# Barnes & Noble Education, Inc. (BNED) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from Barnes & Noble Education, Inc.'s 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1634117/000163411724000048/bned-20240427.htm Accession: 0001634117-24-000048 Filing date: 2024-07-01 Report date: 2024-04-27 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/BNED/ All MD&A years: /company/BNED/mda/ Previous year: /company/BNED/mda/fy2023/ (FY 2023) Next year: /company/BNED/mda/fy2025/ (FY 2025) Item 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc. or “BNED”, a Delaware corporation. References to “Barnes & Noble College” or “BNC” refer to our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our subsidiary MBS Textbook Exchange, LLC. Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. “Fiscal 2024” means the 52 weeks ended April 27, 2024, “Fiscal 2023” means the 52 weeks ended April 29, 2023. Overview Description of Business Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers and inventory management hardware and software providers. We operate 1,245 physical, virtual, and custom bookstores and serve more than 5.8 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment. For a discussion of our business, see Part I - Item 1. Business. The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands. We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day® equitable and inclusive access programs, consisting of First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition. During the 52 weeks ended April 27, 2024, BNC First Day total revenue increased by $127 million, or 37%, to $474 million compared to $347 million during the prior year period. These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which has been observed at those schools where such programs have been adopted, and improve predictability of our future results. In Fiscal 2024, the growth of our BNC First Day programs offset the declines in a la carte courseware sales and closed store sales. We are moving quickly to accelerate our First Day Complete strategy. Many institutions adopted First Day Complete in Fiscal 2024, and we plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond. We expect to continue to introduce scalable and advanced solutions focused largely on the student and customer experience, expand our e-commerce capabilities and accelerate such capabilities through our service providers, Fanatics Retail Group Fulfillment, LLC (“Fanatics”) and Fanatics Lids College, Inc. D/B/A “Lids” (“Lids”) (collectively referred to herein as the “F/L Relationship”), win new accounts, and expand our revenue opportunities through strategic relationships. We expect gross comparable store general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the F/L Relationship. Fanatics and Lids, acting on our behalf as our service providers, provide unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo general merchandise business. The Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels. BNC First Day Equitable and Inclusive Access Programs We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day® equitable and inclusive access programs, consisting of First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition. •First Day Complete is adopted by an institution and includes all or the majority of undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials. The First Day Complete model drives 36 Index to Form 10-K Index to FS substantially greater unit sales and sell-through for the bookstore. •First Day is adopted by a faculty member for a single course, and students receive primarily digital course materials through their school's learning management system ("LMS"). Offering course materials through our equitable and inclusive access First Day Complete and First Day models is an important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of course material sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which has been observed at those schools where such programs have been adopted, and improve predictability of our future results. In Fiscal 2024, the growth of our BNC First Day programs offset the declines in a la carte courseware sales and closed store sales. We are moving quickly to accelerate our First Day Complete strategy. Many institutions adopted First Day Complete in Fiscal 2024, and we plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond. The following table summarizes our BNC First Day sales for the 52 weeks ended April 27, 2024 and April 29, 2023: [[GREPCENT_TABLE]] [["Dollars in millions","","52 weeks ended"],["","","April 27, 2024","","April 29, 2023","","$ Increase","","% Change"],["First Day Complete Sales","","$","292.7","","","$","197.8","","","$","94.9","","","48%"],["First Day Sales","","$","181.2","","","$","148.9","","","$","32.3","","","22%"],["Total BNC First Day Sales","","$","473.9","","","$","346.7","","","$","127.2","","","37%"],["First Day Complete","","Spring 2024","","Spring 2023","","# Increase","","% Change"],["Number of campus stores","","160","","116","","44","","38%"],["Estimated enrollment (a)","","805,000","","580,000","","225,000","","39%"],["(a) Total undergraduate and graduate student enrollment as reported by National Center for Education Statistics (NCES) as of October 26, 2023."]] [[/GREPCENT_TABLE]] Relationship with Fanatics and Lids In December 2020, we entered into the F/L Relationship. Fanatics and Lids, acting on our behalf as our service providers, provide unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo general merchandise business. Fanatics operates as our service provider, including processing consumer personal information on our behalf, using their cutting-edge e-commerce and technology expertise to offer our campus store websites expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments. We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and Lids owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital. As the logo and emblematic general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic general merchandise sales on a gross basis prior to April 2021. 37 Index to Form 10-K Index to FS Financing Arrangements On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our consolidated balance sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 17. Subsequent Events. Cost Savings Initiative During Fiscal 2023, we implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability. We reduced our workforce, eliminated duplicate administrative headcounts at all levels, implemented improved system development processes to reduce maintenance costs, reduced capital expenditures, and evaluated operating contractual obligations for cost savings. Over the course of Fiscal 2024, we have achieved annualized savings of approximately $30 million to $35 million from the Fiscal 2023 cost savings initiatives. Additionally, during Fiscal 2024, Management's implemented further cost savings measures, including reduction of gross capital expenditures, amounting to approximately $29 million in savings. Segments We have two reportable segments: Retail and Wholesale. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are not allocated to a specific reporting segment and continue to be presented as “Corporate Services”. The following discussion provides information regarding the three segments. Retail Segment The Retail Segment operates 1,245 college, university, and K-12 school bookstores, comprised of 707 physical bookstores and 538 virtual bookstores. Our bookstores typically operate under agreements with the colleges, universities, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce websites, which we operate independently or along with our merchant service providers, and which offer students access to required and recommended course materials and affinity products, including emblematic apparel and gifts. The Retail Segment offers our BNC First Day® equitable and inclusive access programs, consisting of First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition. 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. During the 52 weeks ended April 27, 2024, we opened 46 stores and closed 167 stores in the Retail Segment with estimated net annual sales of $(74) million. The Company’s strategic initiative is to close under-performing and less profitable stores. Many institutions adopted First Day Complete in Fiscal 2024, and we plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond. These programs have allowed us to reverse historical long-term trends in course materials revenue declines as the growth of our BNC First Day programs offsets declines in a la carte courseware sales and closed store sales. Wholesale Segment 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 2,750 physical bookstores (including our Retail Segment's 707 physical bookstores) and sources and distributes new and used textbooks to our 538 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 325 college bookstores. Corporate Services represents 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. Seasonality Our business is highly seasonal. For example, our retail business is seasonal, particularly with respect to textbook sales and rentals, with the major portion of sales and operating profit realized during the second and third fiscal quarters when college students generally purchase and rent textbooks for the upcoming semesters and lowest in the first and fourth fiscal quarters. Our quarterly results also may fluctuate depending on the timing of the start of the various schools’ semesters, the revenue impact of accounting principles with respect to the recognition of revenue associated with our equitable and inclusive access programs, 38 Index to Form 10-K Index to FS the ability to secure inventory on a timely basis, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as it sells textbooks and other course materials for retail distribution. 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. Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized when the customer accesses the digital content as product revenue in our consolidated financial statements. Revenue from the rental of physical textbooks 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 and is recognized as rental income in our consolidated financial statements. Depending on the product mix offered under the BNC First Day offerings, revenue recognized is consistent with our policies for product, digital and rental sales, net of an anticipated opt-out or return provision. Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to BNC First Day equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools. As the concentration of digital product sales increases, revenue will be recognized earlier during the academic term as digital textbook revenue is recognized when the customer accesses the digital content compared to: (i) the rental of physical textbooks where revenue is recognized over the rental period, and (ii) a la carte courseware sales where 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. Trends and Other Factors Affecting Our Business For a discussion of our trends and other factors affecting our business, see Part I - Item 1. Business. Results of Operations Elements of Results of Operations Our consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). The results of operations reflected in our consolidated financial statements are presented on a consolidated basis. All material intercompany accounts and transactions have been eliminated in consolidation. During the fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Certain assets and liabilities associated with the DSS Segment are presented in our consolidated balance sheets as current "Assets Held for Sale" and current "Liabilities Held for Sale". The results of operations related to the DSS Segment are included in the consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our consolidated statements of cash flows. Our sales are primarily derived from the sale of course materials, which include new, used, rental and digital textbooks. Additionally, at college and university bookstores which we operate, we sell general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, and other services. Our cost of sales primarily includes costs such as merchandise costs, textbook rental 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. Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, and finance and accounting. 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 a specific reporting segment and are recorded in Corporate Services as discussed in the Overview - Segments discussion above. 39 Index to Form 10-K Index to FS Results of Operations Summary - Continuing Operations (a) For a detailed discussion of Fiscal 2024 and year-over-year comparison to Fiscal 2023, see Results of Operations - Continuing Operations - 52 weeks ended April 27, 2024 compared with the 52 weeks ended April 29, 2023 below. [[GREPCENT_TABLE]] [["","","","","","52 weeks ended"],["Dollars in thousands","","","","","April 27, 2024","","April 29, 2023 (a)"],["Sales:"],["Product sales and other","","","","","$","1,430,456","","","$","1,406,655"],["Rental income","","","","","136,679","","","136,553"],["Total sales","","","","","$","1,567,135","","","$","1,543,208"],["Gross Profit","","","","","$","356,776","","","$","349,439"],["Net loss from continuing operations","","","","","$","(62,481)","","","$","(90,140)"],["Adjusted Earnings (non-GAAP) - Continuing Operations (b)","","","","","$","(35,906)","","","$","(74,003)"],["Adjusted EBITDA (non-GAAP) - Continuing Operations (b)"],["Retail","","","","","$","54,488","","","$","10,640"],["Wholesale","","","","","9,360","","","3,239"],["Corporate Services","","","","","(19,679)","","","(22,000)"],["Eliminations","","","","","1,033","","","(25)"],["Total Adjusted EBITDA (non-GAAP) (b)","","","","","$","45,202","","","$","(8,146)"]] [[/GREPCENT_TABLE]] (a)During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above. (b)Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment are non-GAAP financial measures. See Use of Non-GAAP Measures discussion below. The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales:  [[GREPCENT_TABLE]] [["","","","","","52 weeks ended"],["Continuing Operations","","","","","April 27, 2024","","April 29, 2023"],["Sales:"],["Product sales and other","","","","","91.3","%","","91.2","%"],["Rental income","","","","","8.7","","","8.8"],["Total sales","","","","","100.0","","","100.0"],["Cost of sales (exclusive of depreciation and amortization expense):"],["Product and other cost of sales (a)","","","","","79.4","","","79.6"],["Rental cost of sales (a)","","","","","54.9","","","54.4"],["Total cost of sales","","","","","77.2","","","77.4"],["Gross margin","","","","","22.8","","","22.6"],["Selling and administrative expenses","","","","","19.9","","","23.2"],["Depreciation and amortization expense","","","","","2.6","","","2.7"],["Impairment loss (non-cash)","","","","","0.5","","","0.4"],["Restructuring and other charges","","","","","1.2","","","0.7"],["Operating loss from continuing operations","","","","","(1.4)","%","","(4.3)","%"]] [[/GREPCENT_TABLE]] (a) Represents the percentage these costs bear to the related sales, instead of total sales. 40 Index to Form 10-K Index to FS Results of Operations - Discontinued Operations During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment. Certain assets and liabilities associated with the DSS Segment are presented in our consolidated balance sheets as "Assets Held for Sale" and "Liabilities Held for Sale". The results of operations related to the DSS Segment are included in the consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our consolidated statements of cash flows. On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations. During the 52 weeks ended April 27, 2024, we recorded a Gain on Sale of Business of $3.5 million in Loss from Discontinued Operations, Net, related to the sale. Net cash proceeds from the sale were used for debt repayment and to provide additional funds for working capital needs under our Credit Facility. [[GREPCENT_TABLE]] [["","","","","","52 weeks ended"],["Dollars in thousands","","","","","April 27, 2024","","April 29, 2023"],["Total sales","","","","","$","2,784","","","$","35,353"],["Cost of sales (a)","","","","","76","","","7,156"],["Gross profit (a)","","","","","2,708","","","28,197"],["Selling and administrative expenses","","","","","3,029","","","34,137"],["Depreciation and amortization","","","","","3","","","3,155"],["Gain on sale of business","","","","","(3,545)","","","\u2014"],["Impairment loss (non-cash) (b)","","","","","610","","","\u2014"],["Restructuring costs (c)","","","","","3,308","","","1,848"],["Transaction costs","","","","","13","","","381"],["Operating loss","","","","","(710)","","","(11,324)"],["Income tax expense","","","","","20","","","398"],["Loss from discontinued operations, net of tax","","","","","$","(730)","","","$","(11,722)"]] [[/GREPCENT_TABLE]] (a)    Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $0 million and $6.6 million for the 52 weeks ended April 27, 2024 and April 29, 2023, respectively. (b)    During the 52 weeks ended April 27, 2024, we recognized an impairment loss (non-cash) of $0.6 million (both pre-tax and after-tax), comprised of $0.1 million and $0.5 million of property and equipment and operating lease right-of-use assets, respectively, on the consolidated statement of operations as part of discontinued operations. (c)    During the 52 weeks ended April 27, 2024, we recognized restructuring and other charges of $3.3 million, comprised of severance and other employee termination costs, on the consolidated statement of operations as part of discontinued operations. 41 Index to Form 10-K Index to FS Results of Operations - Continuing Operations - 52 weeks ended April 27, 2024 compared with the 52 weeks ended April 29, 2023 [[GREPCENT_TABLE]] [["","52 weeks ended, April 27, 2024 (a)"],["Dollars in thousands","Retail","","Wholesale","","","","Corporate Services","","Eliminations","","Total"],["Sales:"],["Product sales and other","$","1,378,238","","","$","112,631","","","","","$","\u2014","","","$","(60,413)","","","$","1,430,456"],["Rental income","136,679","","","\u2014","","","","","\u2014","","","\u2014","","","136,679"],["Total sales","1,514,917","","","112,631","","","","","\u2014","","","(60,413)","","","1,567,135"],["Cost of sales (exclusive of depreciation and amortization expense):"],["Product and other cost of sales","1,106,987","","","89,832","","","","","\u2014","","","(61,443)","","","1,135,376"],["Rental cost of sales","74,983","","","\u2014","","","","","\u2014","","","\u2014","","","74,983"],["Total cost of sales","1,181,970","","","89,832","","","","","\u2014","","","(61,443)","","","1,210,359"],["Gross profit","332,947","","","22,799","","","","","\u2014","","","1,030","","","356,776"],["Selling and administrative expenses","278,459","","","13,439","","","","","19,679","","","(3)","","","311,574"],["Depreciation and amortization expense","35,294","","","5,228","","","","","38","","","\u2014","","","40,560"],["Impairment loss (non-cash)","7,166","","","\u2014","","","","","\u2014","","","\u2014","","","7,166"],["Restructuring and other charges","571","","","(813)","","","","","19,651","","","\u2014","","","19,409"],["Operating income (loss) from continuing operations","$","11,457","","","$","4,945","","","","","$","(39,368)","","","$","1,033","","","$","(21,933)"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","52 weeks ended, April 29, 2023 (a)"],["Dollars in thousands","Retail","","Wholesale","","","","Corporate Services","","Eliminations","","Total"],["Sales:"],["Product sales and other","$","1,355,173","","","$","106,366","","","","","$","\u2014","","","$","(54,884)","","","$","1,406,655"],["Rental income","136,553","","","\u2014","","","","","\u2014","","","\u2014","","","136,553"],["Total sales","1,491,726","","","106,366","","","","","\u2014","","","(54,884)","","","1,543,208"],["Cost of sales (exclusive of depreciation and amortization expense):"],["Product and other cost of sales","1,086,095","","","88,091","","","","","\u2014","","","(54,704)","","","1,119,482"],["Rental cost of sales","74,287","","","\u2014","","","","","\u2014","","","\u2014","","","74,287"],["Total cost of sales","1,160,382","","","88,091","","","","","\u2014","","","(54,704)","","","1,193,769"],["Gross profit","331,344","","","18,275","","","","","\u2014","","","(180)","","","349,439"],["Selling and administrative expenses","320,730","","","15,036","","","","","22,000","","","(155)","","","357,611"],["Depreciation and amortization expense","36,737","","","5,373","","","","","53","","","\u2014","","","42,163"],["Impairment loss (non-cash)","6,008","","","\u2014","","","","","\u2014","","","\u2014","","","6,008"],["Restructuring and other charges","2,964","","","916","","","","","6,223","","","\u2014","","","10,103"],["Operating loss from continuing operations","$","(35,095)","","","$","(3,050)","","","","","$","(28,276)","","","$","(25)","","","$","(66,446)"]] [[/GREPCENT_TABLE]] (a)    During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Operating Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above. 42 Index to Form 10-K Index to FS Sales The following table summarizes our sales: [[GREPCENT_TABLE]] [["","","","","","52 weeks ended"],["Dollars in thousands","","","","","April 27, 2024","","April 29, 2023","","$ Increase","% Change"],["Product sales and other","","","","","$","1,430,456","","","$","1,406,655","","","$","23,801","","1.7%"],["Rental income","","","","","136,679","","","136,553","","","$","126","","0.1%"],["Total Sales","","","","","$","1,567,135","","","$","1,543,208","","","$","23,927","","1.6%"]] [[/GREPCENT_TABLE]] Our total sales increased by $23.9 million, or 1.6%, to $1,567.1 million during the 52 weeks ended April 27, 2024 from $1,543.2 million during the 52 weeks ended April 29, 2023 which is primarily related to higher course material sales, primarily at our BNC First Day programs, and higher graduation product sales, offset by declines in a la carte courseware sales, including lower sales resulting from closed stores. The components of the sales variances for the 52-week period are reflected in the table below. [[GREPCENT_TABLE]] [["Sales variances","","52 weeks ended April 27, 2024"],["Dollars in millions"],["Retail Sales"],["New stores","","$","33.4"],["Closed stores","","(72.4)"],["Comparable stores (a)","","62.8"],["Textbook rental deferral","","(1.1)"],["Service revenue (b)","","0.7"],["Other (c)","","(0.2)"],["Retail Sales subtotal:","","$","23.2"],["Wholesale Sales","","$","6.3"],["Eliminations (d)","","$","(5.6)"],["Total sales variance:","","$","23.9"]] [[/GREPCENT_TABLE]] (a)    Logo general merchandise sales for the Retail Segment are recognized on a net basis as commission revenue in the consolidated financial statements. For Retail Gross Comparable Store Sales details, see below. (b)    Service revenue includes brand marketing programs, shipping and handling, 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. Retail The following is a store count summary for physical stores and virtual stores. [[GREPCENT_TABLE]] [["","","Fiscal 2024","","Fiscal 2023"],["Number of Stores:","","Physical","","Virtual","","Total","","Physical","","Virtual","","Total"],["Beginning of period","","774","","","592","","","1,366","","","805","","","622","","","1,427"],["Opened","","23","","","23","","","46","","","36","","","30","","","66"],["Closed","","90","","","77","","","167","","","67","","","60","","","127"],["End of period","","707","","","538","","","1,245","","","774","","","592","","","1,366"]] [[/GREPCENT_TABLE]] During the 52 weeks ended April 27, 2024, we opened 46 stores and closed 167 stores in the Retail Segment, with estimated net annual sales of $(74) million. The Company’s strategic initiative is to close under-performing and less profitable stores. Many institutions adopted First Day Complete in Fiscal 2024, and we plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond. 43 Index to Form 10-K Index to FS Generally, sales are impacted by revenue from net new/closed stores, conversion to BNC First Day programs, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, athletic events, alumni events and prospective student campus tours. Retail total sales increased by $23.2 million, or 1.6%, to $1,514.9 million during the 52 weeks ended April 27, 2024 from $1,491.7 million during the 52 weeks ended April 29, 2023. •Product sales and other increased by $23.1 million, or 1.7%, to $1,378.2 million during the 52 weeks ended April 27, 2024 from $1,355.1 million during the 52 weeks ended April 29, 2023. ◦Course material product sales increased by $44.0 million, or 4.7%, to $972.0 million during the 52 weeks ended April 27, 2024, compared to $927.9 million in the prior year period. The increase was primarily due to the growth of our BNC First Day programs, which increased by $127.2 million, or 36.7%, to $473.9 million, offset by a decline of $83.1 million in a la carte courseware sales, including lower sales resulting from closed stores. [[GREPCENT_TABLE]] [["Dollars in millions","","52 weeks ended"],["","","April 27, 2024","","April 29, 2023","","$ Increase","","% Change"],["First Day Complete Sales","","$","292.7","","","$","197.8","","","$","94.9","","","48%"],["First Day Sales","","$","181.2","","","$","148.9","","","$","32.3","","","22%"],["Total BNC First Day Sales","","$","473.9","","","$","346.7","","","$","127.2","","","37%"],["First Day Complete","","Spring 2024","","Spring 2023","","# Increase","","% Change"],["Number of campus stores","","160","","116","","44","","38%"],["Estimated enrollment (a)","","805,000","","580,000","","225,000","","39%"],["(a) Total undergraduate and graduate student enrollment as reported by National Center for Education Statistics (NCES) as of October 26, 2023."]] [[/GREPCENT_TABLE]] ◦General merchandise product net sales decreased by $21.4 million, or 5.6%, to $364.1 million, compared to $385.5 million in the prior year period, primarily due to closed stores, and lower cafe and convenience, trade, and supply product sales, offset by higher graduation product sales and higher emblematic product sales. Retail Gross Comparable Store Sales for general merchandise increased by $6.6 million, or 1.2%, compared to the prior year period as discussed below. ◦Service and other revenue increased by $0.4 million, or 1%, to $42.2 million, compared to $41.8 million in the prior year period, primarily due to higher other income for non-return rental penalty fees, offset by lower partnership marketing and marketplace sales. •Rental income for course materials increased by $0.1 million, or 0.1%, to $136.7 million during the 52 weeks ended April 27, 2024 from $136.6 million during the 52 weeks ended April 29, 2023, primarily due to the growth of our BNC First Day programs, offset by closed stores and the shift to digital products. Retail Gross Comparable Store Sales To supplement the Total Sales table presented above, the Company uses Retail Gross Comparable Store Sales as a key performance indicator. Retail Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented. For Retail Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis in Retail Gross Comparable Store Sales compared to a net basis as commission revenue in our consolidated financial statements. We believe the current Retail Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time. We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial decision-making. Retail Gross Comparable Store Sales are also referred to as "same-store" sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry. As a result, our calculation of comparable 44 Index to Form 10-K Index to FS store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP. The increase in course material sales was primarily due to the growth of BNC First Day equitable and inclusive access programs (as discussed above), offset by declines in a la carte courseware sales. The decrease in general merchandise sales are primarily related to lower logo product sales, as well as lower trade books and cafe and convenience product sales, offset by higher graduation and supplies product sales. Retail Gross Comparable Store Sales variances for Retail by category for the 52-week period are as follows: [[GREPCENT_TABLE]] [["Dollars in millions","","52 weeks ended"],["","","April 27, 2024","","April 29, 2023"],["Textbooks (Course Materials)","","$","70.4","","","7.2%","","$","4.1","","","0.4%"],["General Merchandise","","6.6","","","1.2%","","43.9","","","8.6%"],["Total Retail Gross Comparable Store Sales","","$","77.0","","","5.0%","","$","48.0","","","3.2%"]] [[/GREPCENT_TABLE]] Wholesale Wholesale sales increased by $6.3 million, or 5.9%, to $112.6 million during the 52 weeks ended April 27, 2024 from $106.3 million during the 52 weeks ended April 29, 2023. The increase is primarily due to lower returns and allowances of $8.0 million, partially offset by a decline in gross sales of $1.7 million from lower customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients. Cost of Sales and Gross Margin Our cost of sales decreased as a percentage of sales to 77.2% during the 52 weeks ended April 27, 2024 compared to 77.4% during the 52 weeks ended April 29, 2023. Our gross margin increased by $7.3 million, or 2.1%, to $356.8 million, or 22.8% of sales, during the 52 weeks ended April 27, 2024 from $349.5 million, or 22.6% of sales, during the 52 weeks ended April 29, 2023. The variances by segment are discussed by segment below. Retail The following table summarizes the Retail cost of sales:  [[GREPCENT_TABLE]] [["","","","52 weeks ended","","52 weeks ended"],["Dollars in thousands","","","","","","","","","April 27, 2024","","% of Related Sales","","April 29, 2023","","% of Related Sales"],["Product and other cost of sales","","","","","","","","","$","1,106,987","","","80.3%","","$","1,086,095","","","80.1%"],["Rental cost of sales","","","","","","","","","74,983","","","54.9%","","74,287","","","54.4%"],["Total Cost of Sales","","","","","","","","","$","1,181,970","","","78.0%","","$","1,160,382","","","77.8%"]] [[/GREPCENT_TABLE]] The following table summarizes the Retail gross margin: [[GREPCENT_TABLE]] [["","","","52 weeks ended","","52 weeks ended"],["Dollars in thousands","","","","","","","","","April 27, 2024","","% of Related Sales","","April 29, 2023","","% of Related Sales"],["Product and other gross margin","","","","","","","","","$","271,251","","","19.7%","","$","269,078","","","19.9%"],["Rental gross margin","","","","","","","","","61,696","","","45.1%","","62,266","","","45.6%"],["Gross Margin","","","","","","","","","$","332,947","","","22.0%","","$","331,344","","","22.2%"]] [[/GREPCENT_TABLE]] For the 52 weeks ended April 27, 2024, the Retail gross margin as a percentage of sales remained flat at 22.2% as discussed below: •Product and other gross margin decreased (20 basis points) driven primarily by lower margin rates for course materials due to higher markdowns, including markdowns related to closed stores (155 basis points), partially offset by lower contract costs as a percentage of sales related to our college and university contracts as a result of the shift to digital, the adoption of our BNC First Day models, and lower renewals for under-performing school contracts (85 basis points) and favorable product sales mix, including higher margin First Day Complete course material sales (50 basis points). 45 Index to Form 10-K Index to FS •Retail Rental gross margin as a percentage of sales decreased (30 basis points), driven primarily by lower rental margin rates, higher markdowns, partially offset by lower contract costs as a percentage of sales related to our college and university contracts as a result of the shift to digital, the adoption of our BNC First Day models, and lower renewals for under-performing school contracts, and a favorable rental sales mix. Wholesale The cost of sales and gross margin for Wholesale were $89.8 million, or 79.8% of sales, and $22.8 million, or 20.2% of sales, respectively, during the 52 weeks ended April 27, 2024. The cost of sales and gross margin for Wholesale were $88.1 million, or 82.8% of sales, and $18.3 million, or 17.2% of sales, respectively, during the 52 weeks ended April 29, 2023. The increase gross margin was primarily due to lower returns and allowances of $5.3 million, partially offset by higher cost of product of $0.8 million. Intercompany Eliminations During the 52 weeks ended April 27, 2024 and 52 weeks ended April 29, 2023, sales eliminations were $60.4 million and $54.9 million, respectively. These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale. During the 52 weeks ended April 27, 2024 and 52 weeks ended April 29, 2023, the cost of sales eliminations were $61.4 million and $54.7 million, respectively. 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. During the 52 weeks periods ended April 27, 2024 and 52 weeks ended April 29, 2023, the gross margin eliminations were $1.0 million and $(0.2) million, respectively. The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods. Selling and Administrative Expenses [[GREPCENT_TABLE]] [["","","","52 weeks ended","","52 weeks ended"],["Dollars in thousands","","","","","","","","","April 27, 2024","","% of Sales","","April 29, 2023","","% of Sales"],["Selling and Administrative Expenses","","","","","","","","","$","311,574","","","19.9%","","$","357,611","","","23.2%"]] [[/GREPCENT_TABLE]] During the 52 weeks ended April 27, 2024, selling and administrative expenses decreased by $46.0 million, or 12.9%, to $311.6 million from $357.6 million during the 52 weeks ended April 29, 2023. The variances by segment are discussed by segment below. Retail For Retail, selling and administrative expenses decreased by $42.3 million, or 13.2%, to $278.4 million during the 52 weeks ended April 27, 2024 from $320.7 million during the 52 weeks ended April 29, 2023. This decrease was primarily due to a $15.0 million decrease in closed stores payroll and related operating costs, cost savings initiatives comprised of a $19.3 million decrease in comparable store payroll expense and related operating costs and a $10.9 million decrease in corporate payroll expense, infrastructure and product development costs, partially offset by a $2.9 million increase in new store payroll expense and related operating costs. Wholesale For Wholesale, selling and administrative expenses decreased by $1.6 million, or 10.6%, to $13.4 million during the 52 weeks ended April 27, 2024 from $15.0 million during the 52 weeks ended April 29, 2023. The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $1.8 million, partially offset by higher operating expenses of $0.2 million. Corporate Services Corporate Services' selling and administrative expenses decreased by $2.3 million, or 10.6%, to $19.7 million during the 52 weeks ended April 27, 2024 from $22.0 million during the 52 weeks ended April 29, 2023. The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $1.5 million and lower operating costs of $0.8 million. 46 Index to Form 10-K Index to FS Depreciation and Amortization Expense [[GREPCENT_TABLE]] [["","","","52 weeks ended","","52 weeks ended"],["Dollars in thousands","","","","","","","","","April 27, 2024","","% of Sales","","April 29, 2023","","% of Sales"],["Depreciation and Amortization Expense","","","","","","","","","$","40,560","","","2.6%","","$","42,163","","","2.7%"]] [[/GREPCENT_TABLE]] Depreciation and amortization expense decreased by $1.6 million to $40.6 million during the 52 weeks ended April 27, 2024 from $42.2 million during the 52 weeks ended April 29, 2023. Capital expenditures decreased by $11.0 million during the 52 weeks ended April 27, 2024 compared to the prior year period and depreciable assets and intangibles were lower due to the store impairment loss recognized during Fiscal 2024 and Fiscal 2023. Impairment loss (non-cash) 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. For information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies and Note 6. Fair Value Measurements. During the 52 weeks ended April 27, 2024, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $7.2 million (both pre-tax and after-tax), comprised of $0.4 million, $3.6 million, and $3.2 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the consolidated statement of operations. During the 52 weeks ended April 29, 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6.0 million (both pre-tax and after-tax), comprised of $0.7 million, $1.7 million, and $3.6 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the consolidated statement of operations. Restructuring and other charges During the 52 weeks ended April 27, 2024, we recognized restructuring and other charges totaling $19.4 million, comprised primarily of $19.6 million, primarily for costs primarily associated with professional service costs for restructuring and process improvements (see next paragraph below) and $1.1 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, partially offset by a $1.3 million in an actuarial gain related to a frozen retirement benefit plan (non-cash). Pursuant to the July 28, 2023 Credit Agreement amendment, the Board established a committee consisting of three independent directors to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement). Restructuring and other expenses include costs associated with the costs of this committee, as well as other related professional service costs. On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our consolidated balance sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 17. Subsequent Events. During the 52 weeks ended April 29, 2023, we recognized restructuring and other charges totaling $10.1 million, comprised primarily of $4.4 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $5.7 million, primarily for costs primarily associated with professional service costs for restructuring and process improvements. Operating Loss [[GREPCENT_TABLE]] [["","","","52 weeks ended","","52 weeks ended"],["Dollars in thousands","","","","","","","","","April 27, 2024","","% of Sales","","April 29, 2023","","% of Sales"],["Operating Loss","","","","","","","","","$","(21,933)","","","(1.4)%","","$","(66,446)","","","(4.3)%"]] [[/GREPCENT_TABLE]] Our operating loss was $(21.9) million during the 52 weeks ended April 27, 2024 compared to operating loss of $(66.4) million during the 52 weeks ended April 29, 2023. The improvements in operating results were due to the matters discussed above. For the 52 weeks ended April 27, 2024, excluding the $19.4 million of restructuring and other charges and the $7.2 million impairment loss (non-cash), all discussed above, operating income was $4.6 million (or 0.3% of sales). 47 Index to Form 10-K Index to FS For the 52 weeks ended April 29, 2023, excluding the $10.1 million of restructuring and other charges and the $6.0 million impairment loss (non-cash), all discussed above, operating loss was $(50.3) million (or (3.3)% of sales). Interest Expense, Net [[GREPCENT_TABLE]] [["","","52 weeks ended"],["Dollars in thousands","","April 27, 2024","","April 29, 2023"],["Interest Expense, Net","","$","40,365","","","$","22,683"]] [[/GREPCENT_TABLE]] Net interest expense increased by $17.7 million to $40.4 million during the 52 weeks ended April 27, 2024 from $22.7 million during the 52 weeks ended April 29, 2023. Interest expense increased primarily due to higher borrowings, higher interest rates and $10.0 million resulting from increased amortization of deferred financing costs. The following table disaggregates interest expense for the 52-week period: [[GREPCENT_TABLE]] [["","","52 weeks ended"],["Dollars in thousands","","April 27, 2024","","April 29, 2023"],["Interest Incurred"],["Credit Facility","","$","24,409","","","$","16,994"],["Term Loan","","3,984","","","3,078"],["Total Interest Incurred","","$","28,393","","","$","20,072"],["Amortization of Deferred Financing Costs"],["Credit Facility","","$","11,910","","","$","1,948"],["Term Loan","","1,240","","","1,181"],["Total Amortization of Deferred Financing Costs","","$","13,150","","","$","3,129"],["Interest Income, net of expense","","$","(1,178)","","","$","(518)"],["Total Interest Expense","","$","40,365","","","$","22,683"]] [[/GREPCENT_TABLE]] Cash interest paid during the 52 weeks ended April 27, 2024 and April 29, 2023 was $24.9 million and $19.0 million, respectively. Income Tax Expense [[GREPCENT_TABLE]] [["","","","52 weeks ended","","52 weeks ended"],["Dollars in thousands","","","","","","","","","April 27, 2024","","Effective Rate","","April 29, 2023","","Effective Rate"],["Income Tax Expense","","","","","","","","","$","183","","","(0.3)%","","$","1,011","","","(1.1)%"]] [[/GREPCENT_TABLE]] We recorded an income tax expense of $0.2 million on a pre-tax loss of $(62.3) million during the 52 weeks ended April 27, 2024, which represented an effective income tax rate of (0.3)% and an income tax expense of $1.0 million on a pre-tax loss of $(89.1) million during the 52 weeks ended April 29, 2023, which represented an effective income tax rate of (1.1)%. The effective tax rate for the 52 weeks ended April 27, 2024 is materially consistent with the prior year comparable period. Net Loss from Continuing Operations [[GREPCENT_TABLE]] [["","","","","","52 weeks ended"],["Dollars in thousands","","","","","April 27, 2024","","April 29, 2023"],["Net Loss from Continuing Operations","","","","","$","(62,481)","","","$","(90,140)"]] [[/GREPCENT_TABLE]] As a result of the factors discussed above, we reported a net loss from continuing operations of $(62.5) million during the 52 weeks ended April 27, 2024, compared with a net loss of $(90.1) million during the 52 weeks ended April 29, 2023. Adjusted Earnings (non-GAAP) - Continuing Operations is $(35.9) million during the 52 weeks ended April 27, 2024, compared with $(74.0) million during the 52 weeks ended April 29, 2023. See Adjusted Earnings (non-GAAP) discussion below. 48 Index to Form 10-K Index to FS Use of Non-GAAP Measures - Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the measure of Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations. We define Adjusted Earnings as net income (loss) from continuing operations adjusted for certain reconciling items that are subtracted from or added to net income (loss) from continuing operations. We define Adjusted EBITDA as net income (loss) from continuing operations plus (1) depreciation and amortization; (2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or added to net income (loss) from continuing operations. We define Free Cash Flow as Cash Flows from Operating Activities less capital expenditures, cash interest and cash taxes. To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements included elsewhere in this Form 10-K, the reconciliation of Adjusted Earnings to net income (loss) from continuing operations, the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss) from continuing operations, and the reconciliation of Adjusted EBITDA by Segment to net income (loss) from continuing operations by segment, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, our use of these non-GAAP financial measures may be different from similarly named measures used by other companies, limiting their usefulness for comparison purposes. We review these non-GAAP financial measures as internal measures to evaluate our performance at a consolidated level and at a segment level and manage our operations. We believe that these measures are useful performance measures which are used by us to facilitate a comparison of our on-going operating performance on a consistent basis from period-to-period. We believe that these non-GAAP financial measures provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone, as they exclude certain items that management believes do not reflect the ordinary performance of our operations in a particular period. Our Board of Directors and management also use Adjusted EBITDA and Adjusted EBITDA by Segment, at a consolidated and at a segment level, as one of the primary methods for planning and forecasting expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure for performance incentive plans. Management also uses Adjusted EBITDA by Segment to determine segment capital allocations. We believe that the inclusion of Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment provides investors useful and important information regarding our operating results, in a manner that is consistent with management's evaluation of business performance. We believe that Free Cash Flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements and assists investors in their understanding of our operating profitability and liquidity as we manage the business to maximize margin and cash flow. For a discussion regarding the Seasonality of our business, see Management Discussion and Analysis - Seasonality discussion above. Consolidated Adjusted Earnings (non-GAAP) - Continuing Operations [[GREPCENT_TABLE]] [["","","","","","52 weeks ended"],["Dollars in thousands","","","","","April 27, 2024","","April 29, 2023"],["Net loss from continuing operations (a)","","","","","$","(62,481)","","","$","(90,140)"],["Reconciling items, after-tax (below)","","","","","26,575","","","16,137"],["Adjusted Earnings (non-GAAP)","","","","","$","(35,906)","","","$","(74,003)"],["Reconciling items, pre-tax"],["Impairment loss (non-cash) (b)","","","","","$","7,166","","","$","6,008"],["Content amortization (non-cash) (c)","","","","","\u2014","","","26"],["Restructuring and other charges (b)","","","","","19,409","","","10,103"],["Reconciling items (d)","","","","","$","26,575","","","$","16,137"]] [[/GREPCENT_TABLE]] 49 Index to Form 10-K Index to FS Consolidated Adjusted EBITDA (non-GAAP) - Continuing Operations [[GREPCENT_TABLE]] [["","","52 weeks ended"],["Dollars in thousands","","April 27, 2024","","April 29, 2023"],["Net loss from continuing operations (a)","","$","(62,481)","","","$","(90,140)"],["Add:"],["Depreciation and amortization expense","","40,560","","","42,163"],["Interest expense, net","","40,365","","","22,683"],["Income tax expense (benefit)","","183","","","1,011"],["Impairment loss (non-cash) (b)","","7,166","","","6,008"],["Content amortization (non-cash) (c)","","\u2014","","","26"],["Restructuring and other charges (b)","","19,409","","","10,103"],["Adjusted EBITDA (Non-GAAP) - Continuing Operations","","$","45,202","","","$","(8,146)"],["Adjusted EBITDA (Non-GAAP) - Discontinued Operations","","$","(321)","","","$","654"],["Adjusted EBITDA (Non-GAAP) - Total","","$","44,881","","","$","(7,492)"]] [[/GREPCENT_TABLE]] (a)    During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above. (b)    See Management Discussion and Analysis - Results of Operations discussion above. (c)    Amortization expense (non-cash) related to content development costs are included in cost of goods sold on our consolidated statements of operations. (d)    There is no pro forma income tax effect of the non-GAAP items. The following is Adjusted EBITDA - Continuing Operations by Segment for Fiscal 2024 and Fiscal 2023: [[GREPCENT_TABLE]] [["Adjusted EBITDA - by Segment","","52 weeks ended April 27, 2024"],["Dollars in thousands","","Retail","","Wholesale","","","","Corporate Services(a)","","Eliminations","","Total"],["Net income (loss) from continuing operations (b)","","$","11,457","","","$","4,945","","","","","$","(79,916)","","","$","1,033","","","$","(62,481)"],["Add:"],["Depreciation and amortization expense","","35,294","","","5,228","","","","","38","","","\u2014","","","40,560"],["Interest expense, net","","\u2014","","","\u2014","","","","","40,365","","","\u2014","","","40,365"],["Income tax expense","","\u2014","","","\u2014","","","","","183","","","\u2014","","","183"],["Impairment loss (non-cash) (c)","","7,166","","","\u2014","","","","","\u2014","","","\u2014","","","7,166"],["Restructuring and other charges (c)","","571","","","(813)","","","","","19,651","","","\u2014","","","19,409"],["Adjusted EBITDA (non-GAAP)","","$","54,488","","","$","9,360","","","","","$","(19,679)","","","$","1,033","","","$","45,202"]] [[/GREPCENT_TABLE]] 50 Index to Form 10-K Index to FS [[GREPCENT_TABLE]] [["Adjusted EBITDA - by Segment","","52 weeks ended April 29, 2023"],["Dollars in thousands","","Retail","","Wholesale","","","","Corporate Services(a)","","Eliminations","","Total"],["Net loss from continuing operations (b)","","$","(35,095)","","","$","(3,050)","","","","","$","(51,970)","","","$","(25)","","","$","(90,140)"],["Add:"],["Depreciation and amortization expense","","36,737","","","5,373","","","","","53","","","\u2014","","","42,163"],["Interest expense, net","","\u2014","","","\u2014","","","","","22,683","","","\u2014","","","22,683"],["Income tax expense","","\u2014","","","\u2014","","","","","1,011","","","\u2014","","","1,011"],["Impairment loss (non-cash) (c)","","6,008","","","\u2014","","","","","\u2014","","","\u2014","","","6,008"],["Content amortization (non-cash) (d)","","26","","","\u2014","","","","","\u2014","","","\u2014","","","26"],["Restructuring and other charges (c)","","2,964","","","916","","","","","6,223","","","\u2014","","","10,103"],["Adjusted EBITDA (non-GAAP)","","$","10,640","","","$","3,239","","","","","$","(22,000)","","","$","(25)","","","$","(8,146)"]] [[/GREPCENT_TABLE]] (a)    Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which fund our operating and financing needs across the organization. Income taxes are reflected in Corporate Services as we record our income tax provision on a consolidated basis. (b)    During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above. (c)    See Management Discussion and Analysis - Results of Operations discussion above. (d)    Amortization expense (non-cash) related to content development costs are included in cost of goods sold on our consolidated statements of operations. [[GREPCENT_TABLE]] [["Adjusted EBITDA (non-GAAP) - Discontinued Operations","","52 weeks ended"],["","","April 27, 2024","","April 29, 2023"],["Loss from discontinued operations (a)","","$","(730)","","","$","(11,722)"],["Add:"],["Depreciation and amortization expense","","3","","","3,155"],["Income tax expense","","20","","","398"],["Content amortization (non-cash)","","\u2014","","","6,594"],["Gain on sale of business","","(3,545)","","","\u2014"],["Impairment loss (non-cash)","","610","","","\u2014"],["Restructuring and other charges","","3,308","","","1,848"],["Transaction costs","","13","","","381"],["Adjusted EBITDA (Non-GAAP) - Discontinued Operations","","$","(321)","","","$","654"]] [[/GREPCENT_TABLE]] (a)    During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above. For additional information, see Note 2. Summary of Significant Accounting Policies. 51 Index to Form 10-K Index to FS Free Cash Flow (non-GAAP) - Continuing Operations [[GREPCENT_TABLE]] [["","","52 weeks ended"],["Dollars in thousands","","April 27, 2024","","April 29, 2023"],["Net cash flows (used in) provided by operating activities from continuing operations (a)","","$","(1,545)","","","$","90,513"],["Less:"],["Capital expenditures (b)","","14,070","","","25,092"],["Cash interest","","24,943","","","19,024"],["Cash taxes (refund) paid","","(7,293)","","","(16,005)"],["Free Cash Flow (non-GAAP)","","$","(33,265)","","","$","62,402"]] [[/GREPCENT_TABLE]] (a)    See Liquidity and Capital Resources - Sources and Uses of Cash Flow discussion below. Given the growth of our BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to BNC First Day equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools. (b)    Purchases of property and equipment are also referred to as capital expenditures. Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, and enhancements to internal systems and our website. The following table provides the components of total purchases of property and equipment: Capital Expenditures - Continuing Operations [[GREPCENT_TABLE]] [["","","52 weeks ended"],["Dollars in thousands","","April 27, 2024","","April 29, 2023"],["Physical store capital expenditures","","$","5,813","","","$","13,068"],["Product and system development","","6,670","","","10,030"],["Other","","1,587","","","1,994"],["Total Capital Expenditures","","$","14,070","","","$","25,092"]] [[/GREPCENT_TABLE]] Liquidity and Capital Resources During Fiscal 2024, our primary sources of cash are net cash flows from operating activities, funds available under our Credit Agreement, Term Loan Agreement, and short-term vendor financing. Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students purchase textbooks for the upcoming Fall and Spring semesters, respectively. As of April 27, 2024, we had $28.6 million of cash on hand, including $18.1 million of restricted cash primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Relationship-related agreements. Going Concern evaluation in conjunction with the issuance of the April 27, 2024 Consolidated Financial Statements The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below. Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these consolidated financial statements are issued. Our primary sources of cash are net cash flows from operating activities and funds available under our Credit Facility. Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales 52 Index to Form 10-K Index to FS are generally highest in the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming Fall and Spring semesters, respectively. The tightening of our available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility) of $40.0 million, has had a significant impact on our liquidity during Fiscal 2023 and Fiscal 2024, including our ability to make timely vendor payments and school commission payments. Our recurring losses and projected cash needs, combined with our current liquidity levels and the maturity of our Credit Facility and Term Loan, which were originally scheduled to become due on December 28, 2024 and April 7, 2025, respectively, raised substantial doubt about our ability to continue as a going concern beyond twelve months from the issuance of our third quarter financial statements as of March 12, 2024 as disclosed in our previously filed Quarterly Report on Form 10-Q. On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our consolidated balance sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 7. Debt and Note 17. Subsequent Events. As a result of the equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, all executed on June 10, 2024, Management concluded that substantial doubt about the Company's ability to continue as a going concern no longer exists. Sources and Uses of Cash Flow - Continuing Operations [[GREPCENT_TABLE]] [["Dollars in thousands","","Fiscal 2024","","Fiscal 2023"],["Net cash flows (used in) provided by operating activities from continuing operations","","$","(1,545)","","","$","90,513"],["Net cash flows used in investing activities from continuing operations","","(13,992)","","","(24,501)"],["Net cash flows (used in) financing activities from continuing operations","","(5,699)","","","(49,675)"],["Net change in cash, cash equivalents, and restricted cash from continuing operations","","$","(21,236)","","","$","16,337"]] [[/GREPCENT_TABLE]] As of April 27, 2024 and April 29, 2023, we had cash of $10.5 million and $14.2 million, respectively. As of April 27, 2024 and April 29, 2023, we had restricted cash of $18.1 million and $16.7 million, respectively, comprised of $17.1 million and $15.8 million, respectively, in prepaid and other current assets in the consolidated balance sheet primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $1.0 million and $0.9 million, respectively, in other noncurrent assets in the consolidated balance sheets related to amounts held in trust for future distributions related to employee benefit plans. Cash Flow from Operating Activities from Continuing Operations Our business is highly seasonal. For our retail operations, cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the upcoming semesters based on the typical academic semester. Given the growth of our BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to BNC First Day equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools. For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, as payments are received from the summer and winter selling season when our wholesale business sell textbooks and other course materials for retail distribution. For both retail and wholesale, cash flows from operating activities are typically a use of cash in the fourth fiscal quarter, when sales volumes are materially lower than the other quarters. Our quarterly cash flows 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. Cash flows used in operating activities from continuing operations during Fiscal 2024 were $(1.5) million compared to cash flows provided by operating activities from continuing operations of $90.5 million during Fiscal 2023. The increase in 53 Index to Form 10-K Index to FS cash flows used in operating activities from continuing operations of $92.1 million was primarily due to the timing of payables ($63.1 million) to vendors for inventory purchases and expenses, all of which were delayed resulting from lower borrowing base availability under our credit facility, lower accounts receivables collections ($55.1 million) compared to the prior year, and higher payments for interest expense ($5.9 million), offset by higher earnings ($27.7 million). Cash Flow from Investing Activities from Continuing Operations Cash flows used in investing activities from continuing operations during Fiscal 2024 were $(14.0) million compared to $(24.5) million during Fiscal 2023. The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments, enhancements to internal systems and websites, and new store construction. Capital expenditures totaled $(14.1) million and $(25.1) million during Fiscal 2024 and Fiscal 2023, respectively. Cash Flow from Financing Activities from Continuing Operations Cash flows used in financing activities from continuing operations during Fiscal 2024 were $(5.7) million compared to $(49.7) million during Fiscal 2023. Our cash flow used in financing from continuing operations decreased due to a decrease in net borrowings during the year, offset by an increase in deferred financing costs paid. Financing Arrangements [[GREPCENT_TABLE]] [["","","","As of"],["","Maturity Date (a)","","April 27, 2024","","April 29, 2023"],["Credit Facility","December 28, 2024","","$","164,947","","","$","154,154"],["Term Loan","April 7, 2025","","32,653","","","30,000"],["sub-total","","","197,600","","","184,154"],["Less: Deferred financing costs, Term Loan (b)","","","(1,263)","","","(2,003)"],["Total debt","","","$","196,337","","","$","182,151"],["Balance Sheet classification:"],["Long-term borrowings","","","$","196,337","","","$","182,151"]] [[/GREPCENT_TABLE]] (a)    On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including amending and extending the maturity date of the Credit Facility to June 9, 2028 and converting all outstanding principal and interest amounts owed under our Term Loan Credit Agreement into shares of our Common Stock. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 17. Subsequent Events. (b)    For additional information on deferred financing costs, see Deferred Financing Costs below. June 2024 Equity and Debt Transactions On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our consolidated balance sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 17. Subsequent Events. Credit Facility As of April 27, 2024, we are party to a credit agreement (the “Credit Agreement”), which was amended from time to time including on April 16, 2024, March 12, 2024, December 12, 2023, October 10, 2023, July 28, 2023, May 24, 2023, March 8, 2023, March 31, 2021, and March 1, 2019, under which the lenders originally committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400.0 million (the “Credit Facility”) effective from the March 1, 2019 amendment. The agreement included an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100.0 million maintaining the maximum availability under the Credit Agreement at $500.0 million. As of July 31, 2022, the FILO Facility was repaid and eliminated according to its terms and future commitments under the FILO Facility were reduced to $0. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the Credit Facility. This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company and a pledge of equity from subsidiaries, exclusive of real estate). For information regarding the Credit Agreement amendments, deferred financing costs and terms, see Part II - Item 8. Financial Statements and Supplementary Data - Note 7. Debt. 54 Index to Form 10-K Index to FS As of April 27, 2024, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement. During the 52 weeks ended April 27, 2024, we borrowed $563.0 million and repaid $552.2 million under the Credit Agreement, with $164.9 million of outstanding borrowings as of April 27, 2024 under the Credit Facility. During the 52 weeks ended April 29, 2023, we borrowed $590.3 million and repaid $631.8 million under the Credit Agreement, with $154.2 million of outstanding borrowings as of April 29, 2023, comprised entirely of borrowings under the Credit Facility and $0 under the FILO Facility, which was repaid on August 1, 2022. As of both April 27, 2024 and April 29, 2023, we have issued $3.6 million and $2.1 million, respectively, in letters of credit under the Credit Facility. Term Loan As of April 27, 2024, we are party to a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC to incur the Term Loan Facility, which was amended on March 8, 2023 and July 28, 2023. The Term Loan Credit Agreement matures on April 7, 2025. The proceeds of the Term Loans were used to finance working capital, and to pay fees and expenses related to the Term Loan Facility. For information regarding the Term Loan Credit Agreement amendments, deferred financing costs and terms, see Part II - Item 8. Financial Statements and Supplementary Data - Note 7. Debt. During the 52 weeks ended April 27, 2024, we incurred $2.7 million for interest in kind on the Term Loan Credit Agreement and repaid $0 under the Term Loan Credit Agreement, with $32.7 million of outstanding borrowings as of April 27, 2024. During the 52 weeks ended April 29, 2023, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of April 29, 2023. Deferred Financing Costs The debt issuance costs have been deferred and are presented as noted below in the consolidated balance sheets and are subsequently amortized ratably over the term of respective debt. [[GREPCENT_TABLE]] [["Dollars in thousands","","","As of"],["Balance Sheet Location","Maturity Date/Amortization Term (a)","","April 27, 2024","","April 29, 2023"],["Credit Facility - Prepaid and Other Current Assets","December 28, 2024","","$","\u2014","","","$","3,776"],["Credit Facility - Other noncurrent assets","","","12,897","","","1,259"],["Credit Facility - sub-total","","","12,897","","","5,035"],["Term Loan - Contra Debt","April 7, 2025","","1,263","","","2,003"],["Total deferred financing costs","","","$","14,160","","","$","7,038"]] [[/GREPCENT_TABLE]] (a)    On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including amending and extending the maturity date of the Credit Facility to June 9, 2028 and converting all outstanding principal and interest amounts owed under our Term Loan Credit Agreement into shares of our Common Stock. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 17. Subsequent Events. 55 Index to Form 10-K Index to FS Interest Expense The following table presents interest expense on the consolidated statement of operations and cash interest paid: [[GREPCENT_TABLE]] [["","","52 weeks ended"],["","","April 27, 2024","","April 29, 2023"],["Interest Incurred"],["Credit Facility","","$","24,409","","","$","16,994"],["Term Loan","","3,984","","","3,078"],["Total Interest Incurred","","$","28,393","","","$","20,072"],["Amortization of Deferred Financing Costs"],["Credit Facility","","$","11,910","","","$","1,948"],["Term Loan","","1,240","","","1,181"],["Total Amortization of Deferred Financing Costs","","$","13,150","","","$","3,129"],["Interest Income, net of expense","","$","(1,178)","","","$","(518)"],["Total Interest Expense","","$","40,365","","","$","22,683"],["Cash Interest Paid","","$","24,943","","","$","19,024"]] [[/GREPCENT_TABLE]] Income Tax Implications on Liquidity As of April 27, 2024, we recognized a current income tax receivable for net operating loss carrybacks in prepaid and other current assets on the consolidated balance sheet. We received refunds of $15.8 million refund in Fiscal 2023, an $8.5 million refund (including $0.9 million in interest) in Fiscal 2024 and we expect to receive additional refunds of approximately $2.4 million in Fiscal 2025. Share Repurchases On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of our outstanding common stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During Fiscal 2024 and Fiscal 2023, we did not purchase shares under the stock repurchase program. As of April 27, 2024, approximately $26.7 million remains available under the stock repurchase program. During Fiscal 2024 and Fiscal 2023, we also repurchased 147,885 shares and 347,808 shares, respectively, of our common stock in connection with employee tax withholding obligations for vested stock awards. Contractual Obligations The following table sets forth our contractual obligations as of June 21, 2024 (in millions): [[GREPCENT_TABLE]] [["","","Payments Due by Period"],["","","Total","","Less Than 1 Year","","1-3 Years","","3-5 Years","","More Than 5 Years"],["New Credit Facility (a)","","$","325.0","","","$","\u2014","","","$","\u2014","","","$","325.0","","","$","\u2014"],["Lease obligations (excluding imputed interest) (b)","","271.7","","","111.6","","","73.4","","","48.7","","","38.0"],["Purchase obligations (c)","","18.6","","","12.1","","","6.5","","","\u2014","","","\u2014"],["Other long-term liabilities reflected on the balance sheet under GAAP (d)","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total","","$","615.3","","","$","123.7","","","$","79.9","","","$","373.7","","","$","38.0"]] [[/GREPCENT_TABLE]] (a)    On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our consolidated balance sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 17. Subsequent Events. 56 Index to Form 10-K Index to FS (b)    Our contracts for physical bookstores with colleges and universities are typically five years with renewal options, but can range from one to 15 years, and are typically cancelable by either party without penalty with 90 to 120 days' notice. Annual projections are based on current minimum guarantee amounts. In approximately 50% of our contracts with colleges and universities that include minimum guarantees, the minimum guaranteed amounts adjust annually to equal less than the prior year's commission earned. See Part II - Item 8. Financial Statements and Supplementary Data — Note 8. Leases. (c)    Includes information technology contracts. (d)    Other long-term liabilities excludes expected payments related to employee benefit plans. Certain Relationships and Related Party Transactions See Part II - Item 8. Financial Statements and Supplementary Data — Note 10. Related Party Transactions. Critical Accounting Policies and Estimates The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below. Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these consolidated financial statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date of these consolidated financial statements if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. In preparing our consolidated financial statements in accordance with GAAP, we are required to use judgment in making estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and judgments with respect to certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. 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 Part II - Item 8. Financial Statements and Supplementary Data - Note 3. 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 sale of digital textbooks, which contains a single performance obligation, is recognized when the customer accesses the digital content as product revenue in our consolidated financial statements. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the term the customer is no longer able to access the content. While the sale of the digital textbook 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. Revenue from the rental of physical textbooks 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 and is recognized as rental income in our consolidated financial statements. 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. 57 Index to Form 10-K Index to FS Revenue recognized for our BNC First Day offerings is consistent with our policies outlined above for product, digital and rental sales, net of an anticipated opt-out or return provision. Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. 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. Effective in April 2021, as contemplated by the F/L Relationship related merchandising agreement and e-commerce agreement, we began to transition the fulfillment of our logo general merchandise sales to Lids and Fanatics. As the logo general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition. 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 brand marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers, shipping and handling, non-return rental penalty fees, and revenue from other programs. 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. Cost is determined primarily by the retail inventory method for our Retail Segment. Our textbook and trade book inventories, for Retail and Wholesale Segments, are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories. There were no LIFO adjustments in Fiscal 2024 and Fiscal 2023. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory. Reserve calculations are sensitive to certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the non-returnable inventory reserve. However, if assumptions based on our history of liquidating non-returnable inventory are incorrect, we may be exposed to losses or gains that could be material. A 10% change in actual non-returnable inventory would have affected pre-tax earnings by approximately $6.2 million in Fiscal 2024. 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. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate shortage rates. However, if our estimates regarding shortage rates are incorrect, we may be exposed to losses or gains that could be material. A 10 basis point change in actual shortage rates would have affected pre-tax earnings by approximately $1.0 million in Fiscal 2024. 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. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate rental cost of goods sold. However, if our estimates 58 Index to Form 10-K Index to FS regarding residual value are incorrect, we may be exposed to losses or gains that could be material. A 10% change in rental cost of goods sold would have affected pre-tax earnings by approximately $3.7 million in Fiscal 2024. Evaluation of Other Long-Lived Assets Impairment As of April 27, 2024, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $52.9 million, $202.5 million, $94.2 million, and $24.7 million, respectively, on our 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 and consider market participants in accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. We evaluate the long-lived assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, we first compared the carrying amount of the asset group to the estimated future undiscounted cash flows. The impairment loss calculation compares the carrying amount of the assets to the fair value based on estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value. Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Although most academic institutions have since reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes. Enrollment trends have been negatively impacted overall by COVID-19 concerns at physical campuses. While many athletic conferences resumed their sport activities, other events, such as parent and alumni weekends and prospective student campus tour activities, some may still be curtailed or offer a virtual option. These combined events continue to impact the Company’s course materials and general merchandise business. During Fiscal 2024, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $7.2 million (both pre-tax and after-tax), comprised of $0.4 million, $3.6 million, and $3.2 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the consolidated statement of operations. During Fiscal 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6.0 million (both pre-tax and after-tax), comprised of $0.7 million, $1.7 million, and $3.6 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the consolidated statement of operations. The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 6. Fair Value Measurements. The impairment analysis process requires significant estimation to determine recoverability of each asset group and to determine the fair value of asset groups that were not recoverable, as well as the fair values of certain operating right-of-use assets included within the asset groups that were not recoverable. The significant assumptions used included annual revenue growth rates, gross margin rates and the estimated relationship of selling and administrative costs to revenue used to estimate the projected cash-flow directly related to the future operation of the stores as well as the weighted average cost of capital used to calculate the fair value. Significant assumptions used to determine the fair values of certain operating right-of-use assets included the current market rent and discount rate. These assumptions are subjective in nature and are affected by expectations about future market or economic conditions (including the effects of the global pandemic). We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate long-lived asset impairment losses. However, if actual results are not consistent with estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material. A 10% decrease in our estimated discounted cash flows would not have materially affected the results of our operations in Fiscal 2024. Income Taxes Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. FASB guidance on accounting for income taxes requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience and expectations of future taxable income by taxing jurisdiction, the carryforward periods available to us for tax reporting purposes 59 Index to Form 10-K Index to FS and other relevant factors. The actual realization of deferred tax assets may differ significantly from the amounts we have recorded. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if available evidence indicates it is more likely than not that the tax position will be fully sustained upon review by taxing authorities, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount with a greater than 50 percent likelihood of being realized upon ultimate settlement. For tax positions that are 50 percent or less likely of being sustained upon audit, we do not recognize any portion of that benefit in the financial statements. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Our actual results could differ materially from our current estimates. Recent Accounting Pronouncements See Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Recent Accounting Pronouncements for information related to new accounting pronouncements.