Note 6. Segment Reporting

Prior to the fourth quarter of Fiscal 2019, we had three reportable segments: BNC, MBS, and DSS. During the fourth quarter of Fiscal 2019, in an effort to streamline our retail go-to-market strategy, reinforce our company branding, and more efficiently focus our product development efforts, we realigned our business and sales organization into the following three reportable segments: Retail, Wholesale and DSS. The Retail Segment combines the operations of the former BNC segment with MBS Direct (from the former MBS segment), the Wholesale Segment is comprised of the MBS wholesale business (from the former MBS segment), and the DSS Segment remains unchanged.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify 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. For additional information about each segment's operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the year ended April 27, 2019.

Retail

The Retail Segment operates 1,436 college, university, and K-12 school bookstores, comprised of 772 physical bookstores and 664 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore, with the majority of these agreements providing us exclusive rights to sell course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce sites which we operate and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive access programs, in which course materials, including e-content, are offered at a reduced price through a course materials fee, and delivered to students on or before the first day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

Wholesale

The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,500 physical bookstores (including our Retail Segment's 772 physical bookstores) and sources and distributes new and used textbooks to our 664 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 400 college bookstores.

DSS

The Digital Student Solutions (“DSS”) Segment includes direct-to-student products and services to assist students to study more effectively and improve academic performance. The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby^®, a direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, tutoring and test prep services.

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.

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:


•	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.

Our international operations are not material and the majority of the revenue and total assets are within the United States. Summarized financial information for our reportable segments is reported below:



	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