Form 8-K BLUE NILE INC For: Feb 06
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February�6, 2015
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
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BLUE NILE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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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
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE
N/A
(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)
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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:
o | Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule�14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | 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�10, 2015, Blue Nile, Inc. ( Blue Nile or "the Company") issued a press release announcing financial results for the fourth quarter ended January�4, 2015. 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 Item 2.02 in this Form 8-K and the exhibit 99.1 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�5.02 | DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; |
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS | |
Executive Cash Bonus Plan for Fiscal Year 2015
On February 6, 2015, the Company's Compensation Committee of the Board of Directors (the "Committee") approved the Executive Cash Bonus Plan for Fiscal Year 2015 (the 2015 Plan ). The 2015 Plan operates under, and is subject to the terms of, the Companys 2013 Equity Incentive Plan (the Plan ), which was approved by the Companys stockholders at the Annual Meeting of Stockholders held on May�21, 2013. The 2015 Plan is intended to increase stockholder value and the success of the Company by motivating 2015 Plan participants to achieve the Companys objectives through the payment of awards when those objectives are achieved.
Performance Period. The Performance Period for the 2015 Plan is the Companys 2015 fiscal year, which is January 5, 2015 through January 3, 2016.
Eligibility. Each of the Company's executive officers, including the chief executive officer, and certain other key employees are eligible for participation in the 2015 Plan, subject to their continued employment through the end of the Performance Period. The Company may also pay discretionary bonuses or other types of incentive compensation outside the 2015 Plan.
Determination of Award. Pursuant to the 2015 Plan (the "Target Award"), each participant is eligible to earn an incentive bonus calculated as a percentage of the participants actual base salary. The Target Award is calculated by multiplying the participants base salary earned during the fiscal year by a Committee approved target bonus percentage. The 2015 Plan requires that the Company achieve an initial minimum level of adjusted EBITDA on the terms set forth in the 2015 Plan (the "Section 162(m) Performance Goal"). If the Section 162(m) Performance Goal is not achieved, no payments shall be earned under the 2015 Plan. If Section 162(m) Performance Goal is achieved, each participant is eligible to earn a maximum bonus equal to 200% of such participants annual Target Award, up to a maximum of $3�million (the Maximum Award ).
Determination of Actual Award - Payout Formula:
On the Payout Determination Date (the date upon which the Committee determines the amounts payable under the 2015 Plan with respect to any previously completed Performance Period), the Committee will determine whether the Company has achieved the Section 162(m) Performance Goal. If the Company has achieved the Section 162(m) Performance Goal, each Participant will be credited with a Maximum Award. The Committee will then exercise negative discretion in respect of the Maximum Award in order to determine the actual award earned by that executive for the Performance Period (the Actual Award ), with such negative discretion based on: (i) achievement against revenue goals selected by the Committee, as reflected by the calculation of the Revenue Result (described below), (ii) achievement against additional adjusted EBITDA goals selected by the Committee, as reflected by the calculation of the adjusted EBITDA Result (as described below), (iii) achievement against any individual performance goals selected
by the Committee, as reflected by the calculation of the Individual Result (described below), and (iii) any other factors selected by the Committee in its sole discretion.
Specifically, the Actual Award is determined as follows:
1. | The product of (i)�the Revenue Result, (ii) 40%, and (iii)�the Target Award is the Financial Award. |
2. | The product of (i)�the EBITDA Result, (ii), 40%, and (iii)�the Target Award is the EBITDA Award. |
3. | The product of (i) the Individual Result, (ii), 20%, and (iii) the Target Award is the Individual Award. |
4. | The sum of the (i) Financial Award, (ii) EBITDA Award, and (iii)�Individual Award, and subject to any other factors selected by the Committee in its sole discretion, is the Actual Award, and the Maximum Award is reduced by the difference between the Actual Award and the Maximum Award. |
To determine the Revenue Result, EBITDA Result, and Individual Result the Compensation will determine a percentage, between 0% and 200%, based on the achievement during the Performance Period of the goals selected by the Committee for the Performance Period.
The foregoing description of the 2015 Plan is a summary of the material terms of the 2015 Plan, does not purport to be complete, and is qualified in its entirety by reference to the entire Executive Cash Bonus Plan for Fiscal Year 2015. A copy of the Executive Cash Bonus Plan for Fiscal Year 2015 is attached to this Current Report on Form 8-K as Exhibit�10.1.
Executive Compensation
On February 6, 2015, the Committee reviewed the compensation of Mr. Kanter, Blue Niles chairman, chief executive officer, and president, and Mr. Binder, Blue Niles executive vice president, chief administrative officer and chief financial officer. In connection with its review, the Committee approved the following severance benefits for Mr. Kanter. If prior to a Change of Control (as defined in the Companys 2015 Change of Control Severance Plan), Mr. Kanter is terminated without Cause, he will be eligible to receive severance benefits equal to: (a) a lump sum cash payment equal to 200% of his then-current annual base salary; (b) a lump sum cash payment equal to a pro-rata portion of his then current bonus target based solely on the achievement of the "Section 162(m) Performance Goal" (as defined under the 2015 Plan) or any similar goal for such fiscal year in which his separation occurs and pro-rated based on the the number of months Mr. Kanter was employed during such fiscal year, and (c) monthly cash payments equal to the applicable COBRA premiums for Mr. Kanter and his eligible dependents for up to 18 months. For purposes of Mr. Kanters severance benefits termination for Cause shall mean any of the following:� (i)�his conviction of, or guilty plea or plea of nolo contendere to, to a felony under the laws of the United States or of any state, or a crime involving moral turpitude or dishonesty (including, but not limited to, fraud, theft, or embezzlement); (ii) his participation in any fraud or act of dishonesty against Blue Nile; (iii)�his willful misconduct, or his material breach of any agreement between Mr. Kanter and Blue Nile (including, but not limited to, his offer letter or the Nondisclosure, Proprietary Information, Inventions, Nonsolicitation and Noncompetition Agreement); (iv)�conduct that Blue Nile determines, in good faith, demonstrates unfitness for the job; (v)�his engagement in any activity that constitutes a material conflict of interest with Blue Nile; or (vi) his significant failure to perform his duties, gross neglect of his duties, or refusal to comply with any lawful directive of the Board of Directors, which conduct, if capable of cure or remedy, is not cured or remedied within 30 days following Mr. Kanters receipt of written notice from the Board of Directors.
The foregoing description of the CEO Severance Benefits is a summary of the material terms of such benefits, does not purport to be complete, and is qualified in its entirety by reference to the CEO Severance Benefits document that is attached to this Current Report on Form 8-K as Exhibit�10.2.
No material adjustments were made to Mr. Kanters annual base salary or bonus target as a percentage of base salary. Mr. Binders base salary was increased from $310,000 to $375,000 and his bonus target remains at 50% of his adjusted base salary. The Committee also decided to award special retention equity grants in the form of restricted stock units to each of Mr. Kanter and Mr. Binder for a Fair Market Value (as defined under the Plan) as of February 15, 2015, which is the grant date, of $2,500,000 and $1,500,000, respectively (the Retention Grants ). The Retention Grants
will be granted during an open window and will vest over five (5)�years, with the shares underlying the grants vesting in equal quarterly installments over five years. The Retention Grants are in addition to a grant of restricted stock units to each of Mr. Kanter and Mr. Binder equal to a Fair Market Value as of February 15, 2015, which is the grant date, of $900,000 and $292,355, respectively (the Annual Grants ). The Annual Grants and the Retention Grants will be granted under the Plan and the Annual Grants and the Retention Grants (other than the vesting schedule set forth above) will be granted on the same terms and conditions as previously disclosed in Blue Niles filings with the Securities and Exchange Commission.
The foregoing is only a brief description of the material terms of the restricted stock units, does not purport to be complete and is qualified in its entirety by reference to the Plan and award agreements previously filed with the Securities and Exchange Commission.
ITEM�9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits
EXHIBIT NUMBER | DESCRIPTION |
10.1 | Executive Cash Bonus Plan for Fiscal Year 2015 |
10.2 | CEO Severance Benefits |
99.1 | Press release dated February 10, 2015, 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. | |
Dated: February 10, 2015 | By: | /s/�David Binder |
David Binder | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
EXHIBIT 10.1
BLUE NILE, INC.
PERFORMANCE BONUS PLAN
EXECUTIVE CASH BONUS PLAN FOR FISCAL YEAR 2015
Purpose:
Blue Nile, Inc. ( Blue Nile or the Company ) has designed this Executive Cash Bonus Plan for Fiscal Year 2015(the Bonus Plan ) for designated executive officers. The Bonus Plan is designed to motivate these executives to achieve the Companys objectives by rewarding the executives with cash payments upon the achievement of the Companys objectives for fiscal year 2015.
Subject to Performance Bonus Plan:
This Bonus Plan operates under, and is subject to the terms of, the Blue Niles 2013 Equity Incentive Plan (the Plan ). The Plan was approved by Blue Niles Board of Directors and Blue Niles stockholders. Any capitalized terms not defined in this Bonus Plan have the meaning set forth in the Plan.
Performance Period:
The Performance Period for this Bonus Plan is the Companys 2015 fiscal year, which is January 5, 2015 through January 3, 2016.
Eligibility:
On the Target Determination Date, the Committee will designate which executive officers and other key employees will be Participants. In order to earn any Bonus Award under the Bonus Plan, a designated executive must remain employed throughout the entire Performance Period. If the executives employment terminates before the end of the Performance Period, the executive will not be eligible to earn or be paid any Bonus Award, except as provided in an applicable severance plan or in an individual agreement with an executive and only to the extent such right does not disqualify such Bonus Award (or any other Bonus Award under this Bonus Plan) as Performance-Based Compensation. If an executive is on a leave of absence for a portion of the Performance Period, the executive will be eligible for a Bonus Award based on the actual salary he or she earned from the Company during the Performance Period for active service (that is, exclusive of any salary replacement benefits paid during the leave via insurance or otherwise).�
The Section 162(m) Performance Goal:
The Section 162(m) Performance Goal used to determine the Maximum Award that may be earned by the Participant for the Performance Period is adjusted EBITDA. On the Target Determination Date, the Committee will establish the level of achievement of adjusted EBITDA that will result in the crediting to the Participant of the Maximum Award. If the Company does not achieve this level of adjusted EBITDA during the Performance Period, no Bonus Award will be earned or paid to any Participant under this Bonus Plan for the Performance Period.
adjusted EBITDA means earnings before interest, and other income, taxes, depreciation and amortization adjusted as follows:
" | to exclude restructuring and/or other nonrecurring charges; |
" | to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; |
" | to exclude the effects of changes to generally accepted accounting principles required by the Financial Accounting Standards Board; |
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" | to exclude the effects of any statutory adjustments to corporate tax rates; |
" | to exclude the effects of any extraordinary items as determined under generally accepted accounting principles; |
" | to exclude any other unusual, non-recurring gain or loss or other extraordinary item; |
" | to exclude the effects of stock based compensation and/or the payment of the bonuses under this Plan and/or any other bonus plans of the Company; |
" | to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; |
" | to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; |
" | to exclude the dilutive effects of acquisitions or joint ventures; |
" | to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; |
" | to exclude or include the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; |
" | to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section�368 of the Code); and |
" | to reflect any partial or complete corporate liquidation. |
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Maximum Award:
On the Target Determination Date, the Committee will establish each the bonus percentage necessary to determine each Participants Maximum Award. A Participants Maximum Award is the lesser of (i) 200% of his or her Target Award and (ii) $3,000,000.
Target Award:
The Target Award equals the product of: (a)�the actual base salary earned by the Participant in the Performance Period and (b)�a bonus percentage between 0% and 100% designated by the Committee on the Target Determination Date. A Participants bonus percentage may not be increased during the Performance Period. If the Participants bonus percentage is decreased or salary amount is changed during the Performance Period, the Participants Target Award will be calculated based on the applicable bonus percentage in place at the time the Participant earned the applicable salary amount.
Determination of Actual Award Payout Formula:
On the Payout Determination Date (the date upon which the Committee determines the amounts payable under the Bonus Plan with respect to any previously completed Performance Period), the Committee will determine whether the Company has achieved the Section 162(m) Performance Goal. If the Company has achieved the Section 162(m) Performance Goal, each Participant will be credited with a Maximum Award. The Committee will then exercise negative discretion in respect of the Maximum Award in order to determine the actual award earned by that executive for the Performance Period (the Actual Award ), with such negative discretion based on: (i) achievement against revenue goals selected by the Committee, as reflected by the calculation of the Revenue Result (described below), (ii) achievement against additional adjusted EBITDA goals selected by the Committee, as reflected by the calculation of the adjusted EBITDA Result (as described below), (iii) achievement against any individual performance goals selected by the Committee, as reflected by the calculation of the Individual Result (described below), and (iii) any other factors selected by the Committee in its sole discretion.
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Specifically, the Actual Award is determined as follows:
1. | The product of (i)�the Revenue Result, (ii) 40%, and (iii)�the Target Award is the Financial Award. | |
2. | The product of (i)�the EBITDA Result, (ii), 40%, and (iii)�the Target Award is the EBITDA Award. | |
3. | The product of (i) the Individual Result, (ii), 20%, and (iii) the Target Award is the Individual Award. | |
4. | The sum of (i)�the Financial Award, (ii) EBITDA Award, and (iii)�the Individual Award, and subject to any other factors selected by the Committee in its sole discretion, is the Actual Award, and the Maximum Award is reduced by the difference between the Actual Award and the Maximum Award. | |
To determine the Revenue Result, EBITDA Result, and Individual Result the Committee will determine a percentage, between 0% and 200%, based on the achievement during the Performance Period of the goals selected by the Committee for the Performance Period.
Administration:
Actual Awards will generally be paid within 60 days after the close of the Performance Period, but in all cases will be paid not later than March 15 of the year following the year in which they were earned, in compliance with the short term deferral exception from Section 409A of the Internal Revenue Code of 1986, as amended. The Company will withhold from any payments under the Bonus Plan and from any other amounts payable to a Participant by the Company any amount required to satisfy the income and employment tax withholding obligations arising under applicable federal and state laws in respect of a Bonus Award.
Participation in the Bonus Plan is at the discretion of the Committee. Designation as a Participant does not change the at-will nature of employment with the Company.
Except as otherwise provided in the Performance Bonus Plan, the Committee will have full power and authority to construe, interpret, and administer the Bonus Plan, including the power to amend or terminate the Bonus Plan at any time, without the consent of any adversely affected Participant. The Committee may at any time adopt such rules, regulations, policies, or practices as, in its sole discretion, it determines to be necessary or appropriate for the administration of, or the performance of its responsibilities under, the Bonus Plan. Any decision by the Committee that is not inconsistent with the provisions of the Performance Bonus Plan shall be conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
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EXHIBIT 10.2
CEO SEVERANCE BENEFITS
If prior to a Change of Control (as defined in Blue Niles 2015 Change of Control Severance Plan (the Severance Plan ), Mr. Kanter is terminated without Cause (and other than as a result of his death or disability), and provided such termination constitutes a Separation from Service (as defined in the Severance Plan), and provided he signs and returns Blue Niles standard general waiver and release of all claims and allows such release to become effective not later than the 60th day following his Separation from Service, Blue Nile will provide Mr. Kanter with the following severance benefits (collectively, the Severance Payments ):
i. | A lump sum cash payment in an amount equal to 200% of his then-current annual base salary. This cash payment will be paid in a lump sum on the 60th day after the date of his Separation from Service, subject to applicable withholdings. |
ii. | A lump sum cash payment in an amount equal to: (a) his actual bonus under Blue Niles Executive Cash Bonus Plan (or any similar applicable plan) (the Bonus Plan ) for the fiscal year in which his Separation from Service occurs, as determined under the terms of the Bonus Plan based solely on the achievement of the Section 162(m) Performance Goal (as defined in the Bonus Plan) or any similar goal for such fiscal year, without the exercise of any negative discretion by the Compensation Committee of the Board of Directors based on any other goals or factors, measured as of the end of such fiscal year; provided, however, that the amount of any such actual bonus may not exceed his target bonus under the Bonus Plan for such fiscal year; multiplied by (b) a fraction, the numerator of which is the number of months he was employed during such fiscal year (employment for a partial month will be calculated as if employed for the full month) and the denominator of which is twelve (12). This cash payment will be paid in a lump sum after the end of such fiscal year (at the time bonuses are generally paid under the Bonus Plan to other participants), but in no event later than the 15th day of the third month following the end of such fiscal year, subject to applicable withholdings. |
iii. | If he timely elects and remains eligible for continued coverage under COBRA (or any similar state law), the Company will pay Mr. Kanter on the first day of each month following his Separation from Service (except as set forth below), a cash payment equal to the applicable COBRA premiums for that month (including premiums for him and his eligible dependents who have elected and remain enrolled in such COBRA coverage), subject to applicable tax withholdings (such amount, the Special Cash Payment ), for a number of months equal to the lesser of (i) the duration of the period in which Mr. Kanter and his eligible dependents are eligible for and enrolled in such COBRA coverage (and not otherwise covered by another employers group health plan) and (ii) 18 months. Mr. Kanter will not be obligated to use the Special Cash Payment toward the cost of COBRA premiums. If he becomes covered under another employer's group health plan or otherwise ceases to be eligible for COBRA during the period provided in this paragraph, Mr. Kanter will be required to immediately notify the Company of such event and the Company shall cease payment of the Special Cash Payments and shall have no further obligations under this paragraph. |
For purposes of Mr. Kanters severance benefits hereunder, termination for Cause shall mean any of the following:� (i)�his conviction of, or guilty plea or plea of nolo contendere to, to a felony under the laws of the United States or of any state, or a crime involving moral turpitude or dishonesty (including, but not limited to, fraud, theft, or embezzlement); (ii) his participation in any fraud or act of dishonesty against Blue Nile; (iii)�his willful misconduct, or his material breach of any agreement between Mr. Kanter and Blue Nile (including, but not limited to, his offer letter or the Nondisclosure, Proprietary Information, Inventions, Nonsolicitation and Noncompetition Agreement); (iv)�conduct that Blue Nile determines, in good faith, demonstrates unfitness for the job; (v)�his engagement in any activity that constitutes a material conflict of interest with Blue Nile; or (vi) his significant failure to perform his duties, gross neglect of his duties, or refusal to comply with any lawful
directive of the Board of Directors, which conduct, if capable of cure or remedy, is not cured or remedied within 30 days following Mr. Kanters receipt of written notice from the Board of Directors.
Application of Section 409A of the Code. It is intended that all of the benefits provided hereunder satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and other guidance thereunder and any state law of similar effect (collectively, Section 409A ) provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5), and 1.409A-1(b)(9), and the benefits hereunder will be construed to the greatest extent possible as consistent with those provisions. To the extent not so exempt, the benefits hereunder will be construed in a manner that complies with Section 409A, and incorporates by reference all required definitions and payment terms. For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii)), Mr. Kanters right to receive any installment payments hereunder will be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder will at all times be considered a separate and distinct payment. If Blue Nile determines that any of the payments upon a Separation from Service provided hereunder (or under any other arrangement with Mr. Kanter) constitute deferred compensation under Section 409A and if Mr. Kanter is a specified employee of Blue Nile, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, at the time of his Separation from Service, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the payments upon a Separation from Service will be delayed as follows: on the earlier to occur of (i) the date that is six months and one day after the effective date of Mr. Kanters Separation from Service, and (ii) the date of Mr. Kanters death (such earlier date, the Delayed Initial Payment Date ), Blue Nile will (A) pay Mr. Kanter a lump sum amount equal to the sum of the payments upon Separation from Service that he would otherwise have received through the Delayed Initial Payment Date if the commencement of the payments had not been delayed pursuant to this paragraph, and (B) commence paying the balance of the payments in accordance with the applicable payment schedules set forth above. No interest will be due on any amounts so deferred. If Section 409A is not applicable by law to Mr. Kanter, Blue Nile will determine whether any similar law in his jurisdiction applies and should be taken into account.
Exhibit 99.1
Blue Nile Announces Fourth Quarter and Full Year 2014 Financial Results
Fourth Quarter Sales Increased 7.9% to $157.4 million
Fourth Quarter Earnings Per Diluted Share Total $0.41
Full Year Sales Increased 5.2% to $473.5 million
Full Year Earnings Per Diluted Share Total $0.80
SEATTLE, FEBRUARY 10, 2015 -- Blue Nile, Inc. (Nasdaq: NILE), a leading online retailer of�diamonds�and fine jewelry, today reported financial results for its fourth quarter and fiscal year ended January�4, 2015, periods that included 14 weeks and 53 weeks, respectively, as fiscal 2014 contained an extra week.
Net sales increased 7.9% to $157.4 million for the fourth quarter ended January�4, 2015 compared to $146.0 million for the fourth quarter ended December�29, 2013. Operating income for the fourth quarter 2014 totaled $6.9 million, representing an operating margin of 4.4% of net sales compared to $7.2 million of operating income and 4.9% of operating margin for the fourth quarter of 2013. Net income for the fourth quarter 2014 totaled $4.8 million, or $0.41 per diluted share. Non-GAAP adjusted EBITDA for the fourth quarter 2014 totaled $8.8 million.
Blue Nile reported net sales of $473.5 million for the fiscal year ended January�4, 2015 compared to $450.0 million for the fiscal year ended December�29, 2013, an increase of 5.2%. Operating income for the fiscal year ended January�4, 2015 was $14.2 million compared to $14.3 million for the fiscal year ended December�29, 2013. Net income for the fiscal year ended January 4, 2015 was $9.7 million and earnings per diluted share totaled $0.80. Non-GAAP adjusted EBITDA for the fiscal year ended January 4, 2015 was $22.1 million.
Net cash provided by operating activities totaled $17.2 million for the fiscal year ended January�4, 2015 compared to $23.4 million for the fiscal year ended December�29, 2013. Non-GAAP free cash flow for the fiscal year ended January�4, 2015 was $13.4 million compared to $17.9 million for the fiscal year ended December�29, 2013.
Our fourth quarter growth continues the positive momentum from Q3 in spite of what was a challenging quarter for many jewelry retailers, said Harvey Kanter, Blue Nile Chairman, CEO and President. While these results are below our expectations, the above-industry growth demonstrates that we made progress and gained share. We remain confident in the underlying strategy; more people are realizing that buying online - and at Blue Nile specifically - provides a superior selection and industry-leading quality at an unmatched price. Its one of the reasons why that, despite a tough quarter for the industry, Blue Nile continued to grow.
Highlights
" | Net sales for the additional week was estimated at $5.9 million, which contributed 4.1% of growth for the fourth quarter 2014 and 1.3% for the fiscal year ended January 4, 2015. |
" | U.S. engagement net sales for the fourth quarter 2014 increased 7.9% to $85.0 million, compared to $78.7 million for the fourth quarter of 2013. U.S. engagement net sales for the fiscal year ended January�4, 2015 increased 4.1% to $266.4 million, compared to $255.8 million for the fiscal year ended December�29, 2013. U.S. engagement net sales for the additional week was estimated at $2.9 million, which contributed 3.7% of growth for the fourth quarter 2014 and 1.1% for the fiscal year ended January 4, 2015. |
" | U.S. non-engagement net sales for the fourth quarter 2014 increased 6.3% to $48.8 million, compared to $45.9 million for the fourth quarter of 2013. U.S. non-engagement net sales for the fiscal year ended January 4, 2015 increased 4.2% to $126.0 million, compared to $121.0 million for the fiscal year ended December�29, 2013. U.S. non-engagement net sales for the additional week was estimated at $1.8 million, which contributed 3.9% of growth for the fourth quarter 2014 and 1.5% for the fiscal year ended January 4, 2015. |
" | International net sales for the fourth quarter 2014 were $23.6 million, compared to $21.4 million for the fourth quarter 2013, an increase of 10.9%. International net sales for the fiscal year ended January�4, 2015 increased 10.8% to $81.1 million, compared to $73.2 million for the fiscal year ended December�29, 2013. Excluding the impact from changes in foreign exchange rates, international net sales increased 16.4% and 14.0% for the fourth quarter 2014 and fiscal year ended January�4, 2015, respectively. International net sales for the additional week was estimated at $1.2 million, which contributed 5.8% of growth for the fourth quarter 2014 and 1.7% for the fiscal year ended January 4, 2015. |
" | Gross profit for the fourth quarter 2014 totaled $28.5 million. As a percent of net sales, gross profit was 18.1% compared to 18.6% for the fourth quarter of 2013. Gross profit for the fiscal year ended January�4, 2015 totaled $86.6 million. |
" | Selling, general and administrative expenses for the fourth quarter 2014 were $21.6 million, compared to $20.0 million in the fourth quarter of 2013. Selling, general and administrative expenses for the fiscal year ended January�4, 2015 were $72.4 million, compared to $69.3 million for the fiscal year ended December�29, 2013. |
" | Earnings per diluted share included stock-based compensation expense of $0.04 for the fourth quarter of 2014 and $0.06 for the fourth quarter of 2013. |
" | Net income for the fiscal year ended December 29, 2013 included an income tax benefit of $1.1 million or $0.08 per diluted share resulting from certain discrete tax items for the third quarter of 2013. Net income for the additional week was estimated at $0.2 million or $0.02 in earnings per diluted share. |
" | Cash and cash equivalents at the end of fiscal year 2014 totaled $91.2 million, compared to $115.9 million at the end of fiscal year 2013. |
" | During the fiscal year ended January�4, 2015, Blue Nile repurchased a total of 1.2 million shares for $40.3 million. |
Financial Guidance
The following forward-looking statements reflect Blue Nile's expectations as of February�10, 2015. Actual results may be materially affected by many factors, such as consumer spending, economic conditions, product assortment and the various factors detailed below.
Expectations for the first quarter of 2015 (Quarter Ending April�5, 2015):
" | Net sales are expected to be between $107 million and $110 million. |
" | Earnings per diluted share are projected at $0.07 to $0.09. |
Expectations for the fiscal year 2015 (Year Ending January�3, 2016):
" | Net sales are expected to be between $488 million and $505 million. |
" | Earnings per diluted share are projected at $0.83 to $0.93. |
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 commodity prices, general economic conditions, consumer
spending (particularly spending by high-end consumers), product assortment, our fluctuating operating results, currency fluctuations, 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 December�29, 2013. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended January 4, 2015, which we expect to file with the Securities and Exchange Commission on or before March 14, 2015. 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
Blue Nile will host a conference call to discuss its fourth quarter financial results today at 5:30 a.m. PT/8:30 a.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 Blue Nile'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.
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. Blue Nile 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 and comparability with similar companies in Blue Nile's industry. 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):
14 Weeks Ended | 13 Weeks Ended | ||||||
January�4, 2015 | December�29, 2013 | ||||||
Net Income | $ | 4,831 | $ | 4,931 | |||
Income tax expense | 2,389 | 2,315 | |||||
Other income, net | (363 | ) | (30 | ) | |||
Depreciation and amortization | 864 | 778 | |||||
Stock-based compensation | 1,096 | 1,243 | |||||
Non-GAAP Adjusted EBITDA | $ | 8,817 | $ | 9,237 | |||
53 Weeks Ended | 52 Weeks Ended | ||||||
January�4, 2015 | December�29, 2013 | ||||||
Net Income | $ | 9,731 | $ | 10,875 | |||
Income tax expense | 4,888 | 3,690 | |||||
Other income, net | (407 | ) | (257 | ) | |||
Depreciation and amortization | 3,607 | 3,141 | |||||
Stock-based compensation | 4,281 | 4,948 | |||||
Non-GAAP Adjusted EBITDA | $ | 22,100 | $ | 22,397 | |||
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):
14 Weeks Ended | 13 Weeks Ended | ||||||
January�4, 2015 | December�29, 2013 | ||||||
Net cash provided by operating activities | $ | 59,733 | $ | 57,318 | |||
Purchases of fixed assets, including internal-use software and website development | (951 | ) | (1,419 | ) | |||
Non-GAAP free cash flow | $ | 58,782 | $ | 55,899 | |||
53 Weeks Ended | 52 Weeks Ended | ||||||
January�4, 2015 | December�29, 2013 | ||||||
Net cash provided by operating activities | $ | 17,208 | $ | 23,438 | |||
Purchases of fixed assets, including internal-use software and website development | (3,771 | ) | (5,528 | ) | |||
Non-GAAP free cash flow | $ | 13,437 | $ | 17,910 | |||
The following table reconciles year-over-year total company sales as well as international net sales percentage increases from the GAAP sales measures to the non-GAAP constant exchange rate basis:
14 Weeks Ended January 4, 2015 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | ||
International net sales | 10.9% | (5.5)% | 16.4% | ||
13 Weeks Ended December 29, 2013 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | ||
International net sales | 6.8% | (4.1)% | 10.9% | ||
53 Weeks Ended January 4, 2015 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | ||
International net sales | 10.8% | (3.2)% | 14.0% | ||
52 Weeks Ended December 29, 2013 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | ||
International net sales | 17.3% | (2.9)% | 20.2% | ||
About Blue Nile, Inc.
Blue Nile, Inc. is the original online jeweler. The company offers a smarter way to buy engagement rings, wedding rings, and fine jewelry by providing in-depth educational materials and unique online tools that place consumers in control of the jewelry shopping process. Blue Nile 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. 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)
or
Josh Holland, 206.336.6773 (Media)
BLUE NILE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
January�4, 2015 | December�29, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 91,186 | $ | 115,942 | |||
Trade accounts receivable | 2,137 | 3,005 | |||||
Other accounts receivable | 1,571 | 521 | |||||
Inventories | 41,668 | 34,530 | |||||
Deferred income taxes | 1,123 | 1,038 | |||||
Prepaid income taxes | 247 | ||||||
Prepaids and other current assets | 1,524 | 1,318 | |||||
Total current assets | 139,209 | 156,601 | |||||
Property and equipment, net | 10,422 | 10,188 | |||||
Intangible assets, net | 103 | 140 | |||||
Deferred income taxes | 3,064 | 5,470 | |||||
Note receivable | 2,000 | 2,000 | |||||
Other investments | 2,280 | 2,280 | |||||
Other assets | 256 | 246 | |||||
Total assets | $ | 157,334 | $ | 176,925 | |||
LIABILITIES AND STOCKHOLDERS EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 128,675 | $ | 122,322 | |||
Accrued liabilities | 11,992 | 10,751 | |||||
Current portion of long-term financing obligation | 32 | 51 | |||||
Current portion of deferred rent | 292 | 279 | |||||
Total current liabilities | 140,991 | 133,403 | |||||
Long-term financing obligation, less current portion | 489 | 574 | |||||
Deferred rent, less current portion | 1,982 | 2,229 | |||||
Other long-term liabilities | 169 | 114 | |||||
Commitments and contingencies | |||||||
Stockholders equity: | |||||||
Common stock | 22 | 22 | |||||
Additional paid-in capital | 227,146 | 223,261 | |||||
Accumulated other comprehensive loss | (236 | ) | (26 | ) | |||
Retained earnings | 103,489 | 93,758 | |||||
Treasury stock | (316,718 | ) | (276,410 | ) | |||
Total stockholders equity | 13,703 | 40,605 | |||||
Total liabilities and stockholders equity | $ | 157,334 | $ | 176,925 | |||
BLUE NILE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
�
14 Weeks Ended | 13 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | ||||||||||||
� | January�4, 2015 | December�29, 2013 | January�4, 2015 | December�29, 2013 | |||||||||||
Net sales | $ | 157,459 | $ | 145,958 | $ | 473,516 | $ | 450,008 | |||||||
Cost of sales | 128,959 | 118,737 | 386,874 | 366,357 | |||||||||||
Gross profit | 28,500 | 27,221 | 86,642 | 83,651 | |||||||||||
Selling, general and administrative expenses | 21,643 | 20,005 | 72,430 | 69,343 | |||||||||||
Operating income | 6,857 | 7,216 | 14,212 | 14,308 | |||||||||||
Other income, net | |||||||||||||||
Interest income, net | 26 | 23 | 117 | 107 | |||||||||||
Other income, net | 337 | 7 | 290 | 150 | |||||||||||
Total other income, net | 363 | 30 | 407 | 257 | |||||||||||
Income before income taxes | 7,220 | 7,246 | 14,619 | 14,565 | |||||||||||
Income tax expense | 2,389 | 2,315 | 4,888 | 3,690 | |||||||||||
Net income | $ | 4,831 | $ | 4,931 | $ | 9,731 | $ | 10,875 | |||||||
Basic net income per share | $ | 0.41 | $ | 0.38 | $ | 0.80 | $ | 0.87 | |||||||
Diluted net income per share | $ | 0.41 | $ | 0.38 | $ | 0.80 | $ | 0.85 | |||||||
Shares used for computation (in thousands): | |||||||||||||||
Basic | 11,853 | 12,835 | 12,144 | 12,540 | |||||||||||
Diluted | 11,907 | 13,030 | 12,209 | 12,760 | |||||||||||
BLUE NILE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
53 Weeks Ended | 52 Weeks Ended | |||||||
� | January�4, 2015 | December�29, 2013 | ||||||
Operating activities: | ||||||||
Net income | $ | 9,731 | $ | 10,875 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,607 | 3,141 | ||||||
Gain on disposal of property and equipment | (7 | ) | ||||||
Stock-based compensation | 4,361 | 5,028 | ||||||
Deferred income taxes | 2,321 | 2,204 | ||||||
Tax deficiency from exercise of stock options | (2,713 | ) | (583 | ) | ||||
Excess tax benefit from exercise of stock options | (195 | ) | (361 | ) | ||||
Changes in assets and liabilities: | ||||||||
Receivables | (182 | ) | (41 | ) | ||||
Inventories | (7,138 | ) | (1,260 | ) | ||||
Prepaid federal income taxes | 247 | (247 | ) | |||||
Prepaid expenses and other assets | (216 | ) | (218 | ) | ||||
Accounts payable | 6,323 | 6,432 | ||||||
Accrued liabilities | 1,241 | (1,688 | ) | |||||
Other long-term liabilities | 55 | 89 | ||||||
Deferred rent and other | (234 | ) | 74 | |||||
Net cash provided by operating activities | 17,208 | 23,438 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (3,771 | ) | (5,528 | ) | ||||
Purchases of other investments | (280 | ) | ||||||
Net cash used in investing activities | (3,771 | ) | (5,808 | ) | ||||
Financing activities: | ||||||||
Repurchase of common stock | (40,308 | ) | (10,433 | ) | ||||
Proceeds from stock option exercises | 2,413 | 21,377 | ||||||
Taxes paid for net share settlement of equity awards | (282 | ) | ||||||
Excess tax benefit from exercise of stock options | 195 | 361 | ||||||
Principal payments under long-term financing obligation | (104 | ) | (60 | ) | ||||
Net cash (used in) provided by financing activities | (38,086 | ) | 11,245 | |||||
Effect of exchange rate changes on cash and cash equivalents | (107 | ) | 50 | |||||
Net (decrease) increase in cash and cash equivalents | (24,756 | ) | 28,925 | |||||
Cash and cash equivalents, beginning of period | 115,942 | 87,017 | ||||||
Cash and cash equivalents, end of period | $ | 91,186 | $ | 115,942 | ||||
53 Weeks Ended | 52 Weeks Ended | |||||||
January�4, 2015 | December�29, 2013 | |||||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for income taxes | $ | 3,675 | $ | 4,965 | ||||
Cash paid for interest relating to long-term financing obligation | 3 | 2 | ||||||
Non-cash investing and financing activities: | ||||||||
Payable for purchases of property and equipment | 36 | 7 | ||||||
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