Note 5. Segment Reporting

Prior to the fourth quarter of Fiscal 2018, we had two reportable segments: BNC and MBS. In connection with our focus on developing digital solutions, during the fourth quarter of Fiscal 2018, the Company realigned its business into the following three reportable segments: BNC, MBS and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are presented as “Corporate Services”.

We identified our segments in accordance with 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. The following summarizes the three segments, with additional information in each respective subsequent segment discussion.

BNC

The BNC Segment is comprised of the operations of BNC which operates 768 physical campus bookstores, the majority of which also have school-branded e-commerce sites operated by BNC and which offers students access to affordable course materials and affinity products, including emblematic apparel and gifts. BNC also offers its First Day™ inclusive access program, in which course materials, including e-content, are offered at a reduced price through a course materials fee, and delivered to students digitally on or before the first day of class. Additionally, the BNC segment offers a suite of digital content, software, and services to colleges and universities, through our LoudCloud platform, such as predictive analytics, a variety of open educational resources courseware, and a competency-based learning platform. For additional information about this segments operations, see Part I - Item 1. Business - BNC Segment.

MBS

The MBS Segment is comprised of MBS's two highly integrated businesses: MBS Direct which operates 676 virtual bookstores for college and university campuses, and K-12 schools, and MBS Wholesale which is one of the largest textbook wholesalers in the country. MBS Wholesale's business centrally sources and sells new and used textbooks to more than 3,500 physical college bookstores, including BNC’s 768 campus bookstores. MBS Wholesale sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 430 college bookstores. For additional information about this segments operations, see Part I - Item 1. Business Segment - MBS Segment.

DSS

The Digital Student Solutions ("DSS") segment includes direct-to-student product and service offerings to assist students to study more effectively and improve academic performance, thus enabling them to gain the valuable skills necessary to succeed after college. DSS is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, with approximately 100,000 subscribers across its digital properties, as well as tutoring and test prep services offered through our partnership with The Princeton Review. We currently offer these online student services directly to students, and increasingly will be leveraging our BNC and MBS physical and virtual bookstore footprint to market directly to students where we serve as the campus bookstore. We continue to aggressively expand our ecosystem of products and services through our own internal development, as well as by partnering with other companies to provide a complete hub of products and services designed to improve student success and outcomes. For additional information about this segments operations, see Part I - Item 1. Business Segment - Digital Student Solutions Segment.

Corporate Services

Corporate Services represent unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

Eliminations

Subsequent to the acquisition of MBS on February 27, 2017, the consolidated financial statements include the accounts of MBS and all material intercompany accounts and transactions have been eliminated in consolidation. The eliminations are primarily related to the following intercompany activities:


•	The sales eliminations represent the elimination of MBS sales to BNC and the elimination of BNC commissions earned from MBS, and


•	The 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.

Summarized financial information for our reportable segments is reported below:



	52 weeks ended			52 weeks ended			52 weeks ended
	April 28, 2018 ^(a)			April 29, 2017 ^(b)			April 30, 2016
Sales:
BNC	$	1,816,083		$	1,845,561		$	1,808,029
MBS	459,529			34,091			—
DSS	15,762			—			—
Elimination	(87,757		)	(5,290		)	—
Total Sales	$	2,203,617		$	1,874,362		$	1,808,029

Gross Profit
BNC	$	441,209		$	454,950		$	454,699
MBS	101,345			4,748			—
DSS	15,403			—			—
Elimination	(724		)	(637		)	—
Total Gross Profit	$	557,233		$	459,061		$	454,699

Depreciation and Amortization
BNC	$	53,737		$	52,067		$	52,564
MBS	6,406			1,059			—
DSS	5,253			—			—
Corporate Services	190			192			126
Total Depreciation and Amortization	$	65,586		$	53,318		$	52,690

Operating (Loss) Income
BNC ^(c)	$	(279,375	)	$	53,674		$	45,042
MBS	44,920			(11,595		)	—
DSS	226			—			—
Corporate Services	(27,750		)	(27,887		)	(40,419		)
Elimination	(724		)	(637		)	—
Total Operating (Loss) Income ^(c)	$	(262,703	)	$	13,555		$	4,623

The following is a reconciliation of segment Operating Income to consolidated Income Before Income Taxes
Total Operating (Loss) Income	$	(262,703	)	$	13,555		$	4,623
Interest Expense, net	(10,306		)	(3,464		)	(1,872		)
Total (Loss) Income Before Income Taxes	$	(273,009	)	$	10,091		$	2,751


(a)	We acquired Student Brands, LLC on August 3, 2017. The consolidated financial statements for the 52 weeks ended April 28, 2018 include the financial results of Student Brands from the acquisition date, August 3, 2017, to April 28, 2018.


(b)	We acquired MBS Textbook Exchange, LLC on February 27, 2017. The consolidated financial statements for the 52 weeks ended April 29, 2017 include the financial results of MBS from the acquisition date, February 27, 2017, to April 29, 2017.


(c)	In Fiscal 2018, we recorded a goodwill impairment (non-cash impairment loss) of $313,100 based on the results of our annual goodwill impairment test. For additional information, see Part I - Item 1. Business and Part II - Item 8. Financial Statements and Supplementary Data - Note 9. Supplementary Information - Goodwill.

Our international operations are not material and the majority of the revenue and total assets are within the United States.



	As of
	April 28, 2018		April 29, 2017
Total Assets
BNC (includes goodwill of $0 and $281,349, respectively)	$	443,541	$	838,680
MBS (includes goodwill of $49,282 and $48,118, respectively)	287,507		251,028
DSS (includes goodwill of $0 for both periods)	36,743		—
Corporate Services	271,420		210,124
Total Assets	$	1,039,211	$	1,299,832



	52 weeks ended		52 weeks ended		52 weeks ended
	April 28, 2018		April 29, 2017		April 30, 2016
Capital Expenditures
BNC	$	37,476	$	34,435	$	50,324
MBS	2,681		218		—
DSS	2,620		—		—
Corporate Services	32		17		466
Total Capital Expenditures	$	42,809	$	34,670	$	50,790