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Barnes & Noble Education Reports First Quarter 2018 Financial Results

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Consolidated Sales Increase 49% including First Full Quarter Results
of MBS Textbook Exchange

Barnes & Noble College Comparable Store Sales Decrease 2.5%

Consolidated Adjusted EBITDA Improves $4.1 Million

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 first
quarter for fiscal 2018. As a result of the acquisition of MBS Textbook
Exchange, LLC ("MBS") on February 27, 2017, the condensed consolidated
financial statements for the 13 weeks ended July 29, 2017 is the first
reporting period to include the financial results of MBS for a full
reporting period. All material intercompany accounts and transactions
have been eliminated in consolidation. The condensed consolidated
financial statements for the 13 weeks ended July 30, 2016 exclude the
financial results of MBS. The first quarter results of our two segments,
Barnes & Noble College Booksellers, LLC ("BNC") and MBS are consistent
with the historical seasonality trends and the Company's expectations.

Financial highlights for the first quarter 2018:

  • Consolidated sales of $355.7 million increased by $116.5 million, or
    48.7%, as compared to prior year period.
  • BNC comparable store sales decreased 2.5% in the quarter, as compared
    with a decrease of 2.8% in the prior year period.
  • Consolidated net loss of $(34.8) million, as compared with a net loss
    of $(27.9) million in the prior year period.
  • Non-GAAP Adjusted EBITDA improved by $4.1 million to $(32.4) million,
    from $(36.5) million in the prior year period.
  • Non-GAAP Adjusted Earnings of $(29.8) million, as compared to $(25.9)
    million in the prior year period.

Operational highlights for the first quarter 2018:

  • BNC opened 24 new physical stores this quarter with estimated annual
    sales of $49 million, bringing total stores operated by BNC to 781
    locations as of July 29, 2017.
  • MBS opened 10 new virtual stores this quarter with estimated annual
    revenue of $4 million, bringing total contracts operated by MBS to 714
    as of July 29, 2017.
  • Completed the acquisition of Student Brands, LLC, a leading
    direct-to-student subscription-based writing skills services business,
    on August 3, 2017 for $58.5 million. Student Brands is expected to
    contribute more than $10 million of EBITDA to BNED's consolidated
    results over the next twelve months and significantly expands the
    Company's opportunity to market the services students need to improve
    performance in the classroom and to secure jobs after graduation.
  • Launched implementations of LoudSight, the Company's predictive
    analytics offering, with Unizin, a nonprofit consortium of 22 schools
    focused on promoting affordability, access, and student success in
    digital education.
  • Signed a multi-year contract with Eastern Gateway Community College
    which includes providing institutional-wide LMS and predictive
    analytics solutions, as well as operating a traditional physical
    bookstore.
  • Partnered with Target to promote its brand and college essentials to
    our customer base.
  • Collaborated with major publishers in the Educational Publishers
    Enforcement Group ("EPEG") to implement enhanced anti-counterfeiting
    procedures developed by EPEG to assist publishers and distributors in
    combating counterfeit print textbooks.

"For the first time, our results include a full quarter of MBS' leading
position in the wholesale and direct markets, providing $16.1 million of
segment Adjusted EBITDA. MBS' first quarter results, coupled with our
success in integrating MBS into our operations post acquisition,
reinforce our belief that the MBS transaction is highly beneficial for
our operating leverage, financial position and for creation of
shareholder value," said Michael P. Huseby, Executive Chairman, Barnes &
Noble Education. "In our Barnes & Noble College segment, general
merchandise sales performed well in the first quarter growing by 3.3% on
a comparable store basis. This growth was led by strong branded apparel
and gift sales. General merchandise represented approximately 50% of the
total sales for the quarter for BNC. The comparable store sales decline
for BNC of 2.5% is in line with our expectations. Looking ahead, we are
well prepared for the fall rush period for course material and general
merchandise sales both in store and online. We are well positioned to
broaden and deepen our partnerships with schools to support student
success. In addition, our agreement with the major publishers to enhance
and formalize procedures to combat counterfeits and assure authentic
content has placed us in a better position to negotiate expanded and
mutually-beneficial commercial relationships with them."

Consolidated first quarter sales of $355.7 million increased $116.5
million, or 48.7%, as compared to the prior year period, primarily due
to the MBS acquisition. The Company reported a consolidated net loss of
$(34.8) million compared to $(27.9) million in the prior year period.

Comparable store sales decreased 2.5% for BNC for the quarter,
representing approximately $5.5 million in revenue, compared to 2.8% for
BNC in the prior year quarter. The decrease is primarily attributable to
textbook sales, which were down 8.5% partially offset by an increase in
general merchandise sales of 3.3%.

The Company's operating loss was $(55.5) million during the 13 weeks
ended July 29, 2017, compared to operating loss of $(52.8) million
during the 13 weeks ended July 30, 2016. For the 13 weeks ended July 29,
2017, excluding the fair value inventory adjustment for MBS of $2.2
million, CEO separation costs of $5.2 million (recorded in restructuring
and other charges) and transaction costs of $0.6 million, operating loss
was $(47.5) million, an improvement of $1.9 million. For the 13 weeks
ended July 30, 2016, excluding the transaction costs of $1.5 million and
restructuring costs of $1.8 million, operating loss was $(49.4) million.

The Company's non-GAAP Adjusted EBITDA improved by $4.1 million to
$(32.4) million for the quarter, as compared to $(36.5) million in the
prior year period. Adjusted EBITDA for BNC was $(36.9) million, compared
with $(36.5) million in the prior year period, reflecting the
seasonality of the business. MBS contributed $16.1 million of Adjusted
EBITDA. The intercompany eliminations of $(11.6) million of profit will
be recognized in the second quarter as BNC sells through the inventory
provided by MBS.

First quarter consolidated net loss was $(34.8) million, or $(0.75) per
diluted share, compared to net loss of $(27.9) million, or $(0.60) per
diluted share, in the prior year period. The current year's fiscal first
quarter has 46.5 million diluted shares outstanding, while the prior
year period had 46.3 million diluted shares outstanding.

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. 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 Wednesday, August 30, 2017
and can be accessed at the Barnes & Noble Education, Inc. corporate
website at www.bned.com.

Barnes & Noble Education, Inc. expects to report fiscal 2018 second
quarter results on or about December 5, 2017.

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. Barnes & Noble Education operates 1,495
physical and virtual bookstores serving more than 6 million students and
their faculty, and offers a suite of digital software, content and
services including direct-to-student study tools. The Company also
operates MBS Textbook Exchange, 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 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; 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; the
risk of price reduction or change in format of course materials by
publishers, which could negatively impact revenues and margin; 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 weeks ended July
29, 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 weeks ended July 30, 2016 exclude the financial results of MBS.

  • BNC operates 781 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 714 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 781 campus bookstores.
 

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 
  13 weeks ended

July 29

 

July 30,

2017

2016

Sales:
Product sales and other $ 334,502 $ 217,736
Rental income 21,209   21,501  
Total sales 355,711   239,237  
Cost of sales:
Product and other cost of sales 277,741 177,994
Rental cost of sales 13,257   13,830  
Total cost of sales 290,998   191,824  
Gross profit 64,713   47,413  
Selling and administrative expenses 99,410 83,937
Depreciation and amortization expense 15,017 12,921
Restructuring and other charges (a) 5,236 1,790
Transaction costs (a) 589   1,527  
Operating loss (55,539 ) (52,762 )
Interest expense, net 3,038   666  
Loss before income taxes (58,577 ) (53,428 )
Income tax benefit (23,794 ) (25,512 )
Net loss $ (34,783 ) $ (27,916 )
 
Loss per common share:
Basic $ (0.75 ) $ (0.60 )
Diluted $ (0.75 ) $ (0.60 )
Weighted average common shares outstanding:
Basic 46,517 46,349
Diluted 46,517 46,349
(a)   For additional information, see Note (a) - (c) in the Non-GAAP
disclosure information of this Press Release.
 
      13 weeks ended

July 29,

 

July 30,

2017

2016

Percentage of sales:
Sales:
Product sales and other 94.0 % 91.0 %
Rental income 6.0 % 9.0 %
Total sales 100.0 % 100.0 %
Cost of sales:
Product and other cost of sales (a) 83.0 % 81.7 %
Rental cost of sales (a) 62.5 % 64.3 %
Total cost of sales 81.8 % 80.2 %
Gross profit 18.2 % 19.8 %
Selling and administrative expenses 27.9 % 35.1 %
Depreciation and amortization expense 4.2 % 5.4 %
Restructuring and other charges 1.5 % 0.7 %
Transaction costs 0.2 % 0.6 %
Operating loss (15.6 )% (22.0 )%
Interest expense, net 0.9 % 0.3 %
Loss before income taxes (16.5 )% (22.3 )%
Income tax benefit (6.7 )% (10.7 )%
Net loss (9.8 )% (11.6 )%
 

(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)

 
 

July 29,

 

July 30,

2017

2016

ASSETS
Current assets:
Cash and cash equivalents $ 14,192 $ 8,906
Receivables, net 112,472 38,898
Merchandise inventories, net 780,414 724,329
Textbook rental inventories 6,931 7,527
Prepaid expenses and other current assets 13,537   8,614  
Total current assets 927,546   788,274  
Property and equipment, net 112,799 107,347
Intangible assets, net 206,382 197,508
Goodwill 329,467 281,337
Other noncurrent assets 42,481   39,003  
Total assets $ 1,618,675   $ 1,413,469  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 511,488 $ 560,163
Accrued liabilities 89,934 41,949
Short-term borrowings 100,000    
Total current liabilities 701,422   602,112  
Long-term deferred taxes, net 19,791 35,636
Other long-term liabilities 96,457 74,976
Long-term borrowings 120,100   25,000  
Total liabilities 937,770   737,724  
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,
49,372 and 48,655 shares, respectively; outstanding, 46,517 and
46,086 shares, respectively
494 487
Additional paid-in-capital 710,851 701,393
Retained earnings (2,420 ) (914 )
Treasury stock, at cost (28,020 ) (25,221 )
Total stockholders' equity 680,905   675,745  
Total liabilities and stockholders' equity $ 1,618,675   $ 1,413,469  
 

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Loss Per Share

(In thousands, except per share data)

(Unaudited)

 
  13 weeks ended

July 29,

 

July 30,

2017

2016

Numerator for basic and diluted earnings per share:
Net loss available to common shareholders $   (34,783 ) $   (27,916 )
 
Denominator for basic and diluted earnings per share:
Basic weighted average common shares 46,517   46,349  
 
Loss per common share:
Basic $   (0.75 ) $   (0.60 )
Diluted $ (0.75 ) $ (0.60 )
 

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Segment Information

(In thousands, except percentages)

(Unaudited)

 

Segment Information (a)

  13 weeks ended

July 29, 2017

  July 30, 2016
Sales
BNC $   249,977 $   239,237
MBS 139,801
Elimination (34,067 )  
Total $   355,711   $   239,237  
 
Gross profit
BNC $ 48,737 $ 47,413

MBS (excluding $2,248 of incremental cost of sales related to
inventory fair value amortization) (b)

29,837
Elimination (11,613 )  
Total $   66,961   $   47,413  
 
Selling and administrative expenses
BNC $ 85,642 $ 83,937
MBS 13,768    
Total $   99,410   $   83,937  
 
Adjusted EBITDA
BNC $ (36,905 ) $ (36,524 )
MBS (b) 16,069
Elimination (11,613 )  
Total $   (32,449 ) $   (36,524 )
 

Percentage of Segment Sales

13 weeks ended
July 29, 2017 July 30, 2016
Gross margin
BNC 19.5 % 19.8 %

MBS (excluding $2,248 of incremental cost of sales related to
inventory fair value amortization) (b)

21.3 % %
Elimination 34.1 % %
Total gross margin 18.8 % 19.8 %
 
Selling and administrative expenses
BNC 34.3 % 35.1 %
MBS 9.8 % %
Total selling and administrative expenses 27.9 % 35.1 %
(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) 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
July 29, 2017   July 30, 2016
Net loss $ (34,783 ) $ (27,916 )
Reconciling items, after-tax (below) 5,006   2,031  
Adjusted Earnings (Non-GAAP) $ (29,777 ) $ (25,885 )
 
Reconciling items, pre-tax
Inventory valuation amortization (MBS) (non-cash) (a) $ 2,248 $
Restructuring and other charges (b) 5,236 1,790
Transaction costs (c) 589   1,527  
Reconciling items, pre-tax 8,073 3,317
Less: Pro forma income tax impact (d) 3,067   1,286  
Reconciling items, after-tax $ 5,006   $ 2,031  
 
Adjusted EBITDA 13 weeks ended
July 29, 2017 July 30, 2016
Net loss $ (34,783 ) $ (27,916 )
Add:
Depreciation and amortization expense 15,017 12,921
Interest expense, net 3,038 666
Income tax benefit (23,794 ) (25,512 )
Inventory valuation amortization (MBS) (non-cash) (a) 2,248
Restructuring and other charges (b) 5,236 1,790
Transaction costs (c) 589   1,527  
Adjusted EBITDA (Non-GAAP) $ (32,449 ) $ (36,524 )
(a)   For the 13 weeks ended Jul 29, 2017, gross margin includes $2.2
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 will be recognized over six months from
the date of acquisition and is 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 and consistent with Mr. Roberts's
employment agreement, Mr. Roberts will receive an aggregate payment
of approximately $4.4 million, comprised of salary, bonus and
benefits. In addition, the Company will pay 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 13 weeks ended July 29, 2017, we recognized
restructuring and other charges of approximately $5.2 million, which
is comprised of the liability for 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).

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Sales Information

(Unaudited)

 

Total Sales

The components of the sales variances for the 13 week periods are
as follows:

 
Dollars in millions   13 weeks ended
July 29, 2017   July 30, 2016
MBS Sales (a)
Wholesale $     92.5 $    
Direct 47.3    
MBS total sales subtotal: $ 139.8 $
BNC Sales
New stores (b) $ 15.4 $ 8.5
Closed stores (b) (2.3 ) (1.8 )
Comparable stores (c) (5.5 ) (6.2 )
Textbook rental deferral 1.3 1.4
Service revenue (d) 1.9 0.1
Other (e) (0.1 ) (1.8 )
BNC total sales subtotal: $ 10.7 $ 0.2
Eliminations (f) $     (34.0 ) $      
Total sales variance $     116.5   $     0.2  
(a)   On February 27, 2017, we acquired MBS Textbook Exchange, LLC
("MBS"). The condensed consolidated financial statements for the 13
weeks ended July 29, 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 weeks ended July 30, 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

13 weeks ended July 29, 2017

July 30, 2016

BNC Stores   MBS Direct Stores BNC Stores
Stores opened 24 10

33

 

Stores closed 12 8 14
Number of stores open at end of period 781 714 770
(c)   See below.
 
(d) Service revenue includes Promoversity, LoudCloud, brand
partnerships, 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 week
periods are as follows:

 
  13 weeks ended
July 29, 2017   July 30, 2016
Textbooks $ (8.4 )   (8.5 )% $ (6.9 )   (6.8 )%
General Merchandise 3.6 3.3 % 1.6 1.6 %
Trade Books (0.7 ) (5.4 )% (0.6 ) (4.7 )%
Other   % (0.3 ) (89.3 )%
Total Comparable Store Sales $ (5.5 ) (2.5 )% $ (6.2 ) (2.8 )%
 

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. For periods presented prior to
the first quarter of Fiscal 2017, comparable store sales includes sales
from stores that have been open for at least 15 months, does not include
sales from closed stores for all periods presented, and includes digital
agency sales on a net basis.

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