Blue Nile 10-Q 9 Nov 16 2016 Q3 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	9 Months Ended
	Oct. 02, 2016	Nov. 04, 2016
Entity Information [Line Items]
Entity Registrant Name	BLUE NILE INC
Entity Central Index Key	1,091,171
Document Type	10-Q
Document Period End Date	Oct. 2, 2016
Amendment Flag	false
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--01-01
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		11,697,428

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 02, 2016	Jan. 03, 2016	Oct. 04, 2015
Current assets:
Cash and cash equivalents	$ 40,558	$ 86,542	$ 33,609
Trade accounts receivable	2,094	3,339	4,006
Other accounts receivable, net	1,577	706	930
Note receivable	300	600	600
Inventories	44,126	46,376	41,946
Prepaids and other current assets	2,497	1,585	2,317
Total current assets	91,152	139,148	83,408
Property and equipment, net	11,669	10,530	10,795
Deferred income taxes	4,259	5,089	4,844
Other investments	2,280	2,280	2,280
Other assets, net	268	367	305
Total assets	109,628	157,414	101,632
Current liabilities:
Accounts payable	77,882	121,917	76,328
Accrued liabilities	8,750	12,336	8,816
Current portion of long-term financing obligation	34	33	33
Current portion of deferred rent	352	290	291
Total current liabilities	87,018	134,576	85,468
Long-term financing obligation, less current portion	430	455	464
Deferred rent, less current portion	1,702	1,697	1,771
Unearned income	1,530	1,988	2,141
Other long-term liabilities	318	242	201
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000 shares authorized, none issued and outstanding	0	0	0
Common stock, $0.001 par value; 300,000 shares authorized; 21,849, 21,714 and 21,672 shares issued, respectively, 11,697, 11,575 and 11,533 shares outstanding, respectively	22	22	22
Additional paid-in capital	236,285	232,148	230,290
Accumulated other comprehensive loss	(227)	(239)	(211)
Retained earnings	110,366	114,023	108,984
Treasury stock, at cost; 10,152, 10,139 and 10,139 shares outstanding, respectively	(327,816)	(327,498)	(327,498)
Total stockholders' equity	18,630	18,456	11,587
Total liabilities and stockholders' equity	$ 109,628	$ 157,414	$ 101,632

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Oct. 02, 2016	Jan. 03, 2016	Oct. 04, 2015
Stockholders' equity:
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000	5,000	5,000
Preferred stock, shares issued	0	0	0
Preferred stock, shares outstanding	0	0	0
Common stock, par value	$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized	300,000	300,000	300,000
Common stock, shares issued	21,849	21,714	21,672
Common stock, shares outstanding	11,697	11,575	11,533
Treasury stock, at cost; shares outstanding	10,152	10,139	10,139

Condensed Consolidated Statemen

Condensed Consolidated Statements Of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Oct. 04, 2015	Oct. 02, 2016	Oct. 04, 2015
Income Statement [Abstract]
Net sales	$ 105,110	$ 109,943	$ 321,937	$ 330,083
Cost of sales	84,470	88,712	258,673	266,790
Gross profit	20,640	21,231	63,264	63,293
Selling, general and administrative expenses	18,843	18,192	56,950	54,905
Operating income	1,797	3,039	6,314	8,388
Other income (loss), net:
Interest income, net	10	12	35	76
Other income (loss), net	90	(33)	571	0
Total other income (loss), net	100	(21)	606	76
Income before income taxes	1,897	3,018	6,920	8,464
Income tax expense	604	1,041	2,420	2,969
Net income	$ 1,293	$ 1,977	$ 4,500	$ 5,495
Basic net income per share	$ 0.11	$ 0.17	$ 0.39	$ 0.47
Diluted net income per share	$ 0.11	$ 0.17	$ 0.38	$ 0.47

Condensed Consolidated Stateme5

Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Oct. 04, 2015	Oct. 02, 2016	Oct. 04, 2015
Other Comprehensive Income (Loss), Tax [Abstract]
Net Income	$ 1,293	$ 1,977	$ 4,500	$ 5,495
Other comprehensive income (loss):
Foreign currency transaction adjustments	5	(14)	12	25
Total comprehensive income	$ 1,298	$ 1,963	$ 4,512	$ 5,520

Condensed Consolidated Stateme6

Condensed Consolidated Statement Of Changes In Stockholders' Equity - 9 months ended Oct. 02, 2016 - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]
Balance at Jan. 03, 2016	$ 18,456	$ 22	$ 232,148	$ 114,023	$ (239)	$ (327,498)
Balance, shares at Jan. 03, 2016		21,714
Treasury Stock, Shares at Jan. 03, 2016	(10,139)					(10,139)
Net income	$ 4,500			4,500
Other comprehensive income	12				12
Dividends ($0.70 per share)	(8,123)			(8,123)
Tax deficiency from share-based awards	(437)		(437)
Exercise of common stock options	1,738	$ 0	1,738
Exercise of common stock options, shares		60
Issuance of common stock to directors	30	$ 0	30
Issuance of common stock to directors, shares		1
Vesting of restricted stock units and dividend equivalents, value	0	$ 0	34	(34)
Vesting of restricted stock units and dividend equivalents, shares		97
Shares withheld related to net share settlement of share-based awards, value	(630)	$ 0	(630)
Shares withheld related to net share settlement of share-based awards, shares		(23)
Stock-based compensation	3,402		3,402
Repurchase of common stock, shares						(13)
Repurchase of common stock, value	318					$ 318
Balance at Oct. 02, 2016	$ 18,630	$ 22	$ 236,285	$ 110,366	$ (227)	$ (327,816)
Balance, shares at Oct. 02, 2016		21,849
Treasury Stock, Shares at Oct. 02, 2016	(10,152)					(10,152)

Condensed Consolidated Stateme7

Condensed Consolidated Statement Of Changes In Stockholders' Equity (Parentheticals)	9 Months Ended
	Oct. 02, 2016$ / shares
Special Dividend [Member]
Special Cash Dividend per share	$ 0.70

Condensed Consolidated Stateme8

Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2016	Oct. 04, 2015
Operating activities:
Net income	$ 4,500	$ 5,495
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	3,732	2,771
Stock-based compensation	3,359	3,831
Deferred income taxes	830	(657)
Tax deficiency from share-based awards	(437)	(597)
Excess tax benefit from share-based awards	(25)	(29)
Changes in assets and liabilities:
Receivables	374	(1,228)
Inventories	2,250	(278)
Prepaid expenses and other assets	(834)	(755)
Accounts payable	(44,336)	(52,344)
Accrued liabilities	(3,586)	(3,176)
Unearned income	(458)	2,141
Deferred rent and other	143	(180)
Net cash used in operating activities	(34,488)	(45,006)
Investing activities:
Purchases of property and equipment	(4,476)	(2,940)
Payments received on note receivable	300	1,400
Net cash used in investing activities	(4,176)	(1,540)
Financing activities:
Repurchase of common stock	(318)	(10,780)
Proceeds from stock option exercises	1,738	241
Taxes paid for net share settlement of equity awards	(630)	(424)
Excess Tax Benefit from Share-based Compensation, Financing Activities	25	29
Payments of Dividends	(8,123)	0
Principal payments under long-term financing obligation	(24)	(24)
Net cash used in financing activities	(7,332)	(10,958)
Effect of exchange rate changes on cash and cash equivalents	12	(73)
Net decrease in cash and cash equivalents	(45,984)	(57,577)
Cash and cash equivalents, beginning of period	86,542	91,186
Cash and cash equivalents, end of period	40,558	33,609
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$ 4,033	$ 4,825

Description Of Our Business And

Description Of Our Business And Summary Of Significant Accounting Policies	9 Months Ended
	Oct. 02, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Description Of Our Business And Summary Of Significant Accounting Policies	Description of Our Business and Summary of Significant Accounting Policies The Company Blue Nile, Inc. (“Blue Nile,” the “Company,” “we” or “our”) is a leading retailer of high-quality diamonds and fine jewelry. In addition to sales of diamonds and fine jewelry, the Company provides education, guidance and support to enable customers to more effectively learn about and purchase diamonds and fine jewelry. The Company, a Delaware corporation based in Seattle, Washington, was formed in March 1999. The Company serves consumers in over 40 countries and territories all over the world through its website at www.bluenile.com. Information found on the Company’s website is not incorporated by reference into this Quarterly Report on Form 10-Q or any of its other filings with the U.S. Securities and Exchange Commission (the “SEC”). Basis of Presentation The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended January 3, 2016 , filed with the SEC on March 1, 2016 (the “Annual Report”). The same accounting policies are followed for preparing quarterly and annual financial statements. In the opinion of management, all adjustments necessary for the fair presentation of the financial position, results of operations, and cash flows for the interim periods have been included and are of a normal, recurring nature. The financial information as of January 3, 2016 is derived from the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2016 , included in Item 8 of the Annual Report. Due to a number of factors, including the seasonal nature of the retail industry and other factors described in this Quarterly Report on Form 10-Q, quarterly results are not necessarily indicative of the results for the full fiscal year or any other subsequent interim period. Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All transactions and balances between the Company and its wholly-owned subsidiaries are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates include the allowance for sales returns, accounting for taxes, and inventory valuation. Actual results could differ materially from those estimates. Foreign Currency The functional currency of most of the Company’s subsidiaries is the applicable local currency. The assets and liabilities of our subsidiaries have been translated to U.S. dollars using the exchange rates effective on the balance sheet dates, while income and expense accounts are translated at the average rates in effect during the periods presented. The resulting translation adjustments are recorded as a component of other comprehensive income (loss) within stockholders’ equity. The Company offers customers the ability to transact in 23 currencies. Some of the Company’s subsidiaries engage in transactions denominated in currencies other than the Company’s functional currency. Gains or losses arising from these transactions are recorded in other income (loss), net in the condensed consolidated statements of operations. Note Receivable and Other Investments The Company holds a minority ownership of a privately-held company in the form of convertible preferred shares, purchased for an aggregate amount of $2.0 million , which we account for under the cost method of accounting. The Company holds a $2.0 million note receivable (the “Note”) from the same privately-held company. As of October 2, 2016, the remaining balance of the Note was $0.3 million , due within the next year. The interest rate changes over the term of the Note to LIBOR plus a predetermined rate per annum . The Note is recorded at its face amount on the Company’s condensed consolidated balance sheet. The Company holds a minority ownership in another privately-held company in the form of common stock and warrants, purchased for $280,000 , which we account for under the cost method of accounting. The Company reviews its investments for impairment when events and circumstances indicate that the decline in fair value of the assets below the carrying value is other-than-temporary. No other-than-temporary impairment charges were recorded for the year to date ended October 2, 2016 . Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers (Topic 606),” which will amend the existing revenue recognition guidance. The core principle of this guidance is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new guidance is effective for the Company beginning the first quarter of 2018, and may be applied on a retrospective basis or by the cumulative effect transition method. To improve and clarify the guidance set forth in ASU 2014-09, the FASB issued the following supplemental guidance relevant to the Company which have the same effective date as that of ASU 2014-09: • in March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; • in April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”; • in May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The Company is currently evaluating the impact of ASU 2014-09 and the related supplemental guidance noted above will have on its consolidated financial statements and related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (“ASU 2014-15”), “Presentation of Financial Statements - Going Concern.” The standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for periods beginning on January 1, 2017. The adoption of this standard is not expected to have a material impact on our financial statements and related disclosures. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. The guidance will require prospective application at the beginning of the Company’s first quarter of fiscal year 2017, but permits adoption in an earlier period. The Company is currently evaluating the impact of this guidance; however, the Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (“ASU 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. ASU 2015-17 is effective for periods beginning on January 1, 2017 and may be applied prospectively or retrospectively. Early adoption is permitted. The Company retrospectively adopted this guidance effective January 3, 2016. The impact of adopting ASU 2015-17 resulted in a reclassification of our current deferred income tax asset to non-current deferred income tax asset in the amount of $1.0 million , in our previously presented consolidated balance sheet as of October 4, 2015. In January 2016, the FASB issued Accounting Standards Update No. 2016-01 (“ASU 2016-01”), “Financial Instruments - Overall, Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends various aspects of recognition, measurement, presentation and disclosure of financial instruments. This update will require prospective application at the beginning of the Company’s first quarter of fiscal year 2018. For certain provisions, early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and the timing of adoption. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842),” which increases transparency and comparability among companies accounting for lease transactions. The most significant change of this update will require the recognition of lease assets and liabilities on the balance sheet for operating lease arrangements with lease terms greater than 12 months for lessees. This update will require a modified retrospective application which includes a number of optional practical expedients related to the identification and classification of leases commenced before the effective date. This update will become effective beginning the first quarter of the Company’s fiscal year 2019. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and the timing of adoption. In March 2016, the FASB issued Accounting Standards Update No. 2016-04, “Liabilities - Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products,” which narrows the scope exception for liabilities related to the sale of prepaid stored-value products to account for breakage on those liabilities consistent with the breakage guidance in Topic 606, “Revenue from Contracts with Customers.” This update will become effective beginning the first quarter of the Company’s fiscal year 2018, and shall be applied using either a modified retrospective transition method, or a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective, or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and the timing of adoption. In March 2016, the FASB issued Accounting Standards Update No. 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” which simplifies the accounting for share-based payment transactions, including income taxes, classification of awards as equity or liabilities and classification of cash flows. This update will become effective beginning the first quarter of the Company’s fiscal year 2017. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. The Company expects the adoption of this standard will result in more volatility in the Company’s income tax expense and effective tax rate.

Stock-based Compensation

Stock-based Compensation	9 Months Ended
	Oct. 02, 2016
Share-based Compensation [Abstract]
Stock-Based Compensation	Stock-based Compensation As of October 2, 2016 , the Company has four equity plans. Additional information regarding these plans is disclosed in the Annual Report. Stock-based compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period for each stock option or restricted stock unit (“RSU”) grant that is expected to vest at some point in the future. Forfeitures are estimated at the date of grant based on the Company’s historical experience and future expectations. The fair value of each stock option on the date of grant is estimated using the Black-Scholes-Merton option valuation model. The assumptions used to calculate the fair value of stock options granted are evaluated and revised, if necessary, to reflect market conditions and the Company’s experience. The fair value of each RSU is based on the Fair Market Value (as defined in the Company’s equity incentive plans) of the Company’s common stock on the date of the grant. There were no stock options granted during the year to date ended October 2, 2016. As of October 2, 2016, the Company had 821,199 stock options outstanding. The assumptions used to calculate the fair value of stock options granted are evaluated and revised, if necessary, to reflect market conditions and the Company's experience. A summary of RSU activity for the year to date ended October 2, 2016 is as follows: RSUs (in thousands) Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Balance, January 4, 2016 301 $ 29.25 Granted 188 25.11 Special dividend adjustment 11 31.10 Vested (97 ) 27.07 Canceled (41 ) 26.70 Balance, October 2, 2016 362 $ 27.50 1.46 $ 12,455 Vested and expected to vest at October 2, 2016 312 $ 31.89 1.36 $ 10,739 The aggregate intrinsic value in the table above is before applicable income taxes and represent the amount recipients would have received if all RSUs had been released on the last business day of the period indicated, based on the closing stock price of the Company’s common stock on such date. The total intrinsic value of RSUs vested was approximately $3.3 million during the year to date ended October 2, 2016 and $1.9 million during the year to date ended October 4, 2015 . During the year to date ended October 2, 2016 and October 4, 2015 , the total fair value of RSUs vested was approximately $2.6 million and $1.9 million , respectively. As of October 2, 2016 , the Company had total unrecognized compensation costs related to unvested RSUs of $7.4 million , before income taxes. The Company expects to recognize this cost over a weighted average period of 2.7 years .

Inventories

Inventories	9 Months Ended
	Oct. 02, 2016
Inventory Disclosure [Abstract]
Inventories	Inventories Inventories are stated at cost and consist of the following (in thousands): October 2, 2016 January 3, 2016 October 4, 2015 Loose diamonds $ 13,544 $ 12,420 $ 12,516 Fine jewelry and other 30,582 33,956 29,430 Total $ 44,126 $ 46,376 $ 41,946

Net Income Per Share

Net Income Per Share	9 Months Ended
	Oct. 02, 2016
Earnings Per Share [Abstract]
Net Income Per Share	Net Income Per Share Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares and common share equivalents outstanding. Common share equivalents included in the computation represent shares issuable upon assumed exercise of outstanding stock options and conversion of unvested RSUs, except when the effect of their inclusion would be antidilutive. The following tables set forth the computation of basic and diluted net income per share (in thousands, except per share data): Quarter ended Year to date ended October 2, October 4, October 2, October 4, Net income $ 1,293 $ 1,977 $ 4,500 $ 5,495 Weighted average common shares outstanding 11,654 11,523 11,622 11,706 Basic net income per share $ 0.11 $ 0.17 $ 0.39 $ 0.47 Dilutive effect of stock options and RSUs 106 89 89 73 Common stock and common stock equivalents 11,760 11,612 11,711 11,779 Diluted net income per share $ 0.11 $ 0.17 $ 0.38 $ 0.47 For the quarter and year to date ended October 2, 2016 , the Company excluded 643,798 and 800,533 stock option and award shares, respectively, from the computation of diluted net income per share due to their antidilutive effect. For the quarter and year to date ended October 4, 2015 , the Company excluded 744,920 and 859,546 option and award shares, respectively, from the computation of diluted net income per share due to their antidilutive effect.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Oct. 02, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes or claims. In addition, the Company is regularly audited by various tax authorities. Although the Company cannot predict with assurance the outcome of any litigation or audit, it does not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on the Company’s financial condition, results of operations, or cash flows.

Subsequent Event Subsequent Eve

Subsequent Event Subsequent Event	9 Months Ended
	Oct. 02, 2016
Subsequent Event [Line Items]
Subsequent Event	On November 6, 2016, the Company entered into a definitive agreement (the “Merger Agreement”) to be acquired by BC Cyan Parent Inc., a Delaware corporation (“Parent”) and BC Cyan Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. Parent and Merger Sub were formed by affiliates of Bain Capital Fund XI, a Delaware limited partnership (“Bain Fund XI”) and Bow Street LLC (“Bow Street”). The Parent will acquire 100 percent of the Company's common stock for $40.75 per share (the “Per Share Price”) in cash, for a total value of approximately $500 million . Capitalized terms used within this Form 10-Q related to the Merger but not otherwise defined have the meaning set forth in the Merger Agreement which was filed as Exhibit 2.1 to the Company's Current Report on Form 8-K as filed with the SEC on November 7, 2016 and as incorporated by reference within this document . At the Effective Time, each: (i) share of common stock, par value $0.001 per share, of the Company (“Company Common Stock”) outstanding as of immediately prior to the Effective Time (other than Owned Company Shares or Dissenting Company Shares) will be cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to the Per Share Price, without interest thereon; (ii) Company Restricted Stock Unit outstanding as of immediately prior to the Effective Time, whether vested or unvested, will, unless otherwise agreed to in writing by the Parent and the Company, be cancelled and converted into the right to receive an amount in cash equal to (a) the amount of the Per Share Price, multiplied by, (b) (i) in the case of Company Restricted Stock Units that are only subject to time-vesting requirements, the total number of shares of Company Common Stock that are subject to such Company Restricted Stock Unit and, (ii) in the case of a Company Restricted Stock Units that are subject to time- and performance-vesting requirements, the total number of shares of Company Common Stock determined to be performance vested with the performance goals deemed achieved at maximum levels, and with the remaining time-vesting requirements deemed satisfied; and (iii) Company Option that is an In-the-Money Company Option outstanding as of immediately prior to the Effective Time, whether vested or unvested, will, unless otherwise agreed to in writing by the Parent and the Company, be cancelled and converted into the right to receive an amount in cash equal to (a) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option), multiplied by (b) the total number of shares of Company Common Stock that are issuable upon the full exercise of such Company Option. All Company Options that are not In-the-Money Company Options will be cancelled on the Effective Time without any cash payment being made in respect thereof. Parent and Merger Sub have obtained equity and debt financing commitments for the transactions contemplated by the Merger Agreement. Pursuant to the Equity Commitment Letter, Bain Fund XI has committed to invest in Parent for the purpose of financing the transactions contemplated by the Merger Agreement and paying related fees and expenses, subject to the terms and conditions set forth therein. The Company is a third party beneficiary of the Equity Commitment Letter. In addition, pursuant to the Limited Guaranty, Bain Fund XI has also provided the Company with a limited guaranty in favor of the Company, which guarantees the payment of certain monetary obligations that may be owed by Parent pursuant to the Merger Agreement, including any reverse termination fee that may become payable by Parent (described further below). In addition, pursuant to the Debt Commitment Letter, Goldman Sachs Bank USA (the “Lead Arranger”) has committed to provide a senior secured asset based revolving credit facility for the purpose of financing the transactions contemplated by the Merger Agreement and paying related fees and expenses, subject to the terms and conditions set forth therein. The obligation of the Lead Arranger to provide debt financing under the Debt Commitment Letter is subject to a number of customary conditions. Consummation of the Merger is subject to certain conditions, including, but not limited to, the: (i) Requisite Stockholder Approval; (ii) expiration or termination of any waiting periods applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any other applicable foreign Antitrust Laws; and (iii) absence of any law or order restraining, enjoining or otherwise prohibiting the Merger. During the period from the date of the Merger Agreement until December 6, 2016 (the “Go-Shop Period”), the Company may solicit alternative acquisition proposals from third parties and provide information to, and participate in discussions and engage in negotiations with, third parties regarding any alternative acquisition proposals. After the expiration of the Go-Shop Period, the Company will become subject to customary restrictions on its ability to solicit alternative acquisition proposals from third parties and to provide information to, and participate in discussions and engage in negotiations with, third parties regarding any alternative acquisition proposals. The Merger Agreement contains certain termination rights for the Company and Parent. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee. If the termination fee becomes payable by the Company due to (x) the Company’s termination of the merger agreement on or prior to the Cut-Off Date with respect to the Company entering into an alternative acquisition agreement with an Excluded Party, the amount of the termination fee will be $7.4 million , and (y) if the termination fee becomes payable under any other circumstance, the amount of the termination fee will be $17.4 million . The Merger Agreement also provides that Parent will be required to pay the Company a reverse termination fee of $32.2 million if (i) the Closing does not occur within five business days of the first date Parent is required to close; (ii) all mutual and Parent closing conditions are satisfied (other than those conditions that their terms are satisfied at the Closing, each of which are capable of being satisfied at Closing); (iii) the Company has irrevocably notified Parent in writing that it is ready, willing and able to close and that all Company closing conditions are satisfied or waived (other than those conditions that their terms are satisfied at the Closing, each of which are capable of being satisfied at Closing); (iv) the Company has given Parent written notice five business days prior to termination stating the Company’s intent to terminate the Merger Agreement if Parent and Merger Sub fail to consummate the Merger; and (v) Parent and Merger Sub fail to close on the later of five business days of the notice and the date Parent is otherwise required to close. In addition to the foregoing termination rights, and subject to certain limitations, the Company or Parent may terminate the Merger Agreement if the Merger is not consummated by May 6, 2017.

Description Of Our Business A15

Description Of Our Business And Summary Of Significant Accounting Policies (Policy)	9 Months Ended
	Oct. 02, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended January 3, 2016 , filed with the SEC on March 1, 2016 (the “Annual Report”). The same accounting policies are followed for preparing quarterly and annual financial statements. In the opinion of management, all adjustments necessary for the fair presentation of the financial position, results of operations, and cash flows for the interim periods have been included and are of a normal, recurring nature. The financial information as of January 3, 2016 is derived from the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2016 , included in Item 8 of the Annual Report. Due to a number of factors, including the seasonal nature of the retail industry and other factors described in this Quarterly Report on Form 10-Q, quarterly results are not necessarily indicative of the results for the full fiscal year or any other subsequent interim period.
Principles of Consolidation	Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All transactions and balances between the Company and its wholly-owned subsidiaries are eliminated in consolidation.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates include the allowance for sales returns, accounting for taxes, and inventory valuation. Actual results could differ materially from those estimates.
Foreign Currency	Foreign Currency The functional currency of most of the Company’s subsidiaries is the applicable local currency. The assets and liabilities of our subsidiaries have been translated to U.S. dollars using the exchange rates effective on the balance sheet dates, while income and expense accounts are translated at the average rates in effect during the periods presented. The resulting translation adjustments are recorded as a component of other comprehensive income (loss) within stockholders’ equity. The Company offers customers the ability to transact in 23 currencies. Some of the Company’s subsidiaries engage in transactions denominated in currencies other than the Company’s functional currency. Gains or losses arising from these transactions are recorded in other income (loss), net in the condensed consolidated statements of operations.
Note Receivable and Other Investments	Note Receivable and Other Investments The Company holds a minority ownership of a privately-held company in the form of convertible preferred shares, purchased for an aggregate amount of $2.0 million , which we account for under the cost method of accounting. The Company holds a $2.0 million note receivable (the “Note”) from the same privately-held company. As of October 2, 2016, the remaining balance of the Note was $0.3 million , due within the next year. The interest rate changes over the term of the Note to LIBOR plus a predetermined rate per annum . The Note is recorded at its face amount on the Company’s condensed consolidated balance sheet. The Company holds a minority ownership in another privately-held company in the form of common stock and warrants, purchased for $280,000 , which we account for under the cost method of accounting. The Company reviews its investments for impairment when events and circumstances indicate that the decline in fair value of the assets below the carrying value is other-than-temporary. No other-than-temporary impairment charges were recorded for the year to date ended October 2, 2016 .
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers (Topic 606),” which will amend the existing revenue recognition guidance. The core principle of this guidance is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new guidance is effective for the Company beginning the first quarter of 2018, and may be applied on a retrospective basis or by the cumulative effect transition method. To improve and clarify the guidance set forth in ASU 2014-09, the FASB issued the following supplemental guidance relevant to the Company which have the same effective date as that of ASU 2014-09: • in March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; • in April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”; • in May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The Company is currently evaluating the impact of ASU 2014-09 and the related supplemental guidance noted above will have on its consolidated financial statements and related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (“ASU 2014-15”), “Presentation of Financial Statements - Going Concern.” The standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for periods beginning on January 1, 2017. The adoption of this standard is not expected to have a material impact on our financial statements and related disclosures. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. The guidance will require prospective application at the beginning of the Company’s first quarter of fiscal year 2017, but permits adoption in an earlier period. The Company is currently evaluating the impact of this guidance; however, the Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (“ASU 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. ASU 2015-17 is effective for periods beginning on January 1, 2017 and may be applied prospectively or retrospectively. Early adoption is permitted. The Company retrospectively adopted this guidance effective January 3, 2016. The impact of adopting ASU 2015-17 resulted in a reclassification of our current deferred income tax asset to non-current deferred income tax asset in the amount of $1.0 million , in our previously presented consolidated balance sheet as of October 4, 2015. In January 2016, the FASB issued Accounting Standards Update No. 2016-01 (“ASU 2016-01”), “Financial Instruments - Overall, Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends various aspects of recognition, measurement, presentation and disclosure of financial instruments. This update will require prospective application at the beginning of the Company’s first quarter of fiscal year 2018. For certain provisions, early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and the timing of adoption. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842),” which increases transparency and comparability among companies accounting for lease transactions. The most significant change of this update will require the recognition of lease assets and liabilities on the balance sheet for operating lease arrangements with lease terms greater than 12 months for lessees. This update will require a modified retrospective application which includes a number of optional practical expedients related to the identification and classification of leases commenced before the effective date. This update will become effective beginning the first quarter of the Company’s fiscal year 2019. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and the timing of adoption. In March 2016, the FASB issued Accounting Standards Update No. 2016-04, “Liabilities - Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products,” which narrows the scope exception for liabilities related to the sale of prepaid stored-value products to account for breakage on those liabilities consistent with the breakage guidance in Topic 606, “Revenue from Contracts with Customers.” This update will become effective beginning the first quarter of the Company’s fiscal year 2018, and shall be applied using either a modified retrospective transition method, or a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective, or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and the timing of adoption. In March 2016, the FASB issued Accounting Standards Update No. 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” which simplifies the accounting for share-based payment transactions, including income taxes, classification of awards as equity or liabilities and classification of cash flows. This update will become effective beginning the first quarter of the Company’s fiscal year 2017. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. The Company expects the adoption of this standard will result in more volatility in the Company’s income tax expense and effective tax rate.
Stock-based Compensation	Stock-based compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period for each stock option or restricted stock unit (“RSU”) grant that is expected to vest at some point in the future. Forfeitures are estimated at the date of grant based on the Company’s historical experience and future expectations. The fair value of each stock option on the date of grant is estimated using the Black-Scholes-Merton option valuation model. The assumptions used to calculate the fair value of stock options granted are evaluated and revised, if necessary, to reflect market conditions and the Company’s experience. The fair value of each RSU is based on the Fair Market Value (as defined in the Company’s equity incentive plans) of the Company’s common stock on the date of the grant.
Inventory	Inventories are stated at cost
Earnings Per Share	Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares and common share equivalents outstanding. Common share equivalents included in the computation represent shares issuable upon assumed exercise of outstanding stock options and conversion of unvested RSUs, except when the effect of their inclusion would be antidilutive.

Stock-based Compensation (Table

Stock-based Compensation (Tables)	9 Months Ended
	Oct. 02, 2016
Share-based Compensation [Abstract]
Summary Of Restricted Stock Unit Activity	RSUs (in thousands) Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Balance, January 4, 2016 301 $ 29.25 Granted 188 25.11 Special dividend adjustment 11 31.10 Vested (97 ) 27.07 Canceled (41 ) 26.70 Balance, October 2, 2016 362 $ 27.50 1.46 $ 12,455 Vested and expected to vest at October 2, 2016 312 $ 31.89 1.36 $ 10,739

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Oct. 02, 2016
Inventory Disclosure [Abstract]
Inventories Stated At Cost (in thousands)	October 2, 2016 January 3, 2016 October 4, 2015 Loose diamonds $ 13,544 $ 12,420 $ 12,516 Fine jewelry and other 30,582 33,956 29,430 Total $ 44,126 $ 46,376 $ 41,946

Net Income Per Share (Tables)

Net Income Per Share (Tables)	9 Months Ended
	Oct. 02, 2016
Earnings Per Share [Abstract]
Computation Of Basic And Diluted Net Income Per Share	Quarter ended Year to date ended October 2, October 4, October 2, October 4, Net income $ 1,293 $ 1,977 $ 4,500 $ 5,495 Weighted average common shares outstanding 11,654 11,523 11,622 11,706 Basic net income per share $ 0.11 $ 0.17 $ 0.39 $ 0.47 Dilutive effect of stock options and RSUs 106 89 89 73 Common stock and common stock equivalents 11,760 11,612 11,711 11,779 Diluted net income per share $ 0.11 $ 0.17 $ 0.38 $ 0.47

Note Receivable and Other Inves

Note Receivable and Other Investments (Details) - USD ($)	9 Months Ended
	Oct. 02, 2016	Jan. 03, 2016	Oct. 04, 2015
Other Investments [Abstract]
Other-than-temporary Impairment Charges	$ 0
Investment [Line Items]
Cost Method Investments	$ 2,280,000	$ 2,280,000	$ 2,280,000
Note receivable			2,000,000
Note Receivable, Interest Rate Description	LIBOR plus a predetermined rate per annum
Notes, Loans and Financing Receivables, Gross, Current	$ 300,000	$ 600,000	$ 600,000
Convertible Preferred Stock [Member]
Investment [Line Items]
Cost Method Investments	2,000,000
Equity Securities [Member]
Investment [Line Items]
Cost Method Investments	$ 280,000

Description Of Our Business A20

Description Of Our Business And Summary Of Significant Accounting Policies Description Of Our Business And Summary Of Significant Accounting Policies Recent Accounting Pronouncements (Details) $ in Millions	Oct. 04, 2015USD ($)
New Accounting Pronouncement, Early Adoption, Effect [Member]
New Accounting Pronouncement, Early Adoption [Line Items]
Deferred Tax Assets, Net, Current	$ 1

Stock-based Compensation (Narat

Stock-based Compensation (Naratives) (Details) - USD ($) $ in Millions	9 Months Ended
	Oct. 02, 2016	Oct. 04, 2015
Share-based Compensation [Abstract]
Intrinsic value of RSUs vested	$ 3.3	$ 1.9
Fair value of RSUs vested	2.6	$ 1.9
Unrecognized compensation costs related to unvested stock options and RSUs, before income taxes	$ 7.4
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation costs related to unvested stock options and RSUs, weighted average period of recognition	2 years 8 months 12 days

Stock-based Compensation (Summa

Stock-based Compensation (Summary Of Stock Option Activity) (Details) shares in Thousands	9 Months Ended
	Oct. 02, 2016shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	821
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted	0

Stock-based Compensation (Sum23

Stock-based Compensation (Summary Of RSU Activity) (Details) - Restricted Stock Units (RSUs) [Member] $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Oct. 02, 2016USD ($)$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs, Balance, January 4, 2016 | shares	301
RSUs, Granted | shares	188
Special Dividend, Adjustment | shares	11
RSUs, Vested | shares	(97)
RSUs, Canceled | shares	(41)
RSUs, Balance, October 2, 2016 | shares	362
RSUs, Vested and expected to vest at October 2, 2016 | shares	312
RSUs, Weighted Average Grant Date Fair Value, Balance, January 4, 2016 | $ / shares	$ 29.25
RSUs, Weighted Average Grant Date Fair Value, Granted | $ / shares	25.11
Special Dividends, Weighted Average Grant Date Fair Value, Adjustment | $ / shares	31.10
RSUs, Weighted Average Grant Date Fair Value, Vested | $ / shares	27.07
RSUs, Weighted Average Grant Date Fair Value, Canceled | $ / shares	26.70
RSUs, Weighted Average Grant Date Fair Value, Balance, October 2, 2016 | $ / shares	27.50
RSUs. Weighted Average Grant Date Fair Value, Vested And Expected To Vest at October 2, 2016 | $ / shares	$ 31.89
RSUs, Weighted Average Remaining Contractual Term (in years), Balance, October 2, 2016	1 year 5 months 16 days
RSUs, Weighted Average Remaining Contractual Term, Vested and expected to vest at October 2, 2016	1 year 4 months 10 days
RSUs, Aggregate Intrinsic Value, Balance, October 2, 2016 | $	$ 12,455
RSUs, Aggregate Intrinsic Value, Vested and expected to vest at October 2, 2016 | $	$ 10,739

Inventories (Inventories Stated

Inventories (Inventories Stated At Cost) (Details) - USD ($) $ in Thousands	Oct. 02, 2016	Jan. 03, 2016	Oct. 04, 2015
Inventory Disclosure [Abstract]
Loose diamonds	$ 13,544	$ 12,420	$ 12,516
Fine jewelry and other, Net	30,582	33,956
Fine jewelry and other			29,430
Total	$ 44,126	$ 46,376	$ 41,946

Net Income Per Share (Narrative

Net Income Per Share (Narrative) (Details) - shares	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Oct. 04, 2015	Oct. 02, 2016	Oct. 04, 2015
Earnings Per Share [Abstract]
Stock option and award shares excluded from computation of diluted net income per share due to their antidilutive effect	643,798	744,920	800,533	859,546

Net Income Per Share (Computati

Net Income Per Share (Computation Basic And Diluted Net Income Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Oct. 04, 2015	Oct. 02, 2016	Oct. 04, 2015
Earnings Per Share [Abstract]
Net income	$ 1,293	$ 1,977	$ 4,500	$ 5,495
Weighted average common shares outstanding	11,654	11,523	11,622	11,706
Basic net income per share	$ 0.11	$ 0.17	$ 0.39	$ 0.47
Dilutive effect of stock options and RSUs	106	89	89	73
Common stock and common stock equivalents	11,760	11,612	11,711	11,779
Diluted net income per share	$ 0.11	$ 0.17	$ 0.38	$ 0.47

Subsequent Event Subsequent E27

Subsequent Event Subsequent Event (Details) - Subsequent Event [Member] - Blue Nile [Member] - Parent, Merger Sub, Bain Fund XI, Bow Street [Member] $ / shares in Units, $ in Millions	Nov. 06, 2016USD ($)$ / shares
Subsequent Event [Line Items]
Outstanding shares of common stock exchange in cash | $ / shares	$ 40.75
Cash consideration	$ 500
Business Combination Termination Fee	7.4
Business Combination Termination Fee(y)	17.4
Business Combination Termination Fee(z)	$ 32.2