Segment Reporting (Notes)

9 Months Ended

Jan. 27, 2018

Segment Reporting

Note 5. Segment Reporting

We identified our segments based on the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. Effective with the acquisition of MBS on February 27, 2017, we have determined that we operate two reportable segments: BNC and MBS. Prior to the acquisition of MBS, BNC was our only reportable segment. Our international operations are not material and the majority of our revenue and total assets are within the United States. For a description of the BNC and MBS businesses, refer to Note 1. Organization of this Form 10-Q.

The condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 include the financial results of MBS and all material intercompany accounts and transactions have been eliminated in consolidation. The eliminations are primarily related to the following intercompany activities:

• BNC purchases new and used textbooks from MBS for distribution at BNC's physical college bookstores. We eliminate the net sales from MBS and the intercompany profit in ending inventory, and

• MBS pays commissions to BNC for certain textbooks it sells to MBS that cannot be returned to suppliers or used in their stores. The commission is based on the volume of textbooks sold to MBS and with respect to the textbook requirements of certain distance learning programs that MBS fulfills on BNC's behalf.

Intercompany Eliminations

Sales eliminations represent the elimination of MBS sales to BNC and the elimination of BNC commissions earned from MBS. Cost of sales eliminations represent (i) the recognition of intercompany profit for BNC inventory that was purchased from MBS in a prior period that was subsequently sold to external customers during the current period, net of (ii) the elimination of intercompany profit for MBS inventory purchases by BNC that remain in ending inventory at the end of the current period. Gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations.

Summarized financial information for our reportable segments is reported below:

	13 weeks ended						39 weeks ended
	January 27, 2018			January 28, 2017			January 27, 2018			January 28, 2017
Sales:
BNC	$	506,460		$	521,624		$	1,518,224		$	1,531,532
MBS	138,927			—			413,579			—
Elimination	(41,996		)	—			(85,840		)	—
Total Sales	$	603,391		$	521,624		$	1,845,963		$	1,531,532
Gross Profit
BNC	$	117,413		$	115,925		$	337,875		$	334,852
MBS	34,949			—			95,713			—
Elimination	(5,827		)	—			(5,782		)	—
Total Gross Profit	$	146,535		$	115,925		$	427,806		$	334,852
Depreciation and Amortization
BNC	$	15,411		$	13,149		$	43,879		$	39,057
MBS	1,596			—			4,849			—
Total Depreciation and Amortization	$	17,007		$	13,149		$	48,728		$	39,057
Operating (Loss) Income
BNC (a),(b),(c)	$	(308,954	)	$	5,198		$	(310,004	)	$	9,196
MBS	19,156			—			47,878			—
Elimination	(5,827		)	—			(5,782		)	—
Total Operating (Loss) Income	$	(295,625	)	$	5,198		$	(267,908	)	$	9,196
The following is a reconciliation of segment Operating (Loss) Income to consolidated (Loss) Income Before Income Taxes:
Total Operating (Loss) Income	$	(295,625	)	$	5,198		$	(267,908	)	$	9,196
Interest Expense, net	(2,954		)	(679		)	(7,828		)	(1,975		)
Total (Loss) Income Before Income Taxes	$	(298,579	)	$	4,519		$	(275,736	)	$	7,221

(a) During the 39 weeks ended January 27, 2018, we recognized expenses totaling approximately $5,361 related to the resignation of Mr. Max J. Roberts as Chief Executive Officer of the Company and the appointment of Mr. Michael P. Huseby to the position of Chief Executive Officer and Chairman of the Board, both effective as of September 19, 2017. For additional information, refer to Note 9. Supplemental Information - Restructuring and Other Charges in this Form 10-Q.

(b) On August 3, 2017, we acquired Student Brands, LLC, a leading direct-to-student subscription-based writing services business. The condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 include the financial results of Student Brands in the BNC segment from the date of acquisition, August 3, 2017, and the condensed consolidated financial statements for the 13 and 39 weeks ended January 28, 2017 exclude the financial results of Student Brands.

(c) During the 13 weeks ended January 27, 2018, we completed our annual goodwill impairment test. Based on the results of the impairment test, the carrying value of the BNC reporting unit exceeded its fair value and we recorded a goodwill impairment (non-cash impairment loss) of $313,130 for the BNC segment. For additional information, see Note 2. Summary of Significant Accounting Policies in this Form 10-Q.