x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 46-0599018 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
120 Mountain View Blvd., Basking Ridge, NJ | 07920 | |
(Address of Principal Executive Offices) | (Zip Code) |
Title of Class | Trading Symbol | Name of Exchange on which registered |
Common Stock, $0.01 par value per share | BNED | New York Stock Exchange |
Large accelerated filer | ¨ | Accelerated filer | x | ||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | ||
Emerging Growth Company | ¨ |
Page No. | |||
13 weeks ended | 39 weeks ended | ||||||||||||||
January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||||||
Sales: | |||||||||||||||
Product sales and other | $ | 453,678 | $ | 491,989 | $ | 1,474,448 | $ | 1,566,007 | |||||||
Rental income | 48,614 | 56,019 | 119,729 | 134,251 | |||||||||||
Total sales | 502,292 | 548,008 | 1,594,177 | 1,700,258 | |||||||||||
Cost of sales: | |||||||||||||||
Product and other cost of sales | 354,999 | 381,953 | 1,146,400 | 1,209,676 | |||||||||||
Rental cost of sales | 28,758 | 33,102 | 70,635 | 80,259 | |||||||||||
Total cost of sales | 383,757 | 415,055 | 1,217,035 | 1,289,935 | |||||||||||
Gross profit | 118,535 | 132,953 | 377,142 | 410,323 | |||||||||||
Selling and administrative expenses | 106,184 | 110,941 | 317,279 | 325,408 | |||||||||||
Depreciation and amortization expense | 15,117 | 16,374 | 46,542 | 49,333 | |||||||||||
Impairment loss (non-cash) | — | — | 433 | — | |||||||||||
Restructuring and other charges | 205 | 2,500 | 3,240 | 2,500 | |||||||||||
Transaction costs | — | 117 | — | 654 | |||||||||||
Operating (loss) income | (2,971 | ) | 3,021 | 9,648 | 32,428 | ||||||||||
Interest expense, net | 1,904 | 2,546 | 5,882 | 7,904 | |||||||||||
(Loss) income before income taxes | (4,875 | ) | 475 | 3,766 | 24,524 | ||||||||||
Income tax (benefit) expense | (3,182 | ) | (294 | ) | 1,683 | 2,680 | |||||||||
Net (loss) income | $ | (1,693 | ) | $ | 769 | $ | 2,083 | $ | 21,844 | ||||||
(Loss) Earnings per share of common stock: | |||||||||||||||
Basic | $ | (0.04 | ) | $ | 0.02 | $ | 0.04 | $ | 0.46 | ||||||
Diluted | $ | (0.04 | ) | $ | 0.02 | $ | 0.04 | $ | 0.46 | ||||||
Weighted average shares of common stock outstanding: | |||||||||||||||
Basic | 48,298 | 47,561 | 47,911 | 47,220 | |||||||||||
Diluted | 48,298 | 47,937 | 48,767 | 47,772 |
January 25, 2020 | January 26, 2019 | April 27, 2019 | |||||||||
(unaudited) | (unaudited) | (audited) | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 9,798 | $ | 22,049 | $ | 14,013 | |||||
Receivables, net | 238,045 | 231,106 | 98,246 | ||||||||
Merchandise inventories, net | 530,260 | 579,582 | 420,322 | ||||||||
Textbook rental inventories | 48,474 | 50,577 | 47,001 | ||||||||
Prepaid expenses and other current assets | 24,617 | 20,691 | 11,778 | ||||||||
Total current assets | 851,194 | 904,005 | 591,360 | ||||||||
Property and equipment, net | 101,055 | 109,414 | 109,777 | ||||||||
Operating lease right-of-use assets | 251,743 | — | — | ||||||||
Intangible assets, net | 179,596 | 208,439 | 194,978 | ||||||||
Goodwill | 4,700 | 53,982 | 4,700 | ||||||||
Deferred tax assets, net | 2,647 | — | 2,425 | ||||||||
Other noncurrent assets | 37,169 | 40,216 | 42,940 | ||||||||
Total assets | $ | 1,428,104 | $ | 1,316,056 | $ | 946,180 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 389,050 | $ | 464,933 | $ | 186,818 | |||||
Accrued liabilities | 193,705 | 219,713 | 121,720 | ||||||||
Current operating lease liabilities | 102,247 | — | — | ||||||||
Short-term borrowings | — | — | 100,000 | ||||||||
Total current liabilities | 685,002 | 684,646 | 408,538 | ||||||||
Long-term deferred taxes, net | — | 7,991 | — | ||||||||
Long-term operating lease liabilities | 169,227 | — | — | ||||||||
Other long-term liabilities | 50,529 | 58,632 | 53,514 | ||||||||
Long-term borrowings | 65,900 | 70,100 | 33,500 | ||||||||
Total liabilities | 970,658 | 821,369 | 495,552 | ||||||||
Commitments and contingencies | — | — | — | ||||||||
Stockholders' equity: | |||||||||||
Preferred stock, $0.01 par value; authorized, 5,000 shares; issued and outstanding, none | — | — | — | ||||||||
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 52,139, 51,026 and 51,030 shares, respectively; outstanding, 48,297, 47,561 and 47,563 shares, respectively | 521 | 511 | 510 | ||||||||
Additional paid-in capital | 732,320 | 724,164 | 726,331 | ||||||||
Accumulated deficit | (242,494 | ) | (198,359 | ) | (244,577 | ) | |||||
Treasury stock, at cost | (32,901 | ) | (31,629 | ) | (31,636 | ) | |||||
Total stockholders' equity | 457,446 | 494,687 | 450,628 | ||||||||
Total liabilities and stockholders' equity | $ | 1,428,104 | $ | 1,316,056 | $ | 946,180 |
39 weeks ended | |||||||
January 25, 2020 | January 26, 2019 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 2,083 | $ | 21,844 | |||
Adjustments to reconcile net income to net cash flows from operating activities: | |||||||
Depreciation and amortization expense | 46,542 | 49,333 | |||||
Content amortization expense | 2,973 | 360 | |||||
Amortization of deferred financing costs | 811 | 1,127 | |||||
Impairment loss (non-cash) | 433 | — | |||||
Deferred taxes | (222 | ) | 5,885 | ||||
Stock-based compensation expense | 6,000 | 6,851 | |||||
Changes in other long-term liabilities | (2,992 | ) | (1,183 | ) | |||
Changes in operating lease right-of-use assets and liabilities | 9,890 | — | |||||
Changes in other operating assets and liabilities, net | 20,834 | 91,645 | |||||
Net cash flows provided by operating activities | 86,352 | 175,862 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (26,841 | ) | (31,711 | ) | |||
Acquisition of businesses, net of cash acquired | — | (10,000 | ) | ||||
Net change in other noncurrent assets | 5,148 | 43 | |||||
Net cash flows used in investing activities | (21,693 | ) | (41,668 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from borrowings under Credit Agreement | 383,400 | 374,000 | |||||
Repayments of borrowings under Credit Agreement | (451,000 | ) | (500,300 | ) | |||
Purchase of treasury shares | (1,265 | ) | (1,971 | ) | |||
Net cash flows used in financing activities | (68,865 | ) | (128,271 | ) | |||
Net (decrease) increase in cash, cash equivalents and restricted cash | (4,206 | ) | 5,923 | ||||
Cash, cash equivalents and restricted cash at beginning of period | 14,768 | 16,869 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 10,562 | $ | 22,792 | |||
Changes in other operating assets and liabilities, net: | |||||||
Receivables, net | $ | (139,875 | ) | $ | (131,046 | ) | |
Merchandise inventories | (109,938 | ) | (136,023 | ) | |||
Textbook rental inventories | (1,473 | ) | (2,798 | ) | |||
Prepaid expenses and other current assets | (12,839 | ) | (8,844 | ) | |||
Accounts payable and accrued liabilities | 284,959 | 370,356 | |||||
Changes in other operating assets and liabilities, net | $ | 20,834 | $ | 91,645 |
Additional | ||||||||||||||||||||||||||
Common Stock | Paid-In | Accumulated | Treasury Stock | Total | ||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Equity | ||||||||||||||||||||
Balance at April 28, 2018 | 50,032 | $ | 501 | $ | 717,323 | $ | (220,203 | ) | 3,115 | $ | (29,658 | ) | $ | 467,963 | ||||||||||||
Stock-based compensation expense | 2,341 | 2,341 | ||||||||||||||||||||||||
Net loss | (38,622 | ) | (38,622 | ) | ||||||||||||||||||||||
Balance at July 28, 2018 | 50,032 | $ | 501 | $ | 719,664 | $ | (258,825 | ) | 3,115 | $ | (29,658 | ) | $ | 431,682 | ||||||||||||
Stock-based compensation expense | 2,632 | 2,632 | ||||||||||||||||||||||||
Vested equity awards | 994 | 10 | (10 | ) | — | |||||||||||||||||||||
Shares repurchased for tax withholdings for vested stock awards | 350 | (1,971 | ) | (1,971 | ) | |||||||||||||||||||||
Net income | 59,697 | 59,697 | ||||||||||||||||||||||||
Balance at October 27, 2018 | 51,026 | $ | 511 | $ | 722,286 | $ | (199,128 | ) | 3,465 | $ | (31,629 | ) | $ | 492,040 | ||||||||||||
Stock-based compensation expense | 1,878 | 1,878 | ||||||||||||||||||||||||
Net income | 769 | 769 | ||||||||||||||||||||||||
Balance at January 26, 2019 | 51,026 | $ | 511 | $ | 724,164 | $ | (198,359 | ) | 3,465 | $ | (31,629 | ) | $ | 494,687 | ||||||||||||
Additional | ||||||||||||||||||||||||||
Common Stock | Paid-In | Accumulated | Treasury Stock | Total | ||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Equity | ||||||||||||||||||||
Balance at April 27, 2019 | 51,030 | $ | 510 | $ | 726,331 | $ | (244,577 | ) | 3,467 | $ | (31,636 | ) | $ | 450,628 | ||||||||||||
Stock-based compensation expense | 2,321 | 2,321 | ||||||||||||||||||||||||
Vested equity awards | 56 | 1 | (1 | ) | — | |||||||||||||||||||||
Shares repurchased for tax withholdings for vested stock awards | 12 | (40 | ) | (40 | ) | |||||||||||||||||||||
Net loss | (32,155 | ) | (32,155 | ) | ||||||||||||||||||||||
Balance at July 27, 2019 | 51,086 | $ | 511 | $ | 728,651 | $ | (276,732 | ) | 3,479 | $ | (31,676 | ) | $ | 420,754 | ||||||||||||
Stock-based compensation expense | 1,860 | 1,860 | ||||||||||||||||||||||||
Vested equity awards | 1,053 | 10 | (10 | ) | — | |||||||||||||||||||||
Shares repurchased for tax withholdings for vested stock awards | 363 | (1,225 | ) | (1,225 | ) | |||||||||||||||||||||
Net income | 35,931 | 35,931 | ||||||||||||||||||||||||
Balance at October 28, 2019 | 52,139 | $ | 521 | $ | 730,501 | $ | (240,801 | ) | 3,842 | $ | (32,901 | ) | $ | 457,320 | ||||||||||||
Stock-based compensation expense | 1,819 | 1,819 | ||||||||||||||||||||||||
Net loss | (1,693 | ) | (1,693 | ) | ||||||||||||||||||||||
Balance at January 25, 2020 | 52,139 | $ | 521 | $ | 732,320 | $ | (242,494 | ) | 3,842 | $ | (32,901 | ) | $ | 457,446 |
13 weeks ended | 39 weeks ended | |||||||||||||||
January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | |||||||||||||
Retail | ||||||||||||||||
Product Sales | $ | 400,170 | $ | 431,555 | $ | 1,320,587 | $ | 1,396,940 | ||||||||
Rental Income | 48,614 | 56,019 | 119,729 | 134,251 | ||||||||||||
Service and Other Revenue (a) | 9,204 | 10,572 | 34,097 | 37,946 | ||||||||||||
Retail Total Sales | $ | 457,988 | $ | 498,146 | $ | 1,474,413 | $ | 1,569,137 | ||||||||
Wholesale Sales | $ | 66,996 | $ | 78,508 | $ | 179,515 | $ | 209,282 | ||||||||
DSS Sales (b) | $ | 6,435 | $ | 5,237 | $ | 17,024 | $ | 15,848 | ||||||||
Eliminations (c) | $ | (29,127 | ) | $ | (33,883 | ) | $ | (76,775 | ) | $ | (94,009 | ) | ||||
Total Sales | $ | 502,292 | $ | 548,008 | $ | 1,594,177 | $ | 1,700,258 |
(a) | Service and other revenue primarily relates to brand partnerships and other service revenues. |
(b) | DSS sales primarily relate to direct-to-student subscription-based revenue. |
(c) | The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale. |
39 weeks ended | ||||||||
January 25, 2020 | January 26, 2019 | |||||||
Deferred revenue at the beginning of period | $ | 20,418 | $ | 20,144 | ||||
Additions to deferred revenue during the period | 170,375 | 189,832 | ||||||
Reductions to deferred revenue for revenue recognized during the period | (130,085 | ) | (140,314 | ) | ||||
Deferred revenue balance at the end of period | $ | 60,708 | $ | 69,662 |
13 weeks ended | 39 weeks ended | |||||||
January 25, 2020 | January 25, 2020 | |||||||
Variable lease expense | $ | 23,402 | $ | 54,412 | ||||
Operating lease expense | 37,188 | 137,148 | ||||||
Net lease expense | $ | 60,590 | $ | 191,560 |
As of | ||||
January 25, 2020 | ||||
Remainder of Fiscal 2020 | $ | 65,672 | ||
Fiscal 2021 | 63,753 | |||
Fiscal 2022 | 47,012 | |||
Fiscal 2023 | 39,724 | |||
Fiscal 2024 | 31,316 | |||
Thereafter | 58,018 | |||
Total lease payments | 305,495 | |||
Less: imputed interest | (34,021 | ) | ||
Operating lease liabilities at period end | $ | 271,474 |
As of | ||||
January 25, 2020 | ||||
Weighted average remaining lease term (in years) | 4.9 years | |||
Weighted average discount rate | 4.3 | % | ||
Supplemental cash flow information: | ||||
Cash payments for lease liabilities within operating activities | $ | 106,690 | ||
ROU assets obtained in exchange for lease liabilities from initial recognition | $ | 88,902 |
• | The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale, and |
• | These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period. |
13 weeks ended | 39 weeks ended | ||||||||||||||
January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||||||
Sales: | |||||||||||||||
Retail | $ | 457,988 | $ | 498,146 | $ | 1,474,413 | $ | 1,569,137 | |||||||
Wholesale | 66,996 | 78,508 | 179,515 | 209,282 | |||||||||||
DSS | 6,435 | 5,237 | 17,024 | 15,848 | |||||||||||
Elimination | (29,127 | ) | (33,883 | ) | (76,775 | ) | (94,009 | ) | |||||||
Total Sales | $ | 502,292 | $ | 548,008 | $ | 1,594,177 | $ | 1,700,258 | |||||||
Gross Profit | |||||||||||||||
Retail | $ | 99,790 | $ | 106,244 | $ | 322,869 | $ | 341,466 | |||||||
Wholesale | 14,235 | 22,739 | 41,688 | 56,559 | |||||||||||
DSS | 5,283 | 4,969 | 13,838 | 15,312 | |||||||||||
Elimination | (773 | ) | (999 | ) | (1,253 | ) | (3,014 | ) | |||||||
Total Gross Profit | $ | 118,535 | $ | 132,953 | $ | 377,142 | $ | 410,323 | |||||||
Depreciation and Amortization | |||||||||||||||
Retail | $ | 11,699 | $ | 12,769 | $ | 35,372 | $ | 39,061 | |||||||
Wholesale | 1,483 | 1,496 | 4,531 | 4,455 | |||||||||||
DSS | 1,904 | 2,072 | 6,543 | 5,698 | |||||||||||
Corporate Services | 31 | 37 | 96 | 119 | |||||||||||
Total Depreciation and Amortization | $ | 15,117 | $ | 16,374 | $ | 46,542 | $ | 49,333 | |||||||
Operating (Loss) Income | |||||||||||||||
Retail | $ | (3,747 | ) | $ | (4,920 | ) | $ | 11,478 | $ | 18,180 | |||||
Wholesale | 8,440 | 15,845 | 23,493 | 35,703 | |||||||||||
DSS | (1,608 | ) | (678 | ) | (6,420 | ) | (627 | ) | |||||||
Corporate Services | (5,412 | ) | (6,234 | ) | (17,832 | ) | (17,862 | ) | |||||||
Elimination | (644 | ) | (992 | ) | (1,071 | ) | (2,966 | ) | |||||||
Total Operating (Loss) Income | $ | (2,971 | ) | $ | 3,021 | $ | 9,648 | $ | 32,428 | ||||||
13 weeks ended | 39 weeks ended | ||||||||||||||
January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||||||
The following is a reconciliation of segment Operating (Loss) Income to consolidated (Loss) Income Before Income Taxes: | |||||||||||||||
Total Operating Income | $ | (2,971 | ) | $ | 3,021 | $ | 9,648 | $ | 32,428 | ||||||
Interest Expense, net | 1,904 | 2,546 | 5,882 | 7,904 | |||||||||||
(Loss) Income Before Income Taxes | $ | (4,875 | ) | $ | 475 | $ | 3,766 | $ | 24,524 | ||||||
13 weeks ended | 39 weeks ended | ||||||||||||||
(shares in thousands) | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | |||||||||||
Numerator for basic and diluted earnings per share: | |||||||||||||||
Net (loss) income available to common shareholders | $ | (1,693 | ) | $ | 769 | $ | 2,083 | $ | 21,844 | ||||||
Less allocation of earnings to participating securities | — | — | (1 | ) | (9 | ) | |||||||||
Net (loss) income available to common shareholders | $ | (1,693 | ) | $ | 769 | $ | 2,082 | $ | 21,835 | ||||||
Numerator for diluted earnings per share: | |||||||||||||||
Net (loss) income available to common shareholders | $ | (1,693 | ) | $ | 769 | $ | 2,082 | $ | 21,835 | ||||||
Allocation of earnings to participating securities | — | — | 1 | 9 | |||||||||||
Less diluted allocation of earnings to participating securities | — | — | (1 | ) | (9 | ) | |||||||||
Net (loss) income available to common shareholders | $ | (1,693 | ) | $ | 769 | $ | 2,082 | $ | 21,835 | ||||||
Denominator for basic earnings per share: | |||||||||||||||
Basic weighted average shares of Common Stock | 48,298 | 47,561 | 47,911 | 47,220 | |||||||||||
Denominator for diluted earnings per share: | |||||||||||||||
Basic weighted average shares of Common Stock | 48,298 | 47,561 | 47,911 | 47,220 | |||||||||||
Average dilutive restricted stock units | — | 178 | 403 | 403 | |||||||||||
Average dilutive performance shares | — | 45 | 9 | 41 | |||||||||||
Average dilutive restricted shares | — | 3 | 12 | 10 | |||||||||||
Average dilutive performance share units | — | 150 | 432 | 98 | |||||||||||
Diluted weighted average shares of Common Stock | 48,298 | 47,937 | 48,767 | 47,772 | |||||||||||
(Loss) Earnings per share of Common Stock: | |||||||||||||||
Basic | $ | (0.04 | ) | $ | 0.02 | $ | 0.04 | $ | 0.46 | ||||||
Diluted | $ | (0.04 | ) | $ | 0.02 | $ | 0.04 | $ | 0.46 |
• | 190,480 restricted stock units ("RSU") awards and 38,096 restricted stock ("RS") awards with a one-year vesting period to the current Board of Directors ("BOD") members for annual compensation. |
• | 709,517 performance share unit ("PSU") awards to employees that will vest based upon the achievement of pre-established performance goals related to absolute total shareholder returns ("TSR") determined by the Company's common stock price and Company Adjusted EBITDA measured over a two-year performance period (Fiscal 2020 - Fiscal 2021) with one additional year of time-based vesting. The number of PSU awards that will vest range from 0%-150% of the target award based on actual performance. |
• | 1,350,674 RSU awards to employees with a three-year vesting period. |
13 weeks ended | 39 weeks ended | ||||||||||||||
January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||||||
Restricted stock expense | $ | 30 | $ | 30 | $ | 90 | $ | 80 | |||||||
Restricted stock units expense | 1,515 | 1,860 | 5,227 | 6,010 | |||||||||||
Performance shares expense | — | (72 | ) | 12 | 42 | ||||||||||
Performance share units expense | 274 | 60 | 671 | 719 | |||||||||||
Stock-based compensation expense | $ | 1,819 | $ | 1,878 | $ | 6,000 | $ | 6,851 |
• | Increased Use of Online and Digital Platforms as Companions or Alternatives to Printed Course Materials. Students and faculty can now choose from a wider variety of educational content and tools than ever before, delivered across both print and digital platforms. |
• | Distribution Network Evolving. The way course materials are distributed and consumed is changing significantly, a trend that is expected to continue. The market for course materials, including textbooks and supplemental materials, is intensely competitive and subject to rapid change. |
• | Disintermediation. We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials. In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, and student-to-student transactions over the Internet. |
• | Supply Chain and Inventory. Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon Wholesale’s ability to build its textbook inventory from suppliers in advance of the selling season. Some textbook publishers have begun to supply textbooks pursuant to consignment or |
• | Price Competition. In addition to the competition in the services we provide to our customers, our textbook and other course materials business faces significant price competition. Students purchase textbooks and other course materials from multiple providers, are highly price sensitive, and can easily shift spending from one provider or format to another. |
• | Competition. In addition to the competition we face from alternative distribution sources, we also have competition from other college bookstore operators, textbook wholesalers and educational content providers. We also compete with competitors offering products utilizing open educational resources ("OER") and other expert sources and enhanced with digital content. Competitors that provide online bookstore solutions to colleges and universities not only compete with our physical bookstore operations, but also compete with Retail's virtual stores. We also compete with other companies that offer college-themed and other general merchandise. Our DSS segment faces competition from other digital student solutions providers, including Chegg, Course Hero and others. |
• | A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced. |
• | Outsourcing Trends. We continue to see the trend towards outsourcing in the campus bookstore market, including virtual bookstores and online marketplace websites, and we also continue to see a variety of business models being pursued for the provision of textbooks and other course materials, such as inclusive access and publisher subscription models, and general merchandise. |
• | New and Existing Bookstore Contracts. We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business. |
• | Overall Economic Environment, College Enrollment and Consumer Spending Patterns. Our business is affected by the overall economic environment, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise. |
• | Economic Environment: Retail general merchandise sales are subject to short-term fluctuations driven by the broader retail environment. We expect general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect the changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, as we improve our e-commerce capabilities through investments we are making in new systems, processes and people. |
• | Enrollment Trends. The growth of our business depends on our ability to attract new customers and to increase the level of engagement by our current student customers. We continue to see downward enrollment trends and shrinking resources from state and federal government for colleges and universities. Enrollment trends, specifically at community colleges, continue to decline, led primarily by an improved economy (e.g. low unemployment) and a dip in the United States birth rate resulting in fewer students at the traditional 18-24 year-old college age. However, online degree program enrollments continue to grow, even in the face of declining overall higher education enrollment, and consistent with projections from the National Center for Education Statistics, we expect undergraduate enrollment to increase in the long-term. |
13 weeks ended | 39 weeks ended | ||||||||||||||
Dollars in thousands | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | |||||||||||
Sales: | |||||||||||||||
Product sales and other | $ | 453,678 | $ | 491,989 | $ | 1,474,448 | $ | 1,566,007 | |||||||
Rental income | 48,614 | 56,019 | 119,729 | 134,251 | |||||||||||
Total sales | $ | 502,292 | $ | 548,008 | $ | 1,594,177 | $ | 1,700,258 | |||||||
Net (loss) income | $ | (1,693 | ) | $ | 769 | $ | 2,083 | $ | 21,844 | ||||||
Adjusted Earnings (non-GAAP) (a) | $ | (748 | ) | $ | 3,308 | $ | 7,011 | $ | 24,929 | ||||||
Adjusted EBITDA (non-GAAP) (a) | |||||||||||||||
Retail | $ | 8,140 | $ | 10,480 | $ | 49,220 | $ | 60,020 | |||||||
Wholesale | 9,923 | 17,458 | 28,024 | 40,275 | |||||||||||
DSS | 1,150 | 1,475 | 2,492 | 5,652 | |||||||||||
Corporate Services | (5,154 | ) | (6,197 | ) | (15,829 | ) | (17,706 | ) | |||||||
Elimination | (644 | ) | (992 | ) | (1,071 | ) | (2,966 | ) | |||||||
Total Adjusted EBITDA (non-GAAP) | $ | 13,415 | $ | 22,224 | $ | 62,836 | $ | 85,275 | |||||||
(a) | Adjusted Earnings and Adjusted EBITDA are non-GAAP financial measures. See Adjusted Earnings (non-GAAP) and Adjusted EBITDA (non-GAAP) discussion below. |
13 weeks ended | 39 weeks ended | ||||||||||
January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||
Sales: | |||||||||||
Product sales and other | 90.3 | % | 89.8 | % | 92.5 | % | 92.1 | % | |||
Rental income | 9.7 | 10.2 | 7.5 | 7.9 | |||||||
Total sales | 100.0 | 100.0 | 100.0 | 100.0 | |||||||
Cost of sales: | |||||||||||
Product and other cost of sales (a) | 78.2 | 77.6 | 77.8 | 77.2 | |||||||
Rental cost of sales (a) | 59.2 | 59.1 | 59.0 | 59.8 | |||||||
Total cost of sales | 76.4 | 75.7 | 76.3 | 75.9 | |||||||
Gross margin | 23.6 | 24.3 | 23.7 | 24.1 | |||||||
Selling and administrative expenses | 21.1 | 20.2 | 19.9 | 19.1 | |||||||
Depreciation and amortization expense | 3.0 | 3.0 | 2.9 | 2.9 | |||||||
Impairment loss (non-cash) | — | — | — | — | |||||||
Restructuring and other charges | — | 0.5 | 0.2 | 0.1 | |||||||
Transaction costs | — | — | — | — | |||||||
Operating (loss) income | (0.5 | )% | 0.6 | % | 0.7 | % | 2.0 | % |
(a) | Represents the percentage these costs bear to the related sales, instead of total sales. |
13 weeks ended, January 25, 2020 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Eliminations | Total | |||||||||||||||||
Sales: | |||||||||||||||||||||||
Product sales and other | $ | 409,374 | $ | 66,996 | $ | 6,435 | $ | — | $ | (29,127 | ) | $ | 453,678 | ||||||||||
Rental income | 48,614 | — | — | — | — | 48,614 | |||||||||||||||||
Total sales | 457,988 | 66,996 | 6,435 | — | (29,127 | ) | 502,292 | ||||||||||||||||
Cost of sales: | |||||||||||||||||||||||
Product and other cost of sales | 329,440 | 52,761 | 1,152 | — | (28,354 | ) | 354,999 | ||||||||||||||||
Rental cost of sales | 28,758 | — | — | — | — | 28,758 | |||||||||||||||||
Total cost of sales | 358,198 | 52,761 | 1,152 | — | (28,354 | ) | 383,757 | ||||||||||||||||
Gross profit | 99,790 | 14,235 | 5,283 | — | (773 | ) | 118,535 | ||||||||||||||||
Selling and administrative expenses | 91,860 | 4,312 | 4,987 | 5,154 | (129 | ) | 106,184 | ||||||||||||||||
Depreciation and amortization expense | 11,699 | 1,483 | 1,904 | 31 | — | 15,117 | |||||||||||||||||
Sub-Total: | $ | (3,769 | ) | $ | 8,440 | $ | (1,608 | ) | $ | (5,185 | ) | $ | (644 | ) | (2,766 | ) | |||||||
Restructuring and other charges | 205 | ||||||||||||||||||||||
Operating loss | $ | (2,971 | ) | ||||||||||||||||||||
13 weeks ended, January 26, 2019 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Eliminations | Total | |||||||||||||||||
Sales: | |||||||||||||||||||||||
Product sales and other | $ | 442,127 | $ | 78,508 | $ | 5,237 | $ | — | $ | (33,883 | ) | $ | 491,989 | ||||||||||
Rental income | 56,019 | — | — | — | — | 56,019 | |||||||||||||||||
Total sales | 498,146 | 78,508 | 5,237 | — | (33,883 | ) | 548,008 | ||||||||||||||||
Cost of sales: | |||||||||||||||||||||||
Product and other cost of sales | 358,800 | 55,769 | 268 | — | (32,884 | ) | 381,953 | ||||||||||||||||
Rental cost of sales | 33,102 | — | — | — | — | 33,102 | |||||||||||||||||
Total cost of sales | 391,902 | 55,769 | 268 | — | (32,884 | ) | 415,055 | ||||||||||||||||
Gross profit | 106,244 | 22,739 | 4,969 | — | (999 | ) | 132,953 | ||||||||||||||||
Selling and administrative expenses | 95,895 | 5,281 | 3,575 | 6,197 | (7 | ) | 110,941 | ||||||||||||||||
Depreciation and amortization expense | 12,769 | 1,496 | 2,072 | 37 | — | 16,374 | |||||||||||||||||
Sub-Total: | $ | (2,420 | ) | $ | 15,962 | $ | (678 | ) | $ | (6,234 | ) | $ | (992 | ) | 5,638 | ||||||||
Restructuring and other charges | 2,500 | ||||||||||||||||||||||
Transaction costs | 117 | ||||||||||||||||||||||
Operating income | $ | 3,021 | |||||||||||||||||||||
39 weeks ended, January 25, 2020 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Eliminations | Total | |||||||||||||||||
Sales: | |||||||||||||||||||||||
Product sales and other | $ | 1,354,684 | $ | 179,515 | $ | 17,024 | $ | — | $ | (76,775 | ) | $ | 1,474,448 | ||||||||||
Rental income | 119,729 | — | — | — | — | 119,729 | |||||||||||||||||
Total sales | 1,474,413 | 179,515 | 17,024 | — | (76,775 | ) | 1,594,177 | ||||||||||||||||
Cost of sales: | |||||||||||||||||||||||
Product and other cost of sales | 1,080,909 | 137,827 | 3,186 | — | (75,522 | ) | 1,146,400 | ||||||||||||||||
Rental cost of sales | 70,635 | — | — | — | — | 70,635 | |||||||||||||||||
Total cost of sales | 1,151,544 | 137,827 | 3,186 | — | (75,522 | ) | 1,217,035 | ||||||||||||||||
Gross profit | 322,869 | 41,688 | 13,838 | — | (1,253 | ) | 377,142 | ||||||||||||||||
Selling and administrative expenses | 274,253 | 13,664 | 13,715 | 15,829 | (182 | ) | 317,279 | ||||||||||||||||
Depreciation and amortization expense | 35,372 | 4,531 | 6,543 | 96 | — | 46,542 | |||||||||||||||||
Sub-Total: | $ | 13,244 | $ | 23,493 | $ | (6,420 | ) | $ | (15,925 | ) | $ | (1,071 | ) | 13,321 | |||||||||
Impairment loss (non-cash) | 433 | ||||||||||||||||||||||
Restructuring and other charges | 3,240 | ||||||||||||||||||||||
Operating income | $ | 9,648 | |||||||||||||||||||||
39 weeks ended, January 26, 2019 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Eliminations | Total | |||||||||||||||||
Sales: | |||||||||||||||||||||||
Product sales and other | $ | 1,434,886 | $ | 209,282 | $ | 15,848 | $ | — | $ | (94,009 | ) | $ | 1,566,007 | ||||||||||
Rental income | 134,251 | — | — | — | — | 134,251 | |||||||||||||||||
Total sales | 1,569,137 | 209,282 | 15,848 | — | (94,009 | ) | 1,700,258 | ||||||||||||||||
Cost of sales: | |||||||||||||||||||||||
Product and other cost of sales | 1,147,412 | 152,723 | 536 | — | (90,995 | ) | 1,209,676 | ||||||||||||||||
Rental cost of sales | 80,259 | — | — | — | 80,259 | ||||||||||||||||||
Total cost of sales | 1,227,671 | 152,723 | 536 | — | (90,995 | ) | 1,289,935 | ||||||||||||||||
Gross profit | 341,466 | 56,559 | 15,312 | — | (3,014 | ) | 410,323 | ||||||||||||||||
Selling and administrative expenses | 281,725 | 16,284 | 9,741 | 17,706 | (48 | ) | 325,408 | ||||||||||||||||
Depreciation and amortization expense | 39,061 | 4,455 | 5,698 | 119 | — | 49,333 | |||||||||||||||||
Sub-Total: | $ | 20,680 | $ | 35,820 | $ | (127 | ) | $ | (17,825 | ) | $ | (2,966 | ) | 35,582 | |||||||||
Restructuring and other charges | 2,500 | ||||||||||||||||||||||
Transaction costs | 654 | ||||||||||||||||||||||
Operating income | $ | 32,428 | |||||||||||||||||||||
13 weeks ended | 39 weeks ended | ||||||||||||||||||
Dollars in thousands | January 25, 2020 | January 26, 2019 | % | January 25, 2020 | January 26, 2019 | % | |||||||||||||
Product sales and other | $ | 453,678 | $ | 491,989 | (7.8)% | $ | 1,474,448 | $ | 1,566,007 | (5.8)% | |||||||||
Rental income | 48,614 | 56,019 | (13.2)% | 119,729 | 134,251 | (10.8)% | |||||||||||||
Total Sales | $ | 502,292 | $ | 548,008 | (8.3)% | $ | 1,594,177 | $ | 1,700,258 | (6.2)% |
Sales variances | 13 weeks ended | 39 weeks ended | ||||||||||||||
Dollars in millions | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||||||
Retail Sales | ||||||||||||||||
New stores | $ | 16.3 | $ | 18.4 | $ | 61.9 | $ | 48.3 | ||||||||
Closed stores | (18.1 | ) | (23.1 | ) | (50.8 | ) | (71.7 | ) | ||||||||
Comparable stores (a) | (37.9 | ) | (44.7 | ) | (99.0 | ) | (101.2 | ) | ||||||||
Textbook rental deferral | 0.7 | 4.9 | 3.0 | 8.5 | ||||||||||||
Service revenue (b) | (1.4 | ) | (1.3 | ) | (3.9 | ) | (1.1 | ) | ||||||||
Other (c) | 0.3 | (3.7 | ) | (5.9 | ) | (2.9 | ) | |||||||||
Retail sales subtotal: | $ | (40.1 | ) | $ | (49.5 | ) | $ | (94.7 | ) | $ | (120.1 | ) | ||||
Wholesale Sales | $ | (11.5 | ) | $ | (15.3 | ) | $ | (29.8 | ) | $ | (23.4 | ) | ||||
DSS Sales | $ | 1.2 | $ | (0.3 | ) | $ | 1.2 | $ | 5.8 | |||||||
Eliminations (d) | $ | 4.7 | $ | 9.7 | $ | 17.2 | $ | (8.2 | ) | |||||||
Total sales variance: | $ | (45.7 | ) | $ | (55.4 | ) | $ | (106.1 | ) | $ | (145.9 | ) |
(a) | Comparable store sales includes sales from physical stores that have been open for an entire fiscal year period and virtual store sales for the period, does not include sales from closed stores for all periods presented, and digital agency sales are included on a gross basis. |
(b) | Service revenue includes Promoversity, brand partnerships, shipping and handling, digital content, software, services, and revenue from other programs. |
(c) | Other includes inventory liquidation sales to third parties, marketplace sales and certain accounting adjusting items related to return reserves, and other deferred items. |
(d) | Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale. See discussion of intercompany activities and eliminations below. |
13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||||||||||||||
Number of Stores: | Physical | Virtual | Physical | Virtual | Physical | Virtual | Physical | Virtual | |||||||||||||||
Number of stores at beginning of period | 772 | 664 | 773 | 677 | 772 | 676 | 768 | 676 | |||||||||||||||
Opened | 5 | 7 | 1 | 6 | 45 | 62 | 35 | 32 | |||||||||||||||
Closed | 5 | 7 | 1 | 3 | 45 | 74 | 30 | 28 | |||||||||||||||
Number of stores at end of period | 772 | 664 | 773 | 680 | 772 | 664 | 773 | 680 |
Comparable Store Sales variances - Retail | 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||
Dollars in millions | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | ||||||||||||||||||||||||
Textbooks (Course Materials) | $ | (31.2 | ) | (9.3 | )% | $ | (44.1 | ) | (11.7 | )% | $ | (85.2 | ) | (8.3 | )% | $ | (98.9 | ) | (8.8 | )% | ||||||||
General Merchandise | (0.9 | ) | (0.7 | )% | 1.9 | 1.6 | % | 4.7 | 1.1 | % | 6.3 | 1.5 | % | |||||||||||||||
Trade Books | (2.3 | ) | (20.2 | )% | (0.5 | ) | (4.4 | )% | (4.9 | ) | (14.7 | )% | (2.6 | ) | (7.3 | )% | ||||||||||||
Total Comparable Store Sales | $ | (34.4 | ) | (7.3 | )% | $ | (42.7 | ) | (8.3 | )% | $ | (85.4 | ) | (5.7 | )% | $ | (95.2 | ) | (6.0 | )% |
13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
Dollars in thousands | January 25, 2020 | % of Related Sales | January 26, 2019 | % of Related Sales | January 25, 2020 | % of Related Sales | January 26, 2019 | % of Related Sales | |||||||||||||||
Product and other cost of sales | $ | 329,440 | 80.5% | $ | 358,800 | 81.2% | $ | 1,080,909 | 79.8% | $ | 1,147,412 | 80.0% | |||||||||||
Rental cost of sales | 28,758 | 59.2% | 33,102 | 59.1% | 70,635 | 59.0% | 80,259 | 59.8% | |||||||||||||||
Total Cost of Sales | $ | 358,198 | 78.2% | $ | 391,902 | 78.7% | $ | 1,151,544 | 78.1% | $ | 1,227,671 | 78.2% |
13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
Dollars in thousands | January 25, 2020 | % of Related Sales | January 26, 2019 | % of Related Sales | January 25, 2020 | % of Related Sales | January 26, 2019 | % of Related Sales | |||||||||||||||
Product and other gross margin | $ | 79,934 | 19.5% | $ | 83,327 | 18.8% | $ | 273,775 | 20.2% | $ | 287,474 | 20.0% | |||||||||||
Rental gross margin | 19,856 | 40.8% | 22,917 | 40.9% | 49,094 | 41.0% | 53,992 | 40.2% | |||||||||||||||
Gross Margin | $ | 99,790 | 21.8% | $ | 106,244 | 21.3% | $ | 322,869 | 21.9% | $ | 341,466 | 21.8% |
• | Product and other gross margin increased (70 basis points), driven primarily by higher margin rates (70 basis points) due to lower markdowns and a favorable sales mix (30 basis points) due to increased sales of higher margin general merchandise, partially offset by higher costs related to our college and university contracts (40 basis points) resulting from contract renewals and new store contracts. |
• | Rental gross margin decreased (10 basis points), driven primarily by lower rental margin rates (100 basis points), partially offset by lower costs related to our college and university contracts (85 basis points) resulting from contract renewals and new store contracts and favorable rental mix (5 basis points). |
• | Product and other gross margin increased (20 basis points), driven primarily by a favorable sales mix (40 basis points) due to increased sales of higher margin general merchandise, partially offset by lower margin rates (15 basis points) due to a shift to lower margin digital products and higher markdowns and higher costs related to our college and university contracts (10 basis points) resulting from contract renewals and new store contracts. |
• | Rental gross margin increased (80 basis points), driven primarily by favorable rental mix (50 basis points) and lower costs related to our college and university contracts (50 basis points) resulting from contract renewals and new store contracts, partially offset by lower rental margin rates (25 basis points). |
13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
Dollars in thousands | January 25, 2020 | % of Sales | January 26, 2019 | % of Sales | January 25, 2020 | % of Sales | January 26, 2019 | % of Sales | |||||||||||||||
Total Selling and Administrative Expenses | $ | 106,184 | 21.1% | $ | 110,941 | 20.2% | $ | 317,279 | 19.9% | $ | 325,408 | 19.1% |
13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
Dollars in thousands | January 25, 2020 | % of Sales | January 26, 2019 | % of Sales | January 25, 2020 | % of Sales | January 26, 2019 | % of Sales | |||||||||||||||
Total Depreciation and Amortization Expense | $ | 15,117 | 3.0% | $ | 16,374 | 3.0% | $ | 46,542 | 2.9% | $ | 49,333 | 2.9% |
13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
Dollars in thousands | January 25, 2020 | % of Sales | January 26, 2019 | % of Sales | January 25, 2020 | % of Sales | January 26, 2019 | % of Sales | |||||||||||||||
Total Operating (Loss)Income | $ | (2,971 | ) | (0.5)% | $ | 3,021 | 0.6% | $ | 9,648 | 0.7% | $ | 32,428 | 2.0% |
13 weeks ended | 39 weeks ended | ||||||||||||||
Dollars in thousands | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | |||||||||||
Interest Expense, Net | $ | 1,904 | $ | 2,546 | $ | 5,882 | $ | 7,904 |
13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
Dollars in thousands | January 25, 2020 | Effective Rate | January 26, 2019 | Effective Rate | January 25, 2020 | Effective Rate | January 26, 2019 | Effective Rate | |||||||||||||||
Income Tax (Benefit) Expense | $ | (3,182 | ) | 65.3% | $ | (294 | ) | (61.9)% | $ | 1,683 | 44.7% | $ | 2,680 | 10.9% |
13 weeks ended | 39 weeks ended | ||||||||||||||
Dollars in thousands | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | |||||||||||
Net (loss) income | $ | (1,693 | ) | $ | 769 | $ | 2,083 | $ | 21,844 |
13 weeks ended | 39 weeks ended | ||||||||||||||
Dollars in thousands | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | |||||||||||
Net (loss) income | $ | (1,693 | ) | $ | 769 | $ | 2,083 | $ | 21,844 | ||||||
Reconciling items, after-tax (below) | 945 | 2,539 | 4,928 | 3,085 | |||||||||||
Adjusted Earnings (non-GAAP) | $ | (748 | ) | $ | 3,308 | $ | 7,011 | $ | 24,929 | ||||||
Reconciling items, pre-tax | |||||||||||||||
Impairment loss (non-cash) (a) | $ | — | $ | — | $ | 433 | $ | — | |||||||
Content amortization (non-cash) (b) | 1,064 | 212 | 2,973 | 360 | |||||||||||
Restructuring and other charges (a) | 205 | 2,500 | 3,240 | 2,500 | |||||||||||
Transaction costs (a) | — | 117 | — | 654 | |||||||||||
Reconciling items, pre-tax | 1,269 | 2,829 | 6,646 | 3,514 | |||||||||||
Less: Pro forma income tax impact (b) | 324 | 290 | 1,718 | 429 | |||||||||||
Reconciling items, after-tax | $ | 945 | $ | 2,539 | $ | 4,928 | $ | 3,085 |
(a) | See Management Discussion and Analysis and Results of Operations discussion above. |
(b) | For the 13 and 39 weeks ended January 25, 2020, earnings are adjusted for amortization expense (non-cash) related to content development costs which are included in cost of goods sold. |
(c) | Represents the income tax effects of the non-GAAP items. |
13 weeks ended | 39 weeks ended | ||||||||||||||
Dollars in thousands | January 25, 2020 | January 26, 2019 | January 25, 2020 | January 26, 2019 | |||||||||||
Net (loss) income | $ | (1,693 | ) | $ | 769 | $ | 2,083 | $ | 21,844 | ||||||
Add: | |||||||||||||||
Depreciation and amortization expense | 15,117 | 16,374 | 46,542 | 49,333 | |||||||||||
Content amortization (non-cash) (a) | 1,064 | 212 | 2,973 | 360 | |||||||||||
Interest expense, net | 1,904 | 2,546 | 5,882 | 7,904 | |||||||||||
Income tax (benefit) expense | (3,182 | ) | (294 | ) | 1,683 | 2,680 | |||||||||
Impairment loss (non-cash) (b) | — | — | 433 | — | |||||||||||
Restructuring and other charges (b) | 205 | 2,500 | 3,240 | 2,500 | |||||||||||
Transaction costs (b) | — | 117 | — | 654 | |||||||||||
Adjusted EBITDA (non-GAAP) (b) | $ | 13,415 | $ | 22,224 | $ | 62,836 | $ | 85,275 |
(a) | For the 13 and 39 weeks ended January 25, 2020, earnings are adjusted for amortization expense (non-cash) related to content development costs which are included in cost of goods sold. |
(b) | See Management Discussion and Analysis and Results of Operations discussion above. |
Adjusted EBITDA - by Segment | 13 weeks ended, January 25, 2020 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Elimination(b) | Total | ||||||||||||||||||
Sales | $ | 457,988 | $ | 66,996 | $ | 6,435 | $ | — | $ | (29,127 | ) | $ | 502,292 | |||||||||||
Cost of sales (a) | 357,988 | 52,761 | 298 | — | (28,354 | ) | 382,693 | |||||||||||||||||
Gross profit | 100,000 | 14,235 | 6,137 | — | (773 | ) | 119,599 | |||||||||||||||||
Selling and administrative expenses | 91,860 | 4,312 | 4,987 | 5,154 | (129 | ) | 106,184 | |||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 8,140 | $ | 9,923 | $ | 1,150 | $ | (5,154 | ) | $ | (644 | ) | $ | 13,415 |
Adjusted EBITDA - by Segment | 13 weeks ended, January 26, 2019 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Elimination(b) | Total | ||||||||||||||||||
Sales | $ | 498,146 | $ | 78,508 | $ | 5,237 | $ | — | $ | (33,883 | ) | $ | 548,008 | |||||||||||
Cost of sales (a) | 391,771 | 55,769 | 187 | — | (32,884 | ) | 414,843 | |||||||||||||||||
Gross profit | 106,375 | 22,739 | 5,050 | — | (999 | ) | 133,165 | |||||||||||||||||
Selling and administrative expenses | 95,895 | 5,281 | 3,575 | 6,197 | (7 | ) | 110,941 | |||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 10,480 | $ | 17,458 | $ | 1,475 | $ | (6,197 | ) | $ | (992 | ) | $ | 22,224 |
Adjusted EBITDA - by Segment | 39 weeks ended, January 25, 2020 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Elimination(b) | Total | ||||||||||||||||||
Sales | $ | 1,474,413 | $ | 179,515 | $ | 17,024 | $ | — | $ | (76,775 | ) | $ | 1,594,177 | |||||||||||
Cost of sales (a) | 1,150,940 | 137,827 | 817 | — | (75,522 | ) | 1,214,062 | |||||||||||||||||
Gross profit | 323,473 | 41,688 | 16,207 | — | (1,253 | ) | 380,115 | |||||||||||||||||
Selling and administrative expenses | 274,253 | 13,664 | 13,715 | 15,829 | (182 | ) | 317,279 | |||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 49,220 | $ | 28,024 | $ | 2,492 | $ | (15,829 | ) | $ | (1,071 | ) | $ | 62,836 |
Adjusted EBITDA - by Segment | 39 weeks ended, January 26, 2019 | |||||||||||||||||||||||
Dollars in thousands | Retail | Wholesale | DSS | Corporate Services | Elimination(b) | Total | ||||||||||||||||||
Sales | $ | 1,569,137 | $ | 209,282 | $ | 15,848 | $ | — | $ | (94,009 | ) | $ | 1,700,258 | |||||||||||
Cost of sales (a) | 1,227,392 | 152,723 | 455 | — | (90,995 | ) | 1,289,575 | |||||||||||||||||
Gross profit | 341,745 | 56,559 | 15,393 | — | (3,014 | ) | 410,683 | |||||||||||||||||
Selling and administrative expenses | 281,725 | 16,284 | 9,741 | 17,706 | (48 | ) | 325,408 | |||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 60,020 | $ | 40,275 | $ | 5,652 | $ | (17,706 | ) | $ | (2,966 | ) | $ | 85,275 |
(b) | See Management Discussion and Analysis and Results of Operations discussion above. |
39 weeks ended | ||||||||
Dollars in thousands | January 25, 2020 | January 26, 2019 | ||||||
Cash, cash equivalents, and restricted cash at beginning of period | $ | 14,768 | $ | 16,869 | ||||
Net cash flows provided by operating activities | 86,352 | 175,862 | ||||||
Net cash flows used in investing activities | (21,693 | ) | (41,668 | ) | ||||
Net cash flows used in financing activities | (68,865 | ) | (128,271 | ) | ||||
Cash, cash equivalents, and restricted cash at end of period | $ | 10,562 | $ | 22,792 |
• | general competitive conditions, including actions our competitors and content providers may take to grow their businesses; |
• | a decline in college enrollment or decreased funding available for students; |
• | decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores; |
• | implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability; |
• | risk that digital sales growth does not exceed the rate of investment spend; |
• | the performance of our online, digital and other initiatives, integration of and deployment of, additional products and services including new digital channels, and enhancements to higher education digital products, and the inability to achieve the expected cost savings; |
• | the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin; |
• | the general economic environment and consumer spending patterns; |
• | decreased consumer demand for our products, low growth or declining sales; |
• | the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various acquisitions, may not be fully realized or may take longer than expected; |
• | the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls being found ineffective; |
• | changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers; |
• | our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute upon additional acquisitions and strategic investments; |
• | risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold to college bookstore customers; |
• | technological changes; |
• | risks associated with counterfeit and piracy of digital and print materials; |
• | our international operations could result in additional risks; |
• | our ability to attract and retain employees; |
• | risks associated with data privacy, information security and intellectual property; |
• | trends and challenges to our business and in the locations in which we have stores; |
• | non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings; |
• | disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations; |
• | disruption of or interference with third party web service providers and our own proprietary technology; |
• | work stoppages or increases in labor costs; |
• | possible increases in shipping rates or interruptions in shipping service; |
• | product shortages, including decreases in the used textbook inventory supply associated with the implementation of publishers’ digital offerings and direct to student textbook consignment rental programs, as well as the risks associated with the impacts that public health crises may have on the ability of our suppliers to manufacture or source products, particularly from outside of the United States; |
• | changes in domestic and international laws or regulations, including U.S. tax reform, changes in tax rates, laws and regulations, as well as related guidance; |
• | enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, recurring billing or similar marketing and sales activities; |
• | the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing; |
• | our ability to satisfy future capital and liquidity requirements; |
• | our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms; |
• | adverse results from litigation, governmental investigations, tax-related proceedings, or audits; |
• | changes in accounting standards; and |
• | the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A in our Annual Report on Form 10-K for the year ended April 27, 2019. |
Period | Total Number of Shares Purchased | Average Price Paid per Share (a) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | |||||||||
October 27, 2019 - November 23, 2019 | — | $ | — | — | $ | 26,669,324 | |||||||
November 24, 2019 - December 28, 2019 | — | $ | — | — | $ | 26,669,324 | |||||||
December 29, 2019 - January 25, 2020 | — | $ | — | — | $ | 26,669,324 | |||||||
— | $ | — | — |
(a) | This amount represents the average price paid per common share. This price includes a per share commission paid for all repurchases. |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
BARNES & NOBLE EDUCATION, INC. | |||
(Registrant) | |||
By: | /S/ THOMAS D. DONOHUE | ||
Thomas D. Donohue | |||
Chief Financial Officer | |||
(principal financial officer) | |||
By: | /S/ SEEMA C. PAUL | ||
Seema C. Paul | |||
Chief Accounting Officer | |||
(principal accounting officer) |
Re: | Limited Waiver of FILO Loan EBITDA Condition |
By: | /s/ Thomas D. Donohue |
By: | /s/ Thomas D. Donohue |
By: | STUDENT BRANDS, LLC, a Delaware |
By: | /s/ Thomas D. Donohue |
1. | I have reviewed this report on Form 10-Q for the quarterly period ended January 25, 2020 of Barnes & Noble Education, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Michael P. Huseby | |||
Michael P. Huseby | ||||
Chairman and Chief Executive Officer | ||||
Barnes & Noble Education, Inc. |
1. | I have reviewed this report on Form 10-Q for the quarterly period ended January 25, 2020 of Barnes & Noble Education, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Thomas D. Donohue | |||
Thomas D. Donohue | ||||
Chief Financial Officer | ||||
Barnes & Noble Education, Inc. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Michael P. Huseby | ||
Michael P. Huseby | ||
Chairman and Chief Executive Officer Barnes & Noble Education, Inc. | ||
March 3, 2020 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Thomas D. Donohue | ||
Thomas D. Donohue | ||
Chief Financial Officer Barnes & Noble Education, Inc. | ||
March 3, 2020 |
Credit Facility (Notes) |
9 Months Ended |
---|---|
Jan. 25, 2020 | |
Credit Facility | Note 9. Credit Facility We have a credit agreement (the “Credit Agreement”), amended March 1, 2019, under which the lenders committed to provide us with a 5-year asset-backed revolving credit facility in an aggregate committed principal amount of $400,000 (the “Credit Facility”). We have the option to request an increase in commitments under the Credit Facility of up to $100,000, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The agreement includes an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100,000 incremental facility maintaining the maximum availability under the Credit Agreement at $500,000. As of January 25, 2020, we are in compliance with all debt covenants under the Credit Agreement. On March 2, 2020, we were granted a waiver to the condition to the upcoming draw under the FILO Facility, scheduled for April 2020, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $90,000. In connection with the waiver, the applicable margin for credit extensions made under the FILO Facility after March 2, 2020 through the end of 2020 was increased by 0.50% (to 3.25% per annum for LIBO rate loans and 2.25% for base rate loans). For additional information including interest terms and covenant requirements related to the Credit Facility, refer to Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the year ended April 27, 2019. During the 39 weeks ended January 25, 2020, we borrowed $383,400 and repaid $451,000 under the Credit Agreement, with $65,900 of outstanding borrowings as of January 25, 2020, comprised entirely of outstanding borrowings under the Credit Facility. During the 39 weeks ended January 26, 2019, we borrowed $374,000 and repaid $500,300 under the Credit Agreement, with $70,100 of outstanding borrowings as of January 26, 2019, comprised entirely of outstanding borrowings under the Credit Facility. As of both January 25, 2020 and January 26, 2019, we have issued $4,759 in letters of credit under the Credit Facility. |
Summary of Significant Accounting Policies (Notes) |
9 Months Ended |
---|---|
Jan. 25, 2020 | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation Our condensed consolidated financial statements reflect our condensed consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. These condensed consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by GAAP. All material intercompany accounts and transactions have been eliminated in consolidation. Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. Due to the seasonal nature of the business, the results of operations for the 13 and 39 weeks ended January 25, 2020 are not indicative of the results expected for the 53 weeks ending May 2, 2020 (Fiscal 2020). For certain of our retail operations, sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution. Our DSS segment sales and operating profit are realized relatively consistently throughout the year. Use of Estimates In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Merchandise Inventories Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory. Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment. Our textbook inventories, for Retail and Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories. For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends. Textbook Rental Inventories Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost. Leases Effective April 28, 2019, we adopted Accounting Standards Codification ("ASC") Topic 842, Leases, and recognized lease assets and lease liabilities on the condensed consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments. We do not recognize lease assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less). We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset. As a result of adopting ASC Topic 842, we recorded an initial operating lease right-of-use asset of $277,006 (inclusive of prepaid assets and accrued liabilities related to existing leases) and an operating lease liability of $294,727 as of April 28, 2019 for all leases that were not completed and with lease terms in excess of twelve months at that date. For additional information, see Note 5. Leases. Revenue Recognition and Deferred Revenue Product sales and rentals The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Note 4. Revenue. Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold. Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale. Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete. We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis. We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year. Service and other revenue Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers. Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer. The majority of subscriptions sold are one month in duration. Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions. Cost of Sales Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses. Selling and Administrative Expenses Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include stock-based compensation and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services. Evaluation of Goodwill and Other Long-Lived Assets As of January 25, 2020, we had $0, $0 and $4,700 of goodwill on our condensed consolidated balance sheet related to our Retail, Wholesale and DSS reporting units, respectively. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value. We completed our annual goodwill impairment test as of the first day of the third quarter of Fiscal 2020. In performing the valuation, we used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions. The fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit; therefore, no goodwill impairment was recognized. During the 13 and 39 weeks ended January 26, 2019, we completed our annual goodwill impairment test for Fiscal 2019 and concluded that the fair value of the MBS and DSS reporting units, as they existed at that time, each exceeded their respective carrying values and no goodwill impairment was recognized. In the fourth quarter of Fiscal 2019, due to the change in our reporting units identified as a result of the change in our reportable segments, we recognized a total goodwill impairment (non-cash impairment loss) of $49,282, consisting of the full carrying value of the goodwill allocated to the Retail and Wholesale reporting units. Our other long-lived assets include property and equipment and amortizable intangibles. As of January 25, 2020, we had $101,055 and $179,596 of property and equipment and amortizable intangible assets, net of depreciation and amortization, respectively, on our condensed consolidated balance sheet. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. During the 39 weeks ended January 25, 2020, we recorded an impairment loss (non-cash) of $433 in the Retail segment related to net capitalized development costs for a project which are not recoverable. Income Taxes As of January 25, 2020, other long-term liabilities includes $32,847 related to the long-term tax payable associated with the LIFO reserve. The LIFO reserve is impacted by changes in the consumer price index (“CPI”) and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle. At the end of the most recent tax year, inventory levels declined as compared to the prior year resulting in approximately $7,260 of the LIFO reserve becoming currently payable. Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remaining long-term tax payable associated with the LIFO reserve could be payable within the next twelve months. We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months. |
Leases (Notes) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases of Lessee Disclosure [Text Block] | Note 5. Leases Effective the first quarter of Fiscal 2020 (April 28, 2019), we adopted FASB ASC 842, Leases (Topic 842), which requires us to recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements. We adopted this standard using a modified retrospective basis, with no restatement of prior periods. We elected the package of practical expedients permitted under the transition guidance for existing or expired contracts and did not reassess whether such contracts contain leases, the lease classification or the initial direct costs. Additionally, we utilized the historical lease term and did not utilize the practical expedient allowing the use of hindsight in determining the lease term and in assessing impairment of its right-of-use (“ROU”) assets. Additionally, we elected to apply the available practical expedient allowing for the election of an accounting policy by class of underlying asset to combine lease and non-lease components for all of our asset classes. Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less). We recognize a ROU asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year. Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants. We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later. The following table summarizes lease expense for the 13 and 39 weeks ended January 25, 2020:
The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of January 25, 2020:
Future lease payment obligations related to leases that were entered into, but did not commence as of January 25, 2020, were not material. The following summarizes additional information related to our operating leases:
|
Income Taxes Income Taxes (Notes) |
9 Months Ended |
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Jan. 25, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure [Text Block] | Note 13. Income Taxes We recorded income tax benefit of $(3,182) on a pre-tax loss of $(4,875) during the 13 weeks ended January 25, 2020, which represented an effective income tax rate of 65.3% and income tax benefit of $(294) on pre-tax income of $475 during the 13 weeks ended January 26, 2019, which represented an effective income tax rate of (61.9)%. The effective tax rate for the 13 weeks ended January 26, 2019 is higher as compared to the prior year comparable period due to permanent differences. We recorded income tax expense of $1,683 on a pre-tax income of $3,766 during the 39 weeks ended January 25, 2020, which represented an effective income tax rate of 44.7% and income tax expense of $2,680 on pre-tax income of $24,524 during the 39 weeks ended January 26, 2019, which represented an effective income tax rate of 10.9%. The effective tax rate for the 39 weeks ended January 26, 2019 is higher as compared to the prior year comparable period due to permanent differences. |
Net Earnings (Loss) Per Share (Tables) |
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Jan. 25, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Basic and Diluted Loss Per Share | The following is a reconciliation of the basic and diluted earnings (loss) per share calculation:
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Revenue (Tables) |
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Jan. 25, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue [Table Text Block] | Disaggregation of Revenue The following table disaggregates the revenue associated with our major product and service offerings:
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Stock-Based Compensation Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 25, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block] | We recognized stock-based compensation expense for equity-based awards in selling and administrative expenses as follows:
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Revenue Deferred Revenue (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 25, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition and Deferred Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract with Customer, Asset and Liability [Table Text Block] | The following table presents changes in contract liabilities:
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