Blue Nile, Inc.
BLUE NILE INC (Form: 8-K, Received: 02/15/2012 16:27:32)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

February 15, 2012

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)

 

 

BLUE NILE, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

 

 

DELAWARE   000-50763   91-1963165

(STATE OR OTHER JURISDICTION

OF INCORPORATION)

 

(COMMISSION FILE

NUMBER)

 

(I.R.S. EMPLOYER

IDENTIFICATION NO.)

411 FIRST AVENUE SOUTH, SUITE 700, SEATTLE, WASHINGTON, 98104

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(206) 336-6700

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE

N/A

(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 15, 2012, Blue Nile, Inc. issued a press release announcing financial results for the fourth quarter and fiscal year 2011. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The press release should be read in conjunction with the note regarding forward-looking statements, which is included in the text of the press release.

The information in this Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, unless expressly set forth by specific reference in such filing.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

EXHIBIT

NUMBER

  

DESCRIPTION

  
99.1    Press release dated February 15, 2012, issued by Blue Nile, Inc.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    BLUE NILE, INC.
  By:  

/s/ Terri K Maupin

    Terri K. Maupin
Dated: February 15, 2012    

Chief Accounting Officer

(Principal Accounting Officer)

 

    By:  

/s/ David Binder

    David Binder
Dated: February 15, 2012    

Chief Financial Officer

(Principal Financial Officer)

 

LOGO

Exhibit 99.1

Blue Nile Announces Fourth Quarter and Fiscal Year 2011 Financial Results

Fourth Quarter Net Sales of $112.3 Million

Fourth Quarter Earnings Per Diluted Share Total $0.30

Implements Plan to Accelerate Growth

Announces $100 Million Stock Repurchase Program

SEATTLE, February 15, 2012 – Blue Nile, Inc. (Nasdaq: NILE), the leading online retailer of diamonds and fine jewelry, today reported financial results for its fourth quarter and fiscal year ended January 1, 2012.

Net sales for the fourth quarter decreased 2.1% to $112.3 million from $114.8 million in the fourth quarter of 2010. Operating income for the quarter was $6.3 million, compared to $9.2 million in the fourth quarter of 2010. Net income for the fourth quarter totaled $4.2 million. Fourth quarter earnings per diluted share totaled $0.30, compared to $0.41 in the fourth quarter of 2010. Non-GAAP adjusted EBITDA for the fourth quarter was $8.4 million, compared to $11.6 million for the fourth quarter last year.

For the full year, Blue Nile reported net sales of $348.0 million, compared to $332.9 million for the full year of 2010, an increase of 4.5%. Operating income for the full year was $16.9 million compared to $21.3 million in the prior year. Net income for the year was $11.4 million and earnings per diluted share totaled $0.77. Non-GAAP adjusted EBITDA for 2011 was $26.7 million.

Net cash provided by operating activities totaled $15.4 million for the year. Non-GAAP free cash flow for the year was $10.1 million.

“The fourth quarter was challenging for Blue Nile, with weakness in demand from our high end diamond customers and some of our international markets, as well as the continued impact of inflationary pressure on commodity costs. While we managed the business through these headwinds, we implemented components of a new strategy designed to accelerate growth. This plan centers around the acquisition of non-engagement customers, which we believe in the long term will feed growth in our engagement and non-engagement businesses. This strategy drove positive momentum, resulting in our strongest period of customer acquisition since 2007, with new customer growth of 15%. Additionally, in the fourth quarter we achieved order growth of 22% and unit growth of 30% compared to the fourth quarter of 2010. Growth in all three of these metrics accelerated in December and we believe these trends are important indicators of the long term growth potential of our business,” said Vijay Talwar, Chief Executive Officer.

The Company also announced that on February 7, 2012, Blue Nile’s Board of Directors authorized the repurchase of up to $100 million of the Company’s common stock over 24 months. The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws.

Selected Financial Highlights

 

   

U.S. engagement net sales for the fourth quarter and full year 2011 were $56.2 million and $186.2 million, respectively. U.S. engagement net sales for the fourth quarter and full year 2010 were $59.8 million and $189.5 million, respectively.


   

U.S. jewelry net sales for the fourth quarter and full year 2011 were $40.4 million and $105.9 million, respectively. U.S. jewelry net sales for the fourth quarter and full year 2010 were $39.7 million and $100.1 million, respectively.

 

   

International net sales for the fourth quarter and full year 2011 were $15.7 million and $55.9 million respectively. International net sales for the fourth quarter and full year 2010 were $15.3 million and $43.3 million, respectively. Excluding the impact from changes in foreign exchange rates, international sales increased 23.3% for the fiscal year.

 

   

In the fourth quarter, orders, which we define as customer orders that have been shipped, grew 22% from the fourth quarter of 2010.

 

   

New customers, which we define as individuals who have not made a prior purchase from Blue Nile, grew 15% in the fourth quarter of 2011 compared to the fourth quarter of 2010.

 

   

Gross profit for the quarter totaled $23.2 million. As a percent of net sales, gross profit was 20.7% compared to 22.0% for the fourth quarter of 2010. Gross profit for the year totaled $72.1 million.

 

   

Selling, general and administrative expenses for the quarter were $16.9 million, compared to $16.1 million in the fourth quarter of 2010. The increase is primarily related to marketing to drive new customer acquisition and new personnel to support expansion of our product assortment and order growth. Selling, general and administrative expense for the quarter includes stock-based compensation expense of $1.2 million, compared to $1.6 million in the fourth quarter of the prior year.

 

   

Net income per diluted share for the quarter includes stock-based compensation expense of $0.06, compared to $0.07 for the fourth quarter of 2010.

 

   

Cash and cash equivalents at the end of the fiscal year totaled $89.4 million compared to $113.3 million at the end of fiscal year 2010.

 

   

Full year 2011 capital expenditures totaled $5.4 million compared to $1.8 million for the full year 2010.

Financial Guidance

Expectations for the first quarter of 2012 (Quarter Ending April 1, 2012):

 

   

Net sales are expected to be between $81.0 million and $84.0 million.

 

   

Earnings per diluted share are projected at $0.04 to $0.07.

Expectations for the fiscal year 2012 (Year Ending December 30, 2012):

 

   

Net sales are expected to be between $384.0 million and $417.0 million.

 

   

Earnings per diluted per share are projected at $0.70 to $0.85.

Forward-Looking Statements

This press release contains forward-looking statements that include risks and uncertainties, including, without limitation, all statements related to future financial and business performance, market opportunity and plans to grow our business.


Words such as “expect,” “anticipate,” “believe,” “project,” “will” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to our new strategy, general economic conditions, our fluctuating operating results, seasonality in our business, our ability to acquire products on reasonable terms, our online business model, demand for our products, our ability to attract customers in a cost effective manner, the strength of our brand, competition, fraud, system interruptions, our ability to fulfill orders and other risks detailed in our filings with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q and our Annual Report on Form 10-K for the year ended January 2, 2011. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended January 1, 2012 which we expect to file with the Securities and Exchange Commission on or before March 1, 2012. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and Blue Nile undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.

Conference Call

The Company will host a conference call to discuss its fourth quarter and full year 2011 financial results today at 2:00 p.m. PT/5:00 p.m. ET. A live webcast of the conference call may be accessed at http://investor.bluenile.com . Following the completion of the call, a recorded replay of the webcast will be available for 30 days at the same Internet address. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results. In the event that any non-GAAP financial measure is discussed on the conference call that is not described in this release, related complementary information will be made available at http://investor.bluenile.com as soon as practicable after the conclusion of the conference call.

Analyst/Investor Day

The Company will host a 2012 Analyst/Investor Day on Thursday, February 16 th at 1:00 p.m. PT when we will discuss in more detail the growth strategy for 2012. The event will be broadcast live via webcast and may be accessed at http://investor.bluenile.com . Following the completion of the event, a recorded replay of the webcast will be available for 30 days at the same Internet address.

Non-GAAP Financial Measures

To supplement Blue Nile’s consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), Blue Nile uses non-GAAP adjusted EBITDA and non-GAAP free cash flow as measures of certain components of financial performance. Blue Nile defines non-GAAP adjusted EBITDA as earnings before interest and other income, taxes, depreciation and amortization, adjusted to exclude the effects of stock-based compensation expense. Blue Nile defines non-GAAP free cash flow as net cash provided by (used in) operating activities less cash outflows for purchases of fixed assets, including internal use software and website development. The Company reports sales information in accordance with GAAP. Internally, management monitors its sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating international sales into U.S. dollars (the “constant exchange rate basis”). Blue Nile’s management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that the non-GAAP financial measures used by Blue Nile may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. Whenever Blue Nile uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measures. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Blue Nile’s management believes that non-GAAP adjusted EBITDA and non-GAAP free cash flow, as defined, as well as international sales on a constant exchange rate basis provide meaningful supplemental information to the company and to investors. Blue Nile believes that both management and investors benefit from referring to these non-GAAP measures in assessing the performance of Blue Nile and when planning and forecasting future periods. Further, management believes that the inclusion of the non-GAAP adjusted EBITDA and non-GAAP free cash flow calculations provide consistency in Blue Nile’s financial reporting. Management believes the constant exchange rate measurement provides a more representative assessment of the sales performance and provides better comparability between reporting periods.


A reconciliation of non-GAAP adjusted EBITDA to net income is as follows (in thousands):

 

     Quarter ended     Quarter ended  
     January 1, 2012     January 2, 2011  

Net Income

   $ 4,221      $ 6,179   

Income tax expense

     2,215        3,148   

Other income, net

     (149     (107

Depreciation and amortization

     877        828   

Stock-based compensation

     1,261        1,583   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 8,425      $ 11,631   
  

 

 

   

 

 

 

 

     Year ended     Year ended  
     January 1, 2012     January 2, 2011  

Net Income

   $ 11,350      $ 14,142   

Income tax expense

     5,895        7,396   

Other income, net

     (326     (252

Depreciation and amortization

     3,398        3,129   

Stock-based compensation

     6,414        6,862   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 26,731      $ 31,277   
  

 

 

   

 

 

 

A reconciliation of differences of non-GAAP free cash flow from the comparable GAAP measure of net cash provided by operating activities is as follows (in thousands):

 

     Quarter ended     Quarter ended  
     January 1, 2012     January 2, 2011  

Net cash provided by operating activities

   $ 46,612      $ 60,626   

Purchases of fixed assets, including internal-use software and website development

     (660     (240
  

 

 

   

 

 

 

Non-GAAP free cash flow

   $ 45,952      $ 60,386   
  

 

 

   

 

 

 

 

     Year ended
January  1, 2012
    Year ended
January  2, 2011
 
    

Net cash provided by operating activities

   $ 15,454      $ 41,608   

Purchases of fixed assets, including internal-use software and website development

     (5,391     (1,843
  

 

 

   

 

 

 

Non-GAAP free cash flow

   $ 10,063      $ 39,765   
  

 

 

   

 

 

 


The following table reconciles year-over-year international sales percentage increases (decreases) from the GAAP sales measures to the non-GAAP constant exchange rate basis:

 

Quarter ended

January 1, 2012

   Year over year growth     Effect of foreign
exchange movements
    Year over year growth on
constant exchange rate basis
 

International Sales

     2.6     0.0     2.6

Quarter ended

January 2, 2011

   Year over year growth     Effect of  foreign
exchange movements
    Year over year growth on
constant exchange rate basis
 

International Sales

     30.8     3.4     27.4

Year ended

January 1, 2012

   Year over year growth     Effect of foreign
exchange movements
    Year over year growth on
constant exchange rate basis
 

International Sales

     29.1     5.8     23.3

Year ended

January 2, 2011

   Year over year growth     Effect of foreign
exchange movements
    Year over year growth on
constant exchange rate basis
 

International Sales

     30.4     7.2     23.2

About Blue Nile, Inc.

Blue Nile, Inc. is the leading online retailer of diamonds and fine jewelry. The Company delivers the ultimate customer experience, providing consumers with a superior way to buy engagement rings , wedding rings and fine jewelry . Blue Nile offers in-depth educational materials and unique online tools that place consumers in control of the jewelry shopping process. The Company has some of the highest quality standards in the industry and offers thousands of independently certified diamonds and fine jewelry at prices significantly below traditional retail. Blue Nile can be found online at www.bluenile.com , www.bluenile.ca and www.bluenile.co.uk . Blue Nile’s shares are traded on the Nasdaq Stock Market LLC under the symbol NILE.

Contact:

Blue Nile, Inc.

Nancy Shipp, 206.388.3626 (Investors)

nancys@bluenile.com

or

John Baird, 206.336.6805 (Media)

johnb@bluenile.com


BLUE NILE, INC.

Condensed Consolidated Balance Sheets

(in thousands)

 

     January  1,
2012
    January  2,
2011
 
    
     (unaudited)        

ASSETS

  

Current assets:

    

Cash and cash equivalents

   $ 89,391      $ 113,261   

Trade accounts receivable

     2,317        1,405   

Other accounts receivable

     2,550        366   

Inventories

     29,267        20,166   

Deferred income taxes

     689        557   

Prepaids and other current assets

     1,009        1,083   
  

 

 

   

 

 

 

Total current assets

     125,223        136,838   

Property and equipment, net

     8,340        6,157   

Intangible assets, net

     252        274   

Deferred income taxes

     9,053        8,424   

Other assets

     157        118   
  

 

 

   

 

 

 

Total assets

   $ 143,025      $ 151,811   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

  

Current liabilities:

    

Accounts payable

   $ 95,590      $ 90,296   

Accrued liabilities

     9,396        11,490   

Current portion of long-term financing obligation

     59        48   

Current portion of deferred rent

     211        86   
  

 

 

   

 

 

 

Total current liabilities

     105,256        101,920   

Long-term financing obligation, less current portion

     685        748   

Deferred rent, less current portion

     2,060        82   

Stockholders’ equity:

    

Common stock

     21        20   

Additional paid-in capital

     187,762        173,143   

Accumulated other comprehensive loss

     (123     (66

Retained earnings

     74,491        63,141   

Treasury stock

     (227,127     (187,177
  

 

 

   

 

 

 

Total stockholders’ equity

     35,024        49,061   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 143,025      $ 151,811   
  

 

 

   

 

 

 


BLUE NILE, INC.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

 

     Quarter ended      Year ended  
     January  1,
2012
     January  2,
2011
     January  1,
2012
     January  2,
2011
 
             

Net sales

   $ 112,324       $ 114,779       $ 348,013       $ 332,889   

Cost of sales

     89,123         89,477         275,881         260,949   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     23,201         25,302         72,132         71,940   

Selling, general and administrative expenses

     16,914         16,082         55,213         50,654   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     6,287         9,220         16,919         21,286   

Other income, net:

           

Interest income, net

     26         13         142         35   

Other income

     123         94         184         217   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income, net

     149         107         326         252   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     6,436         9,327         17,245         21,538   

Income tax expense

     2,215         3,148         5,895         7,396   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 4,221       $ 6,179       $ 11,350       $ 14,142   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic net income per share

   $ 0.31       $ 0.43       $ 0.80       $ 0.98   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted net income per share

   $ 0.30       $ 0.41       $ 0.77       $ 0.94   
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used for computation (in thousands):

           

Basic

     13,602         14,457         14,182         14,446   

Diluted

     13,957         15,036         14,675         15,080   


Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

     Year ended  
     January 1,     January 2,  
     2012     2011  

Operating activities:

    

Net income

   $ 11,350      $ 14,142   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     3,398        3,129   

Loss on disposal of property and equipment

     35        26   

Stock-based compensation

     6,534        6,982   

Deferred income taxes

     (761     (1,763

Tax benefit from exercise of stock options

     771        4,595   

Excess tax benefit from exercise of stock options

     (646     (413

Changes in assets and liabilities:

    

Receivables

     (1,391     64   

Inventories

     (9,101     (732

Prepaid expenses and other assets

     35        (78

Accounts payable

     5,207        14,199   

Accrued liabilities

     (2,080     1,663   

Deferred rent and other

     2,103        (206
  

 

 

   

 

 

 

Net cash provided by operating activities

     15,454        41,608   
  

 

 

   

 

 

 

Investing activities:

    

Purchases of property and equipment

     (5,391     (1,843

Maturity of short-term investments

     —          15,000   
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (5,391     13,157   
  

 

 

   

 

 

 

Financing activities:

    

Repurchase of common stock

     (39,950     (25,336

Proceeds from stock option exercises

     5,466        5,392   

Excess tax benefit from exercise of stock options

     646        413   

Principal payments under long-term financing obligation

     (52     (44
  

 

 

   

 

 

 

Net cash used in financing activities

     (33,890     (19,575
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (43     (78
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (23,870     35,112   

Cash and cash equivalents, beginning of period

     113,261        78,149   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 89,391      $ 113,261