8-K

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

May 5, 2016

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:

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 May 5, 2016, Blue Nile, Inc. (“Blue Nile” or “the Company”) issued a press release announcing financial results for the first quarter ended April 3, 2016. 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 (the “Exchange Act”), 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

(d) Exhibits

EXHIBIT NUMBER	DESCRIPTION
99.1	Press release dated May 5, 2016, 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.
	Registrant
Dated: May 5, 2016	By: /s/ David Binder
	David Binder
	Chief Financial Officer and Chief Administrative Officer
	(Principal Financial Officer)

EX-99.1

Exhibit 99.1

Blue Nile Announces First Quarter 2016 Financial Results

First Quarter Net Sales of $103.1 million

First Quarter Earnings Per Diluted Share of $0.09

SEATTLE, May 5, 2016 -- Blue Nile, Inc. (Nasdaq: NILE), a leading online retailer of diamonds and fine jewelry, today reported financial results for its first quarter ended April 3, 2016.

Net sales decreased3.2% to $103.1 million for the first quarter ended April 3, 2016 compared to $106.5 million for the first quarter ended April 5, 2015. Operating income for the quarter totaled $1.2 million, representing an operating margin of 1.2% of net sales, compared to $1.9 million in operating income and 1.8% operating margin for the first quarter 2015. Net income totaled $1.1 million, or $0.09 per diluted share versus $1.2 million, or $0.10 per diluted share for the first quarter2015.

Non-GAAP adjusted EBITDA for the quarter totaled $3.6 million compared to $4.0 million for the first quarter2015. For the trailing twelve month period ended April 3, 2016, net cash provided by operating activities totaled $11.3 million compared to $10.5 million for the trailing twelve month period ended April 5, 2015. For the trailing twelve month period ended April 3, 2016, non-GAAP free cash flow totaled $7.2 million, as compared to $6.6 million for the trailing twelve month period ended April 5, 2015.

“As expected, it was a challenging environment for us in the first quarter,” said Harvey Kanter, Blue Nile Chairman, CEO and President. “However, we are encouraged by what we’ve seen to date in the second quarter and are making good progress on key initiatives, which we expect to fundamentally improve performance long term.”

Highlights

• Blue Nile paid its first ever dividend on March 7, 2016 to shareholders of record at the close of business on February 22, 2016. This special cash dividend is equal to $0.70 per share. The Company determined the value of the dividend based on the level of earnings in fiscal year 2015. On an annual basis, the Company will reassess its use of capital, including investments in operations, strategic alternatives, share repurchases, and cash dividends.

• U.S. engagement net sales for the first quarter2016 decreased 7.0% to $56.7 million, compared to $61.0 million for the first quarter2015.

• U.S. non-engagement net sales for the first quarter2016 increased 4.0% to $27.1 million, compared to $26.0 million for the first quarter2015.

• International net sales for the first quarter2016 were $19.3 million, compared to $19.5 million for the first quarter2015, a decrease of 0.9%. Excluding the impact from changes in foreign exchange rates, international net sales increased4.1%.

• Gross profit for the first quarter2016 totaled $20.2 million. As a percent of net sales, gross profit was 19.6% compared to 18.8% for the first quarter2015.

• Selling, general and administrative expenses for the first quarter2016 were $19.0 million, compared to $18.1 million in the first quarter2015. Selling, general and administrative expenses included stock-based compensation expense of $1.2 million for both the first quarter in 2016 and the first quarter in 2015.

• Earnings per diluted share for the first quarter2016 was $0.09 compared to $0.10 for the first quarter2015.  Earnings per diluted share included stock-based compensation expense of $0.07 for both the first quarter2016 and the first quarter2015.

• At the end of the first quarter2016, cash and cash equivalents totaled $29.7 million.

Financial Guidance

The following forward-looking statements reflect Blue Nile’s expectations as of May 5, 2016. Actual results may be materially affected by many factors, such as consumer spending, economic conditions and the various factors detailed below.

Expectations for the second quarter of 2016 (Quarter ended July 3, 2016):

• Net sales are expected to be between $114 million and $117 million.

• Earnings per diluted share are projected at $0.20 to $0.23.

Expectations for the fiscal year 2016 (Year Ending January 1, 2017):

• Net sales are expected to be between $465 million and $495 million.

• Earnings per diluted share are projected at $0.88 to $0.95.

Blue Nile reports fiscal results on a 52/53-week format.

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 January 3, 2016. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended April 3, 2016, which we expect to file with the Securities and Exchange Commission on or before May 13, 2016. 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 first 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):

	Quarter ended			Quarter ended
	April 3, 2016			April 5, 2015
Net income	$	1,080		$	1,187
Income tax expense	639			676
Other (income) loss, net	(471		)	47
Depreciation and amortization	1,151			904
Stock-based compensation	1,186			1,208
Non-GAAP adjusted EBITDA	$	3,585		$	4,022

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

	Quarter ended			Quarter ended
	April 3, 2016			April 5, 2015
Net cash used in operating activities	$	(47,241	)	$	(50,484	)
Purchases of fixed assets, including internal-use
software and website development	(1,142		)	(799		)
Non-GAAP free cash flow	$	(48,383	)	$	(51,283	)
	Twelve months ended			Twelve months ended
	April 3, 2016			April 5, 2015
Net cash provided by operating activities	$	11,279		$	10,533
Purchases of fixed assets, including internal-use
software and website development	(4,098		)	(3,942		)
Non-GAAP free cash flow	$	7,181		$	6,591

The non-GAAP free cash flow for the twelve months ended April 5, 2015 presented above includes financial information from the Company’s fiscal 2014 reporting period which included 53 weeks, with an additional week falling into the fourth quarter.

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

Quarter ended April 3, 2016	Year over year growth	Effect of foreign exchange movements	Year over year growth on constant exchange rate basis
International net sales	(0.9)%	(5.0)%	4.1%
Quarter ended April 5, 2015	Year over year growth	Effect of foreign exchange movements	Year over year growth on constant exchange rate basis
International net sales	8.6%	(7.8)%	16.4%

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)

nancys@bluenile.com

or

Josh Holland, 206.336.6773 (Media)

joshh@bluenile.com

BLUE NILE, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)

	April 3, 2016			January 3, 2016			April 5, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	29,749		$	86,542		$	39,657
Trade accounts receivable, net	1,702			3,339			2,801
Other accounts receivable	814			706			1,206
Note receivable	600			600			—
Inventories	45,871			46,376			38,349
Prepaid income taxes	—			—			196
Prepaids and other current assets	1,220			1,585			1,345
Total current assets	79,956			139,148			83,554
Property and equipment, net	10,570			10,530			10,319
Intangible assets, net	76			82			98
Deferred income taxes(1)	4,697			5,089			4,225
Note receivable	—			—			2,000
Other investments	2,280			2,280			2,280
Other assets	214			285			232
Total assets	$	97,793		$	157,414		$	102,708
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	74,260		$	121,917		$	77,763
Accrued liabilities	6,743			12,336			6,262
Current portion of long-term financing obligation	33			33			32
Current portion of deferred rent	308			290			295
Total current liabilities	81,344			134,576			84,352
Long-term financing obligation, less current portion	447			455			480
Deferred rent, less current portion	1,647			1,697			1,913
Unearned income	1,836			1,988			—
Other long-term liabilities	259			242			168
Commitments and contingencies
Stockholders’ equity:
Common stock	22			22			22
Additional paid-in capital	232,968			232,148			228,189
Accumulated other comprehensive loss	(212		)	(239		)	(374		)
Retained earnings	106,980			114,023			104,676
Treasury stock	(327,498		)	(327,498		)	(316,718		)
Total stockholders’ equity	12,260			18,456			15,795
Total liabilities and stockholders’ equity	$	97,793		$	157,414		$	102,708
(1) In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. We early adopted this standard effective January 3, 2016 retrospectively and reclassified the current deferred income tax assets previously presented in the consolidated balance sheet as of April 5, 2015, to noncurrent deferred income tax assets.

BLUE NILE, INC.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	Quarter ended
	April 3, 2016		April 5, 2015
Net sales	$	103,056	$	106,447
Cost of sales	82,830		86,474
Gross profit	20,226		19,973
Selling, general and administrative expenses	18,978		18,063
Operating income	1,248		1,910
Other income (loss), net:
Interest income, net	9		36
Other income (loss), net	462		(83		)
Total other income (loss), net	471		(47		)
Income before income taxes	1,719		1,863
Income tax expense	639		676
Net income	$	1,080	$	1,187
Basic net income per share	$	0.09	$	0.10
Diluted net income per share	$	0.09	$	0.10
Shares used for computation (in thousands):
Basic	11,592		11,869
Diluted	11,666		11,923

BLUE NILE, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Quarter ended
	April 3, 2016			April 5, 2015
Operating activities:
Net income	$	1,080		$	1,187
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	1,151			904
Stock-based compensation	1,196			1,218
Deferred income taxes	392			(38		)
Tax deficiency from share-based awards	(94		)	(36		)
Changes in assets and liabilities:
Receivables	1,529			(299		)
Inventories	505			3,319
Prepaid income taxes	—			(196		)
Prepaid expenses and other assets	436			203
Accounts payable	(47,676		)	(50,949		)
Accrued liabilities	(5,593		)	(5,730		)
Unearned income	(152		)	—
Deferred rent and other	(15		)	(67		)
Net cash used in operating activities	(47,241		)	(50,484		)
Investing activities:
Purchases of property and equipment	(1,142		)	(799		)
Net cash used in investing activities	(1,142		)	(799		)
Financing activities:
Proceeds from stock option exercises	1			—
Taxes paid for net share settlement of share-based awards	(307		)	(168		)
Principal payments under long-term financing obligation	(8		)	(9		)
Cash dividends paid	(8,123		)	—
Net cash used in financing activities	(8,437		)	(177		)
Effect of exchange rate changes on cash and cash equivalents	27			(69		)
Net decrease in cash and cash equivalents	(56,793		)	(51,529		)
Cash and cash equivalents, beginning of period	86,542			91,186
Cash and cash equivalents, end of period	$	29,749		$	39,657

	Quarter ended
	April 3, 2016		April 5, 2015
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,934	$	2,253