1, 2020, from $97.7 million in the same period of 2019 [134]. - Retail selling and administrative expenses decreased by $26.8 million, or 32.0%, to $57.0 million, mainly due to a $22.8 million reduction in payroll and operating expenses [135]. - Total depreciation and amortization expense decreased by $1.8 million, or 11.4%, to $14.1 million during the 13 weeks ended August 1, 2020, from $15.9 million in the prior year [139]. Market and Competitive Environment - The COVID-19 pandemic significantly impacted the company's first quarter results, with many schools shifting to remote learning [92]. - The company continues to face downward enrollment trends and shrinking resources from state and federal government for colleges and universities [103]. - The market for educational materials is undergoing significant changes due to rising tuition costs and increased competition from alternative sources [102]. - The company is experiencing growing competition from alternative media and sources of textbooks, impacting its traditional distribution channels [103]. - The company operates in a competitive environment with risks including COVID-19 impacts, changes in college enrollment, and digital sales growth not meeting investment rates [168]. Financial Position and Cash Flow - Cash flows used in operating activities were $(54.8) million, an increase of $14.6 million compared to $(40.2) million in the prior year, primarily due to higher net loss and changes in working capital [157]. - Cash flows provided by financing activities were $59.5 million for the 13 weeks ended August 1, 2020, compared to $40.6 million in the prior year, reflecting higher net borrowings [160]. - Capital expenditures totaled $7.1 million for the 13 weeks ended August 1, 2020, down from $8.3 million in the same period in 2019 [159]. - The company had $234.6 million in outstanding borrowings under the Credit Agreement as of August 1, 2020, compared to $174.1 million as of July 27, 2019 [161]. - As of August 1, 2020, cash, cash equivalents, and restricted cash at the end of the period were $8.2 million, down from $9.0 million at the beginning of the period [156]. Strategic Initiatives - The company expanded its strategic partnership with VitalSource® in August 2020 to provide students with access to additional learning opportunities [91]. - The company plans to continue expanding its general merchandise e-commerce capabilities and increase market share through new accounts and strategic partnerships [91]. - The Board of Directors authorized a stock repurchase program of up to $50 million, with approximately $26.7 million remaining available as of August 1, 2020 [163]. - During the 13 weeks ended August 1, 2020, the company repurchased 178,669 shares of Common Stock outside of the stock repurchase program for employee tax withholding obligations [163]. Risk Management - The company faces risks related to data privacy, information security, and potential disruptions from third-party service providers [168]. - The company anticipates that strategic objectives and synergies from acquisitions may not be fully realized or may take longer than expected [168]. - The company has not identified any changes in internal control over financial reporting that materially affected its controls during the first quarter [175]. - The effectiveness of the company's disclosure controls and procedures was evaluated and deemed effective at a reasonable assurance level [174]. - The company has no material changes in market risk disclosures compared to the previous fiscal year [172].