FinanceLooker

Excrept from filing document 2024-04-27

The aggregate market value of the voting and non voting stock held by non affiliates of the registrant was approximately 45 million based upon the closing market price of 0 97 per share of Common Stock on the New York Stock Exchange as of October 28 2023 As of June 21 2024 26 208 036 shares of Common Stock par value 0 01 per share were outstanding
This annual report on Form 10 K contains certain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and information relating to us and our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management When used in this communication the words anticipate believe estimate expect intend plan will forecasts projections and similar expressions as they relate to us or our management identify forward looking statements Moreover we operate in a very competitive and rapidly changing environment New risks emerge from time to time It is not possible for our management to predict all risks nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements we may make In light of these risks uncertainties and assumptions the future events and trends discussed in this Form 10 K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward looking statements
the strategic objectives successful integration anticipated synergies and or other expected potential benefits of various strategic and restructuring initiatives may not be fully realized or may take longer than expected
dependency on strategic service provider relationships such as with VitalSource Technologies Inc and the 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 and the potential for adverse operational and financial changes to these strategic service provider relationships may adversely impact our business
product shortages including decreases in the used textbook inventory supply associated with the implementation of publishers digital offerings and direct to student textbook consignment rental programs
disruptions to our information technology systems infrastructure data supplier systems and customer ordering and payment systems due to computer malware viruses hacking and phishing attacks resulting in harm to our business and results of operations
risks associated with the impact that public health crises epidemics and pandemics such as the COVID 19 pandemic have on the overall demand for Barnes Noble Education Inc products and services our operations the operations of our suppliers service providers and campus partners and the effectiveness of our response to these risks
changes in and enactment of applicable laws rules or regulations or changes in enforcement practices including without limitation with regard to artificial intelligence or consumer data privacy rights which may restrict or prohibit our use of consumer personal information for texts emails interest based online advertising or similar marketing and sales activities
Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect actual results or outcomes may vary materially from those described as anticipated believed estimated expected intended or planned Subsequent written and oral forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph We undertake no obligation to publicly update or revise any forward looking statements whether as a result of new information future events or otherwise after the date of this Form 10 K
Our Annual Report on Form 10 K Quarterly Reports on Form 10 Q Current Reports on Form 8 K and amendments to reports filed pursuant to Sections 13 a and 15 d of the Securities Exchange Act of 1934 as amended the Exchange Act are filed with the U S Securities and Exchange Commission SEC which maintains an Internet site at
to access such reports We are subject to the informational requirements of the Exchange Act and file or furnish reports proxy statements and other information with the SEC Such reports and other information filed by the Company with the SEC are available free of charge on our website at
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 and Fiscal 2022 means the 52 weeks ended April 30 2022
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
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
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
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
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
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
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
We identify our segments in accordance with the way our business is managed focusing on the financial information distributed and the manner in which our chief operating decision maker allocates resources and assesses financial performance
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 two segments
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 existing and prospective clients the flexibility of physical virtual or custom store solutions Students have access to the right course materials at the right time combined with a superior in house customer service department to help with ordering delivery and digital content inquiries At certain institutions students also have the flexibility of using financial aid and proprietary campus debit cards for their course material purchases
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 We have entered into several agreements with major publishers including Cengage Learning McGraw Hill Education and Pearson Education to distribute their digital content through
In Fiscal 2024 in the Retail Segment we signed contracts for 46 new physical and virtual bookstores for estimated first year annual sales of approximately 35 million which is generally fully achieved as the store becomes fully operational in their first full year of operations In Fiscal 2024 we closed 167 stores in the Retail Segment with estimated annual sales of 109 million The Company s strategic initiative is to close under performing and less profitable stores Many institutions have adopted
Currently we estimate that approximately 27 of college and university affiliated bookstores in the United States are operated by their respective institutions We anticipate that schools will continue to outsource their campus bookstore and we intend to aggressively pursue profitable new business opportunities to grow our Retail business footprint We evaluate each new contract based on established profitability measures to ensure we maintain a portfolio of profitable accounts Our ability to offer existing and prospective clients physical virtual and custom store solutions is a key element of our competitive strategy
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
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
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
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
We operate 707 physical campus bookstores Our physical bookstores are typically operated under management agreements with the college or university to be the official college or university bookstore and the exclusive seller of course materials and supplies including physical and digital products sold in store online or through learning management systems We pay the school a percentage of sales for the right to be the official college or university bookstore and the use of the premises approximately half of our agreements do not have any minimum guaranteed amount to be paid to our partners In addition we have the non exclusive right to sell all items typically sold in a college bookstore both in store and online We also
have the ability to integrate the store s systems with the colleges and university s systems in order to accept student financial aid university debit cards and other forms of payment Our decentralized management structure empowers local teams to make decisions based on the local campus needs and fosters collaborative working relationships with our partners
For those on campus stores with a limited store footprint we also offer solutions for institutions to provide general merchandise products at the physical on campus store with course materials offered virtually and fulfilled direct to student either to an individual address or a central campus pick up point
The physical bookstore management contracts with colleges and universities typically include five year terms with renewal options and are typically cancellable by either party without penalty with 90 to 120 days notice Our campus bookstores have an average relationship tenure of 15 years From Fiscal 2021 through Fiscal 2024 approximately 82 of these contracts were renewed or extended often before their termination dates
We operate 538 virtual campus bookstores Our virtual bookstores generally operate under a contract as the institution s official source of course materials with exclusive rights to book lists and access to online programs that link course materials to the courses offered by the school Our virtual only solutions typically ship course materials directly to students but also have the ability to offer ship to campus options
Virtual bookstore agreements typically have terms between three and five years with automatic renewal periods For the past three years we have retained approximately 90 of our contracts annually with the majority of the contracts automatically renewed as per the contract terms or renewed before their expiration dates We pay the school a percentage of sales for the right to be the official college or university bookstore
As of April 27 2024 we operate 707 physical college and university bookstore operations and 538 virtual bookstore operations 350 K 12 virtual stores or 65 and 188 Higher Education virtual stores or 35 located in the United States in 50 states and the District of Columbia Our Retail new business sales team is organized by specific territory and can offer all solutions physical virtual or custom store solutions to public state private community college trade and technical for profit online education institutions within their respective territories
We offer a broad suite of affordable course materials including new and used print textbooks which are available for sale or rent digital textbooks and publisher hosted digital courseware at our physical and virtual bookstores as well as offered directly to students through
Our physical and virtual bookstores provide a comprehensive e commerce experience and a broad suite of affordable course materials Additionally our physical campus stores are social and academic hubs through which students can access affordable course materials along with emblematic apparel and gifts trade books technology school supplies café offerings convenience food and beverages and graduation products The majority of physical campus stores also have school branded e commerce sites which we operate independently or along with our merchant service providers and which offer the same products as the on campus stores plus additional items
Sales and rentals of course materials are a core revenue driver and our faculty and student platforms operate as a seamless extension of our partner schools registration student information and learning management systems Students can purchase course materials including new and used print available for sale or rent eTextbooks and publisher digital courseware platforms We work directly with faculty to ensure the course materials they have chosen for their courses are available in all required formats before the start of classes Our wholesale distribution channel enables our Retail Segment to optimize textbook sourcing so they are able to more efficiently source and distribute a comprehensive inventory of affordable course materials to customers
AIP is an innovative platform that provides enhanced support for faculty and academic leadership to research submit and monitor course material selections further driving affordability and student success
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 We have contracted with VitalSource Technologies Inc VitalSource to use their technology to power our
offers the delivery of both digital and physical course materials priced at below market rates as compared to the total retail price for the same course materials if purchased separately a la carte Offering course materials through our equitable and inclusive access programs is an important strategic initiative of ours to meet the market demands of substantially reduced pricing to students while at the same time increasing our market share revenue and relative gross margins of course materials 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
We have contracted with VitalSource a global leader in building enhancing and delivering digital content on our digital reading platform and digital content catalog The strategic relationship with VitalSource allows us to use its technology to power our
For our physical campus bookstores and custom store solutions we drive general merchandise sales through both in store and online channels and feature collegiate and athletic apparel other custom branded school spirit products lifestyle and wellness products technology products supplies graduation products and convenience items We continue to see growth in general merchandise sales which has been further bolstered through our F L Relationship as discussed above We continue to enhance the user experience and product mix offered through our next generation e commerce platform In Fiscal 2024 Retail Gross Comparable Store Sales for general merchandise increased by 6 6 million or 1 2
We operate 48 True Spirit apparel and spirit shop e commerce websites through our F L Relationship which are virtual stores that appeal specifically to the alumni and sports fan base We also operate pop up retail locations at major sporting events such as football and basketball games for our partner colleges and universities The True Spirit e commerce websites for athletic branded merchandise and the physical pop up retail locations build our partner schools brands through alumni and athletics fostering school spirit and capturing the excitement of collegiate sports We utilize event driven direct marketing strategies for events such as tournaments and playoffs or homecoming events to target an online population of students alumni and sports fans with emails social media posts and search engine marketing
as well as regional coffee roasters and 19 stand alone convenience stores Our Café locations and convenience marketplaces offer diverse grab and go options including organic vegan gluten free and regional fresh food products These offerings increase traffic and time spent in our physical stores As market needs change we are adapting our model to include more grab and go pre packed fresh food items simplified menus to reduce food waste and new technology to reduce operating complexity and make the customer experience more efficient
Through our unique relationship with students colleges and universities and our premier locations on campus and online we operate as a media channel for brands looking to target the college demographic and derive revenue from these marketing programs We also focus on promoting lifestyle products to students and faculty by promoting various brands to connect on a much more personal level We create strategic integrated campaigns which include research email social media display advertising on campus events signage and sampling Our client list includes brands such as Clinique College Ave Dell DoorDash HelloFresh Hewlett Packard and Wall Street Journal Revenue from these services have high margin rates due to the relatively low incremental cost structure to provide these services
Purchases are made at the bookstore level with strategic corporate oversight to determine purchase quantities and maintain appropriate inventory levels After titles are adopted for an upcoming term we determine how much inventory to purchase based on several factors including student enrollment and the previous term s course material sales history For physical campus bookstores we use an automated sourcing system to determine if another store has the necessary new or used textbooks on hand and may transfer the inventory to the appropriate store
The Retail Segment fulfillment order is directed first to our wholesale business before other sources of inventory are utilized Our wholesale business significantly increases our textbook supply at competitive prices as well as our ability to liquidate non returnable inventory Through this close inventory management we consolidate textbook units from multiple Retail Segment stores and other non traditional wholesale sources into fewer but larger store shipments reducing our shipping expenses and providing for efficiency of store handling which puts our books on the stores shelves faster Our broad wholesale distribution channel and warehousing systems also drive inventory efficiencies by using real time information regarding title availability edition status and market prices allowing the Retail Segment to optimize its course material sourcing and purchasing processes
After internal sourcing the bookstore purchases remaining inventory needs from outside suppliers and publishers Out of stock inventory is minimized by managing inventory through our Wholesale Segment For course material sales and rentals we utilize sophisticated inventory management platforms to manage pricing and inventory across all stores Our primary suppliers of new textbooks are publishers including Pearson Education Cengage Learning McGraw Hill Education Macmillan Learning and John Wiley Sons Both unsold textbooks and trade books are generally returnable to publishers for full credit We also receive a supply of used textbooks from students through returns of previously rented and purchased books We offer a Cash for Books program in which students can sell their books back to the physical or virtual bookstore at the end of the semester typically in December and May Students typically receive up to 50 of the price they originally paid for the book if it has been adopted for a future class or the current wholesale price if it has not
The larger physical bookstores feature an expanded selection of trade books general reading Merchants meet with publishers on a regular basis to identify new titles and trends to support this changing business
General merchandise vendors and product selection is driven by our central merchant organization that is responsible for curating the overall product assortment as well as in conjunction with Fanatics and Lids through our F L Relationship for logo and emblematic general merchandise assortment in store and online respectively Benchmarks are established across school type region and the demographics of each of our schools to allow for store level insights and customization for a product assortment that is unique to address the needs of each school that we serve Our ability to support and promote our partner schools brands strengthens our relationships with the administration faculty alumni fans parents and students
Our ability to source school supplies and general merchandise sold in our campus bookstores including technology related products and emblematic clothing is impacted by the broader macro economic global supply chain
Our campus relationships and contractual agreements allow us to seamlessly integrate into the college and university community With direct access to our customer base through both physical and digital channels we drive awareness revenue and loyalty for the schools that we serve We actively market and promote to all segments of our customer base for our physical and virtual bookstores as well as
We develop fully integrated marketing programs to drive engagement with the students parents alumni and fans to promote all of our product and services with a focus on academic course material needs as well as school spirit supply graduation and technology categories
marketing strategies target an online population of students lifelong learners parents and general textbook shoppers through a variety of channels including email search engine marketing and affiliate marketing
platform which gives us the ability to reach approximately 7 million active students parents and alumni via email and our on campus activities and opportunities with students and faculty help to guide and inform our strategies and direction In addition we expect to benefit from the F L Relationship for insights on logo and emblematic merchandise brand selection and style preferences as Lids may be able to identify certain retail trends for similar age demographics at their more than 1 100 Lids retail locations We believe Lids has its finger on the pulse of the buyer behavior of the 12 20 year old student consumer to identify and act on trends prior to other retailers
Our customizable technology delivers a seamless experience providing students and faculty with the ability to research locate and purchase the most affordable course materials Our platforms include single sign on SSO student information system integration registration integration learning management system integration real time financial aid platform point of sale platform and course fee solutions Through our fully integrated purchasing process students can purchase their course materials in store online or when registering for classes
We support faculty and academic leadership with our proprietary online platform which allows for seamless content research discovery and course material adoption enabling them to offer course materials that are both relevant and affordable for their students
Our retail business is highly 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 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
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
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
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 textbook 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
is comprised of the wholesale and virtual retail fulfillment and support operations of our MBS subsidiary The Wholesale Segment enables the Company to generate more value from the textbook marketplace through inventory and procurement synergies Since our acquisition of MBS in 2017 we have achieved certain operational and cost synergies by our ongoing integration of various activities and functions such as new business sales inventory management customer support and information technology support amongst other activities
We are one of the largest textbook wholesalers in the country providing a comprehensive selection of new and used textbooks at a lower cost of supply to approximately 2 750 physical bookstores including our Retail Segment s 707 physical campus bookstores Our wholesale business also sources and distributes new and used textbooks to our 538 virtual bookstores Additionally through our Wholesale Segment we sell hardware and a software suite of applications that provides inventory management and point of sale solutions to approximately 325 college bookstores
Our large inventory of used textbooks consists of approximately 235 000 unique textbook titles in stock and utilizes a highly automated distribution facility that is capable of processing over 21 million textbooks annually
Additionally we are a national distributor for rental textbooks offered through McGraw Hill Education s consignment rental program which includes approximately 1 136 titles and Pearson Education s consignment rental program which includes approximately 922 titles Through our centrally located advanced distribution center we offer seamless integration of these consignment rental programs and centralized administration and distribution to 1 450 stores including the Retail Segment stores These consignment rental programs are available to our wholesale customers including institutionally run and contract managed campus bookstores as well as our physical and virtual bookstores
We sell hardware and a software suite of applications that provides inventory management and point of sale solutions to approximately 325 college bookstores We provide on site installation for point of sale terminals and servers and offer technical assistance through user training and our support center facility The cost savings and ease of deployment ensure clients get the most out of their management systems and create strong customer loyalty
Our Wholesale Segment serves as the hub of BNED s physical book ecosystem Since the demand for used textbooks has historically been greater than the available supply our financial results are highly dependent upon Wholesale s ability to build its textbook inventory from suppliers in advance of the selling season Our relationships with institutional bookstores other bookstore operators book dealers publishers and other distributors and wholesalers secures a supply of high demand new and used textbooks which is critical to the success of the wholesale business The products that we sell originate from a wide variety of domestic and international vendors Our ability to source new and used textbooks is also impacted by the broader macro economic global supply chain A primary supplier of used textbooks are students through the return of previously rented and purchased books to their campus bookstore
Through our proprietary Database Buying Guide we have access to the best maintained most accurate and most complete source of college textbook information available a key asset that allows us to develop superior supply and demand insights and risk management capabilities Our broad wholesale distribution channel and warehousing systems also drives inventory efficiencies allowing us to optimize our textbook sourcing distribution and liquidation processes for BNC s retail stores We leverage our wholesale distribution channel and warehousing systems to optimize our low cost physical textbook availability for use in our retail programs including
We have developed deep relationships with our wholesale customer base as a result of our substantial inventory of used textbooks a comprehensive catalog of textbooks and superior service and systems support We continue to maintain a portfolio of profitable accounts given the demand for used and new textbooks has historically been greater than the available supply
Our wholesale business is highly seasonal as a major portion of quarterly sales and operating profit is realized during the first second and third fiscal quarters when textbooks are sold for retail distribution
We operate within a competitive and rapidly changing business environment and each of our lines of business face competition for the products and services they offer As it relates to our full service campus bookstore operations Follett Corporation is the primary competitor for institutional contracts We also compete with other vendors including eCampus BBA Solutions University Gear Shop Valore Campus Textbook Brokers Texas Book Company BibliU Slingshot Akademos and on occasion Ambassador Educational Solutions for virtual store operations We also face competition from direct to student course material channels including Amazon Chegg com publishers e g Cengage Learning Pearson Education and McGraw Hill Education that bypass the retail distribution channel by selling directly to students and institutions and other third party websites and or local bookstores We face competition from eTextbook digital content providers VitalSource Technologies Inc and Red Shelf which offer independent bookstores a catalog of digital content and distribution services and also have direct to student selling channels for digital materials VitalSource recently acquired Akademos providing a distribution solution for print materials
Competitors for institutional contracts for our cafe and convenience general merchandise offerings include Sodexo and Aramark Our general merchandise business also faces competition from direct to student sales from Walmart Amazon Dick s
The market for educational materials continues to undergo significant change As tuition and other costs rise colleges and universities face increasing pressure to attract and retain students and provide them with innovative affordable educational content and tools that support their educational development Current trends competition and other factors affecting our business include
Our business is affected by capital markets the overall economic environment funding levels at colleges and universities by changes in enrollments at colleges and universities and spending on course materials and general merchandise
We may require additional capital in the future to sustain or grow our business including implementation of our strategic initiatives The future availability of financing will depend on a variety of factors such as economic and market conditions and the availability of credit These factors have and could continue to materially adversely affect our costs of borrowing and our financial position and results of operations would be adversely impacted Volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like or need to raise capital which could have an impact on our ability to react to changing economic and business conditions
Retail general merchandise sales are subject to short term fluctuations driven by the broader retail environment and other economic factors such as interest rate fluctuations and inflationary considerations Broader macro economic global supply chain issues could impact our ability to source textbooks school supplies and general merchandise sold in our campus bookstores including technology related products and emblematic clothing Union and labor market issues may also impact our ability to provide services and products to our customers A significant reduction in U S economic activity could lead to decreased consumer spending
The growth of our business depends on our ability to attract new customers and to increase the level of engagement by our current customers In the Fall of 2023 and Spring of 2024 we observed increased year over year enrollment trends Enrollment trends specifically at community colleges generally correlate with changes in the economy and unemployment factors e g low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends as students generally enroll to obtain skills that are in demand in the workforce Additionally enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18 24 year old college age Online degree program enrollments continue to grow which impacts the level of in store traffic for general merchandise sales just as for cafe and convenience products
We are increasingly dependent upon information technology systems infrastructure and data Cyber attacks are increasing in their frequency sophistication and intensity and have become increasingly difficult to detect We continue to invest in data protection including insurance and information technology to prevent or minimize these risks and to date we have not experienced any material service interruptions and are not aware of any material breaches
The way course materials are distributed and consumed is changing significantly a trend that is expected to continue The market for course materials including textbooks and supplemental materials is intensely competitive and subject to rapid change
We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials In addition to the official physical or virtual campus bookstore course materials are also sold through off campus bookstores e commerce outlets digital platform companies and publishers including Cengage Learning McGraw Hill Education and Pearson Education bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions including student to student transactions over the Internet and multi title subscription access
The products that we sell originate from a wide variety of domestic and international vendors During Fiscal 2024 our four largest retail suppliers excluding our wholesale business which fulfills orders for all our physical and virtual bookstores accounted for approximately 28 of our merchandise purchased with the largest supplier accounting for approximately 7 of our merchandise purchased Since the demand for used textbooks has historically been greater than the available supply our financial results are highly dependent upon Wholesale s ability to build its textbook inventory from suppliers in advance of the selling season Some textbook publishers have begun to supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future Additionally Wholesale is a national distributor for rental textbooks offered through McGraw Hill Education s and Pearson Education s consignment rental program We do not have long term arrangements with most of our suppliers to guarantee availability of merchandise content or services particular payment terms or the extension of credit limits If our current suppliers were to stop selling merchandise content or services to us on acceptable terms including as a result of one or more supplier bankruptcies due to poor economic conditions or refusal by such suppliers to ship products to us due to delayed or extended payment windows as a result of our own liquidity constraints we may be unable to procure the same merchandise content or services from other suppliers in a timely and efficient manner and on acceptable terms or at all Additionally delayed or incomplete publisher shipments of physical textbook orders or delays in receiving digital courseware access codes could have an adverse impact on sales including our
equitable access program which relies upon timely receipt of inventory in advance of class start dates each academic term The broader macro economic global supply chain issues may also impact our ability to source school supplies and general merchandise sold in our campus bookstores including technology related products and emblematic clothing
In addition to the competition in the services we provide to our customers our textbook and other course materials business faces significant price competition Students purchase textbooks and other course materials from multiple providers are highly price sensitive and can easily shift spending from one provider or format to another
programs contribute to improved student outcomes while increasing our market share revenue and relative gross profits of course materials 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 as the growth of our
in Fiscal 2025 and beyond We cannot guarantee that we will be able to achieve these plans within these timeframes or at all Additionally the United States Department of Education has recently proposed regulatory changes that if adopted as proposed could impact equitable and inclusive access models across the higher education industry
We continue to see the trend towards outsourcing in the campus bookstore market and also continue to see a variety of business models being pursued for the provision of course materials such as equitable and inclusive access programs and publisher subscription models and general merchandise
We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business We also expect that certain less profitable or non essential bookstores we operate may close as we focus on the profitability of our stores In Fiscal 2024 the growth of our
We are subject to a number of laws and regulations that affect companies conducting business on the Internet and in the education industry many of which are still evolving and could be interpreted in ways that could harm our business For example we often cannot be certain how existing laws and regulations or new laws and regulations will apply in the e commerce and online context including but not limited to such topics as privacy antitrust credit card fraud advertising taxation sweepstakes promotions content regulation financial aid scholarships student matriculation and recruitment quality of products and services and intellectual property ownership and infringement
Numerous laws and regulatory schemes have been adopted at the national and state level in the United States and in some cases internationally that have a direct impact on our business and operations For example
The Controlling and Assault of Non Solicited Pornography and Marketing Act of 2003 CAN SPAM Act and similar laws adopted by most U S states which pertain directly or indirectly to commercial email regulate unsolicited commercial emails create criminal penalties for emails containing fraudulent headers and control other abusive online marketing practices Similarly the U S Federal Trade Commission FTC has guidelines that impose responsibilities on us with respect to communications with consumers and impose fines and liability for failure to comply with rules with respect to advertising or marketing practices they may deem misleading or deceptive
The Telephone Consumer Protection Act of 1991 TCPA restricts telemarketing and the use of automated telephone equipment The TCPA limits the use of automatic dialing systems artificial or prerecorded voice messages SMS text messages and fax machines It also applies to unsolicited text messages advertising the commercial availability of goods or services Additionally a number of states have enacted statutes that address telemarketing For example some states such as California Illinois and New York have created do not call lists Other states such as Oregon and Washington have enacted no rebuttal statutes that require the telemarketer to end the call when the consumer indicates that he or she is not interested in the product being sold Restrictions on telephone marketing including calls and text messages are enforced by the FTC the Federal Communications Commission states and through the availability of statutory damages and class action lawsuits for violations of the TCPA
The Restore Online Shopper Confidence Act ROSCA and similar state laws impose requirements and restrictions on online services that automatically charge payment cards on a periodic basis to renew a subscription service if the consumer does not cancel the service
Laws and regulations related to the Program Participation Agreement of the U S Department of Education which define the terms and conditions that an institution must meet to begin and continue participation in the Title IV federal student aid programs and other similar laws regulate the recruitment of students to colleges and other institutions of higher learning
The Digital Millennium Copyright Act DMCA provides relief for claims of circumvention of copyright protected technologies and includes a safe harbor intended to reduce the liability of online service providers for hosting listing or linking to third party content that infringes copyrights of others
The Communications Decency Act provides that online service providers will not be considered the publisher or speaker of content provided by others such as individuals who post content on an online service provider s website
The Company is subject to certain laws relating to the collection use retention security and transfer of personal information In many cases these laws and regulations apply to not only third party transfers of personal information but also may impact transfers of personal information among the company and its affiliates In the absence of a federal comprehensive consumer data privacy law 16 U S states have enacted comprehensive consumer privacy laws as of April 29 2024 including California Colorado Connecticut Delaware Indiana Iowa Kentucky Montana Nebraska New Hampshire New Jersey Oregon Tennessee Texas Utah and Virginia
As of April 27 2023 we had approximately 3 750 domestic employees of which approximately 2 400 were full time and the remaining were regularly scheduled part time employees and approximately 120 full time international employees In addition we employed approximately 5 000 temporary and seasonal domestic employees during peak periods during Fiscal 2024 Of our approximate 2 520 full time employees 2 250 work in our Retail Segment 250 work in our Wholesale Segment and 20 work in corporate support functions Our employees are not represented by unions except for 9 employees in locations with existing collective bargaining agreements and approximately 40 employees at a single location for which an initial collective bargaining agreement is pending negotiations We believe that our relationship with our employees is good
We believe our continued success is dependent in part on our ability to attract retain and motivate quality employees Our success depends on our ability to promote and recruit qualified corporate personnel regional and store managers and full time and part time store employees Regional managers are primarily responsible for recruiting new store managers while store managers are responsible for the hiring and training of store employees Many of our part time retail store employees are students attending the colleges and universities we serve To attract and retain motivated and talented people we look for opportunities to promote from within the Company
We are always actively recruiting talented people with a passion for education for our retail stores and corporate offices including our part time and seasonal roles and to be a part of our work study internship program To find our pool of talent we network internally and externally via our talent acquisition team through agency relationships and current employees whom we mobilize as talent scouts and brand ambassadors
We are committed to diversity in the workplace as we believe our company s talent should reflect the faculty students and communities we serve on each of our campuses As we aim to hire a truly diverse overall workforce we have formed partnerships with Historically Black Colleges and Universities HBCUs and Hispanic Serving Institutions HSIs and are looking to continue developing relationships with veteran agencies and organizations that support individuals with disabilities to assist with the recruitment of these individuals
We invest in our employees through structured training programs that offer all employees opportunities for development We create manage or offer a large collection of courses for employees that cover a range of subjects such as goal setting how to be an effective leader situational leadership and effective communication
Student employees have the opportunity to participate in our Aspiring Leaders Management Development Program which is geared toward our Campus Store Team Members and Supervisors that show interest in developing their managerial skills as well as learning more about the ins and outs of running one of our unique campus bookstores Learning and Development has created a comprehensive and interactive program for those interested in joining
As a major employer of Millennials and Generation Z employees Barnes Noble College has become an employer of choice among students nationwide and our wholesale operations also offer employment opportunities to students
We are committed to providing competitive pay and benefits to our employees Corporate and store management including store directors regional managers and store managers are compensated with base pay plus annual bonuses based on financial metrics We also offer equity awards to employees in several levels of management Non management employees are compensated on an hourly basis in addition to periodic contests and rewards Many of our employees participate in one of our various incentive programs which provide the opportunity to receive additional compensation based upon department or Company performance
We also provide our eligible employees the opportunity to participate in a 401 k retirement savings plan which includes an annual end of fiscal year discretionary Company match We offer a competitive benefits package for eligible employees and an employee discount on merchandise purchased from our stores
In addition we offer an employee assistance program that provides employees and their family members immediate support and guidance including access to free short term licensed counseling services as well as assessments and referrals for further services Employees have 24 hour access by phone and through an interactive website to find information and resources for hundreds of everyday work and life issues search for clinicians submit online service requests and participate in interactive customizable self improvement programs
We are focused on creating an inclusive culture and a diverse employee base to better serve our diverse customer base We provide programming to our employees on diversity equity and inclusion topics Approximately 66 of our full time and part time domestic employees identify as women and approximately 33 identify as ethnically diverse
We have required all employees to complete training aimed at preventing harassment and discrimination To establish our DEI program we engaged an outside consultant to evaluate current practices and impressions and assist us in educating employees on aspects of diversity and inclusion about which they may not have been aware
We have developed a DEI blueprint to help fulfill our company s mission and purpose to elevate lives through education and build a stronger sense of belonging by actively engaging employees and collaborating closely with the campuses we serve We understand that to affirm our mission and values we must commit to a set of DEI best practices that will help us recognize changing demographics and shifting needs of the institutions students faculty and communities we serve in order to actively respond and adapt as needed
Our DEI program is managed by Corporate Communications and our Chief Human Resources Officer and overseen by our Board of Directors The following is an overview of the DEI initiatives we have undertaken
Launching our Company s Employee Resource Group ERG program with a company wide ERG survey internal learning session providing ongoing support for the first two ERGs Gender Equity and Community Pride 365 as well as internal communications on the programming and the groups initiatives
In recent years we have hosted external webinars featuring partner institutions and industry experts on how to serve the evolving needs of students and their communities Discussions have included equitable access solutions for the future workforce how to better serve a diverse student population Hispanic Serving Institutions and students with intellectual and developmental disabilities and mental health and wellness
age 55 was appointed Chief Executive Officer in June 2024 Previously Mr Shar served as our Executive Vice President BNED Retail and President Barnes Noble College Booksellers LLC since October 2021 Prior to that he served as Executive Vice President Retail Mr Shar has overall responsibility for the growth and profitability of the Company including the development and implementation of client focused solutions that deliver innovation and increased value to the higher education marketplace and providing strategic direction and operational leadership across the Company Mr Shar also leads strategy and execution for merchandising marketing and business development serving the higher education and K 12 markets Previously Mr Shar served as Senior Vice President Revenue and Product Development for the Company Prior to joining BNED in 2018 Mr Shar was Chief Marketing Officer at Akademos Inc an e commerce and digital marketing company that provides online bookstore services from 2014 to 2018 He previously was the General Manager of NOOK Digital Content at Barnes Noble Inc where he oversaw business development product development and marketing for the Global NOOK Newsstand NOOK Video and NOOK Apps digital businesses Prior to his nearly five years with NOOK he served as Senior Vice President and General Manager at CNNMoney responsible for the CNNMoney website and mobile franchise Prior to that he was Vice President of Consumer Marketing at Sports Illustrated Group and Director of Consumer Marketing for FORTUNE Magazine Group
age 52 serves as our Executive Vice President Corporate Development Affairs Chief Legal Officer and Corporate Secretary Previously Mr Miller served as Executive Vice President Corporate Strategy and General Counsel Mr Miller joined Barnes Noble Education in April 2017 Before joining the Company he served as Executive Vice President General Counsel and Secretary of Monster Worldwide Inc from December 2008 through December 2016 as Vice President and Deputy General Counsel from July 2008 to December 2008 and as Vice President and Associate General Counsel from October 2007 to July 2008 Prior to Monster Mr Miller was Senior Counsel for Motorola Inc from February 2007 to September 2007 From June 2002 to January 2007 he served in various capacities as Senior Corporate Counsel for Symbol Technologies Inc Prior to joining Symbol Mr Miller was associated with both Sullivan Cromwell LLP and Winthrop Stimson Putnam Roberts in New York
age 58 was appointed as Executive Vice President Chief Financial Officer in September 2023 In this role Mr Watson is responsible for the company s financial management including leading the accounting treasury tax financial planning and operations internal audit and investor relations teams Prior to joining BNED he was Executive Vice President and Chief Financial Officer for Paraco Gas Corporation At Paraco he oversaw the financial management of the Company including accounting tax internal audit human resources information technology supply chain business intelligence risk management and mergers and acquisitions Before joining Paraco Gas in 2018 he served as a senior financial executive for Cablevision Systems Corporation PanAmSat Corporation and Entex IT Services as well as various finance roles at MCI Telecommunications and Prudential Securities Inc Mr Watson holds a Bachelor of Business Administration in Finance from Iona University
age 60 has served as our Senior Vice President Chief Accounting Officer since July 2015 In this role she manages the external reporting technical accounting and corporate accounting functions of the Company Prior to joining the Company Ms Paul held positions of increasing responsibility at Covanta Holding Corporation including Corporate Controller from July 2014 to July 2015 Senior Director External Reporting Technical Accounting from June 2013 to July 2014 Director External Reporting from January 2011 to May 2013 and Manager External Reporting from August 2005 to December 2010 Ms Paul is a Certified Public Accountant and has held various senior financial roles with several large companies including Net2Phone Sybase Inc and Liberty Mutual Insurance Company
including in our consolidated financial statements and related notes and Management s Discussion and Analysis of Financial Condition and Results of Operations or in other filings by BNED with the SEC could adversely affect our business financial condition results of operations and the trading price of our common stock Additional risks and uncertainties that are not currently known to us or that are not currently believed by us to be material may also harm our business operations and financial results Because of the following risks and uncertainties as well as other factors affecting our financial condition and operating results past financial performance should not be considered to be a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods
We must have sufficient sources of liquidity to fund working capital requirements The combination of cash on hand cash flow received from operations funds available under our credit agreements and short term vendor financing must be sufficient to meet our normal working capital and debt service requirements for at least the next twelve months If these sources of liquidity do not satisfy our requirements we may not operate as a going concern and will need to seek additional financing such as recently completed Transactions detailed in
In addition we may require additional capital in the future to sustain or grow our business including implementation of our strategic initiatives The future availability of financing will depend on a variety of factors such as economic and market conditions and the availability of credit Additional financing may not be available to us on favorable terms when required or at all Failure to secure adequate financing when required could lead to going concern issues the consequences of which would have a severe negative impact upon our business These factors could also materially adversely affect our costs of borrowing and our financial position and results of operations would be adversely impacted Volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like or need to raise capital which could have an impact on our ability to react to changing economic and business conditions Accordingly if the economy worsens our business results of operations and financial condition could be materially and adversely affected If we raise additional funds through the issuance of equity equity linked or debt securities those securities may have rights preferences or privileges senior to the rights of our common stock and our stockholders may experience substantial dilution There can be no assurances that such financing can or will be obtained at any time in the future if needed
In addition as noted above our liquidity is dependent in part on the availability of funds under our credit agreements If we are not able to comply with the covenants under our credit agreements we may need to seek consents waivers and or amendments to our credit agreements from our lenders to avoid an event of default thereunder Although we have been successful in negotiating consents waivers and or amendments to our credit agreements we may be unsuccessful in negotiating any further consents waivers and or amendments to any such agreements as we may deem necessary Further the terms of any such consents waivers and or amendments may be less favorable than the current terms of our credit agreements or may impose additional restrictions on the operations of our business Under such circumstances our business and liquidity could be materially and adversely affected See
We operate within a competitive and rapidly changing business environment in general and each of our lines of business faces competition for the products and services they offer We face competition from other college bookstore operators and educational content providers including Follett Corporation a contract operator of campus bookstores Textbook Brokers a bookstore management and operations provider Slingshot BibliU and BBA Solutions a college textbook retailer Our online virtual course material store operations also face competition from eCampus an online provider of course materials and Akademos a virtual bookstore and marketplace for academic institutions and on occasion Ambassador Educational Solutions We also face competition from other third party sellers and local bookstores as well as direct to student platforms including bn com the e commerce platform of Barnes Noble Inc Chegg com an online textbook rental company publishers including Cengage Learning Pearson Education and McGraw Hill Education which bypass the traditional retail distribution channel by selling directly to students and institutions We face competition from e Textbook digital content providers VitalSource Technologies Inc and Red Shelf Our wholesale business competes with Amazon GoTextbooks and Texas Book Company Competitors that compete with our general merchandise offerings include Amazon Sodexo and Aramark online retailers physical and online office supply stores and local and national retailers that offer college themed and other general merchandise Students often purchase from multiple textbook providers are highly price sensitive and can easily shift spending from one provider or format to another As a consequence in addition to being competitive in the services we provide to our customers our textbook business faces significant price competition Some of our competitors have adopted and may continue
to adopt aggressive pricing policies and devote substantial resources to marketing website and systems development In addition a variety of business models are being pursued for the provision of print and digital textbooks some of which may be more profitable or successful than our business model including our
equitable and include access models Furthermore the market for course materials is diluted from counterfeiting and piracy of digital and print copies or illegal copies of selected chapters made by students or others user generated and faculty created content and sharing or non purchase of required course materials by students
We have encountered and will continue to encounter these risks and if we do not manage them successfully our business financial condition results of operations and prospects may be materially and adversely affected
Management believes that our continued success will depend to a significant extent upon the efforts and abilities of certain of our executive officers and senior management many of whom have significant experience and strong commercial relationships in our industry and capital market relationships The loss of any of these individuals could harm our business financial condition and results of operations We do not maintain key man life insurance on any of our officers or other employees Experienced management and technical marketing and support personnel in our industry are in high demand and competition for their talents is intense
In addition changes we make to our current and future work environments may not meet the needs or expectations of our employees or may be perceived as less favorable compared to other companies policies which could negatively impact our ability to hire and retain qualified personnel The loss of any of our executive officers or other key employees the failure to successfully transition key roles or the inability to hire train retain and manage qualified personnel could harm our business
We also rely on a significant number of personnel to operate our stores fulfillment network and carry out our other operations Failure to successfully hire train manage and retain sufficient personnel to meet our needs can strain our operations increase payroll and other costs and harm our business and reputation In addition changes in laws and regulations applicable to employees independent contractors and temporary personnel could increase our payroll costs decrease our operational flexibility and negatively impact how we are able to staff our operations and supplement our workforce
We are also subject to labor union efforts to organize groups of our employees from time to time These organizational efforts if successful decrease our operational flexibility which could adversely affect our operating efficiency In addition our response to any organizational efforts could be perceived negatively and harm our business and reputation
An important part of our business strategy for our retail operation is to expand sales for our bookstore operations by being awarded additional contracts to manage physical and or virtual bookstores for colleges universities and K 12 schools across the United States Our ability to obtain those additional contracts is subject to a number of factors that we are not able to control In addition the anticipated strategic benefits of new and additional college and university bookstores may not be realized at all or may not be realized within the time frames contemplated by management In particular for the operation of physical bookstores contracts for additional managed stores may involve a number of special risks including adverse short term effects on operating results diversion of management s attention and other resources standardization of accounting systems dependence on retaining hiring and training key personnel unanticipated problems or legal liabilities and actions of our competitors and customers Because certain terms of any contract are generally fixed for the initial term of the contract and involve judgments and estimates that may not be accurate including for reasons outside of our control we have contracts that are not profitable and may have such contracts in the future The retail price charged to the consumer for textbooks is set by our contracts with colleges and universities to be a maximum markup based on the publishers costs and as colleges continue to focus on affordability those prices have been reduced which has negatively impacted our revenue and margin and further reductions could continue to have a negative impact
In addition we may face significant competition in retaining existing physical and virtual store contracts and when renewing those contracts as they expire Our physical bookstore contracts are typically for five years with renewal options and most contracts are cancellable by either party without penalty with 90 to 120 days notice Our virtual bookstore contracts are typically for three to five years and most are cancellable without penalty with notice Despite the lower startup and ongoing operating expense associated with virtual stores the loss of such contracts could impact revenue and profitability We may not be successful in retaining our current contracts renewing our current contracts or renewing our current contracts on terms that provide us the opportunity to improve or maintain the profitability of managing stores that are the subject matter of such contracts
The products that we sell originate from a wide variety of domestic and international vendors During Fiscal 2024 our four largest retail suppliers excluding our wholesale business which fulfills orders for all our physical and virtual bookstores accounted for approximately 28 of our merchandise purchased with the largest supplier accounting for approximately 7 of our merchandise purchased Our wholesale business sources over 95 of its inventory from two primary channels approximately 55 from third party suppliers and approximately 40 from retail bookstores including our retail bookstores While we believe that our relationships with our suppliers are good suppliers may modify the terms of these relationships due to general economic conditions or otherwise or especially with respect to wholesale inventory publishers could terminate distribution to wholesalers including our wholesale business
We do not have long term arrangements with most of our suppliers to guarantee availability of merchandise content or services particular payment terms or the extension of credit limits If our current suppliers were to stop selling merchandise content or services to us on acceptable terms including as a result of one or more supplier bankruptcies due to poor economic conditions or refusal by such suppliers to ship products to us due to delayed or extended payment windows as a result of our own liquidity constraints we may be unable to procure the same merchandise content or services from other suppliers in a timely and efficient manner and on acceptable terms or at all Additionally delayed or incomplete publisher shipments of physical textbook orders or delays in receiving digital courseware access codes could have an adverse impact on sales including our
Furthermore certain of our merchandise is sourced indirectly from outside the United States Political or financial instability merchandise quality issues product safety concerns trade restrictions work stoppages tariffs foreign currency exchange rates transportation capacity and costs inflation civil unrest natural disasters public health crises epidemics and pandemics and other factors relating to foreign trade are beyond our control and could disrupt our supply of foreign sourced merchandise
Our traditional retail and wholesale businesses are dependent on the continued supply of textbooks The publishing industry generally has suffered recently due to among other things changing consumer preferences away from the print medium and the economic climate A significant disruption in this industry generally or a significant unfavorable change in our relationships with key suppliers could adversely impact our business In addition any significant change in the terms that we have with our key suppliers including purchase or rental terms payment terms return policies the discount or margin on products or changes to the distribution model of textbooks could adversely affect our financial condition and liquidity For example some textbook publishers have proposed to supply textbooks on consignment terms instead of selling to us which would eliminate those titles from the used textbook inventory supply With respect to our wholesale business the demand for used and new textbooks is typically greater than the available supply and our wholesale business is highly dependent upon its ability to build its textbook inventory from publishers and suppliers in advance of the selling season These publisher and supplier relationships are not generally governed by long term contracts and publishers and suppliers could choose not to sell to us Any negative impact on our ability to build our textbook inventory could have an adverse impact on financial results
In response to changes in the market over the last few years we have also significantly increased our textbook rental business offering students a lower cost alternative to purchasing textbooks which is also subject to certain inventory risks such as textbooks not being resold or re rented due to textbooks being returned late or in poor condition faculty members not continuing to adopt or use certain textbooks or as discussed below changes in the way publishers supply textbooks to us
Some textbook publishers rent textbooks on consignment terms directly to students Accordingly we have entered into agreements with a number of textbook publishers to administer their consignment rental programs with distributors and their direct to student textbook consignment rental programs These programs if successful will result in a substantial decrease in the supply of those titles from the used textbook inventory supply which impacts our wholesale business
Our wholesale business is a national distributor for rental textbooks offered through McGraw Hill Educations consignment rental program which includes approximately 1 136 titles and Pearson Education s consignment rental program which includes approximately 922 titles Through its centrally located advanced distribution center our wholesale business offers the seamless integration of these consignment rental programs and centralized administration and distribution to approximately 1 450 stores including our Retail Segment stores These consignment rental programs are available to our wholesale customers including institutionally run and contract managed campus bookstores as well as our physical and virtual bookstores
In addition the profit margins associated with the traditional distribution model are fairly predictable and constant but the move to a model of increased consignment rental programs combined with pressure to provide more affordable course materials to students could result in lower profit margins for a substantial part of our wholesale and retail business
Our wholesale business sources new textbooks from publishers and new and used textbooks from other suppliers to resell to its customers If it is unable to appropriately manage its inventory and anticipate the release of new editions of titles faculty s change in choice of titles return rate or use of alternative educational material our wholesale business could be exposed to risks of excess inventory and less marketable or obsolete inventory This may lead to excess or obsolete inventory that might have to be sold at a deep discount which may impact its revenues and profit margin and may have a negative impact on our financial condition and results of operations
Shipping is a critical part of our business and changes in or disruptions to our shipping arrangements have in the past and may in the future adversely affect our business financial condition and results of operations
We rely on a limited number of shipping companies to deliver inventory to us and deliver completed orders to our customers An inability to negotiate acceptable terms with these companies or performance problems staffing limitations union strikes or other difficulties experienced by these companies or by our own transportation systems including as a result of labor market constraints and related costs could negatively impact our operating results and customer experience In addition our ability to receive inbound inventory efficiently and ship completed orders to customers also may be negatively affected by natural or human caused disasters including public health crises or extreme weather including as a result of climate change geopolitical events and security issues labor or trade disputes and similar events
We currently rely on a limited number of third party global providers to deliver inventory to us and deliver completed orders to our customer If we are not able to negotiate acceptable pricing and other terms with these providers or if these providers experience performance problems or other difficulties in processing our orders or delivering our products to customers it could negatively impact our results of operations and our customers experience Furthermore changes to the terms of our shipping arrangements or the imposition of surcharges or surge pricing have in the past and may in the future adversely impact our margins and profitability We have from time to time experienced increased shipping costs as a result and these costs may continue to increase in the future We may not be able to or choose to pass such increases on to our customers in the future
Any future pandemic epidemic or outbreak of an infectious disease may also continue to adversely affect workforces and supply chains globally potentially impacting the operations of our third party shipping providers which could negatively impact our business and results of operations
Our ability to receive inbound inventory efficiently and ship merchandise to customers including at costs to which we are accustomed may also be negatively affected by other factors beyond our and or these providers control including pandemic weather fire flood power loss earthquakes acts of war or terrorism or other events specifically impacting other shipping providers such as labor disputes or shortages financial difficulties system failures and other disruptions to the operations of the shipping companies on which we rely For example a strike by employees of any of our third party global providers or a port worker strike work slow down or other transportation disruption could significantly disrupt our business We have in the past experienced and may in the future experience shipping delays for reasons outside of our control
A deterioration of the current economic environment could have a material adverse effect on our financial condition and operating results as well as our ability to fund our growth and strategic business initiatives Our business is affected by funding levels at colleges and universities and by changes in enrollments at colleges and universities changes in student enrollments and lower spending on course materials and general merchandise The growth of our business depends on our ability to attract new students and to increase the level of engagement by current student customers To the extent we are unable to attract new students or students spend less generally our business could be adversely affected
Our business is seasonal particularly with respect to textbook sales and rentals with sales and rentals attributable to our retail businesses generally highest in the second and third fiscal quarters when college students purchase textbooks for the upcoming semesters and lowest in the first and fourth fiscal quarters Sales attributable to our wholesale business are generally highest in our first second and third quarters as it sells textbooks for retail distribution
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
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 textbook 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
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 Less than satisfactory net sales during our peak fiscal quarters could have a material adverse effect on our financial condition or operating results for the year and our results of operations from those quarters may not be sufficient to cover any losses that may be incurred in the other fiscal quarters of the year
Our operations are substantially limited to the United States however we have operations in India and contract with service providers outside the United States and may continue to expand internationally in accordance with applicable laws and regulations Such international expansion may result in additional risks that are not present domestically and could adversely affect our business or our results of operations including compliance with additional United States laws and regulations and those of other nations applicable to international operations cultural and language differences currency fluctuations between the U S dollar and foreign currencies which are harder to predict in the current adverse global economic climate restrictions on the repatriation of earnings potentially adverse tax consequences and limitations on our ability to utilize losses generated in our foreign operations different legal and regulatory requirements and other barriers to conducting business and different or less stable political and economic environments Further conducting business abroad subjects us to increased legal and regulatory compliance and oversight For example in connection with our international operations we are subject to laws prohibiting certain payments to governmental officials such as the Foreign Corrupt Practices Act A failure to comply with applicable laws and regulations could result in regulatory enforcement actions as well as substantial civil and criminal penalties assessed against us and our employees
Public health crises epidemics and pandemics related governmental reactions and economic conditions may have a negative impact on our business liquidity results of operations and stock price due to the occurrence of some or all of the following events or circumstances
our inability to realize our expected return on textbooks in our print textbook library as educators transition to online curriculums and the lack of supply of used textbooks as a result of limited on campus buyback opportunities
the potential negative impact on the health of our employees particularly if a significant number of them are impacted could affect our ability to ensure business continuity during the period of disruption related to the pandemic and
governmental orders have forced many of our on site and management office employees to work remotely which may adversely impact our ability to effectively manage our business and maintain our financial reporting processes and related controls as well as introduce operational risk including an increased vulnerability to potential cyber security attacks
Our results also depend on the successful implementation of our strategic initiatives including implementation of our BNC First Day equitable and inclusive access course material models We may not be able to implement this strategy successfully on a timely basis or at all
models to meet the market demands of reducing costs to students and contributing to improved student outcomes while increasing our market share revenue and relative gross profits of course materials 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 We are moving quickly to accelerate our
in Fiscal 2025 and beyond We cannot guarantee that we will be able to achieve these plans within these timeframes or at all While we believe we have the capital resources experience management resources and internal systems to successfully implement our
equitable and inclusive access models across our client portfolio we may not be successful in implementing this strategy The implementation of this strategy is a complex process and relies on leveraging our services and relationships to help accelerate the adoption of our
equitable and inclusive access models or these models do not meet the expectations of these constituencies there could be a negative impact on the implementation of our strategy To successfully execute this strategy we need to continue to further evolve the focus of our organization towards the delivery of cost effective and unique solutions for our customers Any failure to successfully execute this strategy could adversely affect our operating results
Part of our strategy includes the successful execution of strategic acquisitions and relationships including our service provider relationships with VitalSource Technologies Inc VST and with the F L Relationship which may not be successful
As part of our strategy we will continue to seek and may in the future acquire businesses or business operations or enter into other business transactions to grow our business and expand our product and service offerings We may not be able to identify suitable candidates for additional business combinations and strategic investments obtain financing on acceptable terms for such transactions obtain necessary regulatory approvals if any or otherwise consummate such transactions on acceptable terms or at all In addition we compete for acquisitions with other potential acquirers some of which may have greater financial or operational resources than we do Any strategic acquisitions or investments that we are able to identify and complete may also involve a number of risks including our inability to successfully or profitably integrate operate maintain and manage our newly acquired operations or employees the diversion of our management s attention from our existing business to integrate operations and personnel possible material adverse effects on our results of operations during the integration process becoming subject to contingent or other liabilities including liabilities arising from events or conduct predating the acquisition that were not known to us at the time of the acquisition and our possible inability to achieve the intended objectives of the transaction including the inability to achieve cost savings and synergies Acquisitions may also have unanticipated tax legal regulatory and accounting ramifications including recording goodwill and non amortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges and incurring amortization expenses related to certain intangible assets
A strategic service provider relationship between two independent businesses is a complex costly and time consuming process that will require significant management attention and resources Realizing the benefits of our strategic business relationship with VST and with the F L Relationship will depend in part on our ability to work with our strategic service providers to integrate our systems simplify the customer experience offer compelling solutions to our customers and maintain financially beneficial terms Setting up and maintaining the operations and processes of these strategic relationships may cause us to incur significant costs disrupt our business and if implemented ineffectively would limit the expected benefits to us The failure to successfully and timely implement and operate our strategic relationships could harm our ability to realize the anticipated benefits of these relationships and could adversely affect our results of operations
In the future we may invest in new products and services and other initiatives to generate revenues but there is no guarantee these approaches will be successful Development of new products and services create integration risk while development of new products and services and enhancements to existing products and services involve significant time labor and expense and are also subject to risks and challenges including managing the length of the development cycle entry into
new markets integration into our existing business legal and regulatory compliance evolution in sales and marketing methods and maintenance and protection of intellectual property and proprietary rights If we are not successful with our new products and services we may not be able to maintain or increase our revenues as anticipated or recover any associated development costs and our financial results could be adversely affected
Our business involves the receipt storage processing and transmission of personal information about customers and employees In accordance with our published privacy policies we may share non deidentified personal information about such persons between our affiliates and with certain vendors and third parties that assist with certain aspects of our business pursuant to written agreements Also in connection with our student financial aid platform and the processing of college and university debit cards we have access to certain student personal information that has been provided to us by the colleges and universities we serve Our handling and use of personal information is subject to applicable federal and state privacy and information security laws and regulations and industry standards such as the Payment Card Industry Data Security Standard As an entity that provides services to institutions of higher education we are contractually bound to handle certain personal information from student education records in accordance with the requirements of Family Educational Rights and Privacy Act FERPA Privacy and information security laws regulations and applicable industry standards are evolving rapidly and our on going compliance with them may result in cost increases due to necessary systems changes and the development of new processes which may be difficult to timely implement If we fail to materially comply with these applicable laws regulations and industry standards we could be subject to increased legal risk In addition even if we materially comply with all applicable laws regulations and industry standards and even though we have taken significant steps to protect non deidentified personal information e g encrypting such personal information in transit and at rest we could experience a data security breach and our reputation could be damaged possibly resulting in a material breach of contract with one or more of our clients litigation and or lost future sales or decreased usage of credit and debit card products Further in the event that we disclose unencrypted non deidentified student information in violation of our contractual FERPA obligations the U S Department of Education could require a client to suspend our access to their student information Because the techniques used to obtain unauthorized access disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target we may be unable to anticipate these techniques or to implement adequate preventative measures A party that is able to circumvent our security measures could misappropriate our proprietary information or our customers and employees personal information and cause interruption in our operations Any compromise of our data security could result in a violation of applicable laws regulations or industry standards significant legal and financial exposure beyond the scope or limits of insurance coverage increased operating costs associated with remediation equipment acquisitions or disposal and added personnel and a loss of confidence in our security measures which could harm our business or affect investor confidence Data security breaches may also result from non malicious and non technical means for example inadvertent actions by an employee
Although most of our personnel and consumers are in the United States we do have some personnel and consumers located outside the United States These international operations may subject us to a complex array of international laws and regulations relating to the collection use retention disclosure security and transfer of personally identifiable information Many jurisdictions have passed laws in this area and other jurisdictions are considering imposing additional restrictions The interpretation and application of data protection laws in the United States and elsewhere are rapidly evolving It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our current data practices Complying with applicable international laws and regulations could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business
Further although we continue to implement internal controls and procedures designed to protect our proprietary and confidential information and non deidentified customer and employee personal data including sensitive personal data in order to comply with privacy and information security laws and regulations our facilities and systems may be vulnerable to security breaches and other data loss including cyber attacks Such a security breach or data loss could lead to negative publicity damage to our reputation exposure to litigation and liability theft modification or destruction of proprietary information and personal data damage to or inaccessibility of critical systems manufacture of defective products production downtimes operational disruptions and remediation and other significant costs which could adversely affect our reputation financial condition and results of operations
We are increasingly dependent upon information technology systems infrastructure and data Our computer systems may be vulnerable to service interruption or destruction malicious intrusion ransomware and cyber attacks Cyber attacks are increasing in their frequency sophistication and intensity and have become increasingly difficult to detect Cyber attacks could include the deployment of harmful malware denial of service social engineering ransomware and other means to affect service reliability and threaten data confidentiality integrity and availability Our key business service providers and vendors face similar risks and a security breach of their systems could adversely affect our security posture While we continue to invest in data protection and information security technology to prevent or minimize these risks and to date we have not experienced any material service interruptions and are not aware of any material breaches there can be no assurance that our efforts will prevent service interruptions or identify breaches in our systems that could adversely affect our business and operations and or result in the loss of critical or sensitive information which could result in financial legal business or reputational harm
Our wholesale business sells and services point of sales systems to its college bookstore customers These systems are complex and incorporate third party hardware and software Despite testing and quality control we cannot be certain that defects or errors will not be found in these systems In addition because these systems are installed in different environments we may experience difficulty or delay in installation Our products may be integrated with other components or software and in the event that there are defects or errors it may be difficult to determine the origin of defects or errors Additionally any difficulty or failure in the operation of these systems could cause business disruption for our customers If any of these risks materialize they could result in additional costs and expenses exposure to liability claims diversion of technical and other resources to engage in remediation efforts loss of customers or negative publicity each of which could impact our business and operating results
We rely upon third party web service providers to operate certain aspects of our service and any disruption of or interference with such services would impact our operations and our business would be materially and adversely impacted
Amazon Web Services AWS and other third party web service providers provide a distributed computing infrastructure platform for business operations or what is commonly referred to as a cloud computing service We have architected our software and computer systems so as to utilize data processing storage capabilities and other services provided by AWS and other providers
We rely on third party software and service providers including AWS to provide systems storage and services including user log in authentication for our website Any technical problem with cyber attack on or loss of access to such third parties systems servers or technologies could result in the inability of our students to rent or purchase print textbooks interfere with access to our digital content and other online products and services or result in the theft of end user personal information
Our reliance on AWS or other third party providers makes us vulnerable to any errors interruptions or delays in their operations Any disruption in the services provided by AWS could harm our reputation or brand adversely impact consumers and or cause us to lose revenues or incur substantial recovery costs and distract management from operating our business
AWS may terminate its agreement with us upon 30 days notice Upon expiration or termination of our agreement with AWS we may not be able to replace the services provided to us in a timely manner or on terms and conditions including service levels and cost that are favorable to us and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete
Our marketing and sales efforts are centered around an active digital community which includes engaged email subscribers text messaging interest based online advertising recurring billing and our continuous dialogue with customers on our school customized social media channels For example the following laws and regulations may apply
the CAN SPAM Act of 2003 and similar laws adopted by most U S states pertaining directly or indirectly to commercial email regulate unsolicited commercial emails create civil and criminal penalties for emails containing fraudulent headers and control other abusive online marketing practices
the U S Federal Trade Commission the FTC has guidelines that impose responsibilities on companies with respect to communications with consumers and impose fines and liability for failure to comply with rules with respect to advertising or marketing or sales practices they may deem misleading or deceptive
the Telephone Consumer Protection Act of 1991 TCPA restricts telemarketing and the use of automated telephone equipment The TCPA limits the use of automatic dialing systems artificial or prerecorded voice messages and SMS text messages It also applies to unsolicited text messages advertising the commercial availability of goods or services Additionally a number of states have enacted statutes that address telemarketing For example some states such as California Illinois and New York have created do not call lists Other states such as Oregon and Washington have enacted no rebuttal statutes that require the telemarketer to end the call when the consumer indicates that he or she is not interested in the product being sold Restrictions on telephone marketing including calls and text messages are enforced by the FTC the Federal Communications Commission states and through the availability of statutory damages and class action lawsuits for violations of the TCPA
The Restore Online Shopper Confidence Act ROSCA and similar state laws impose requirements and restrictions on online services that automatically charge payment cards on a periodic basis to renew a subscription service if the consumer does not cancel the service
In the absence of a federal comprehensive data privacy law 16 U S states have enacted comprehensive consumer privacy laws as of April 29 2024 e g the California Consumer Privacy Act CCPA which became effective on January 1 2020 with enforcement commencing on July 1 2020 CCPA as amended provides California consumers the right to know what personal data companies collect how it is used and the right to access delete and opt out of sale of their personal information to third parties It also expands the definition of personal information and gives consumers increased privacy rights and protections for that information The California Privacy Rights Act CPRA took effect on December 16 2020 and became fully operative on January 1 2023 CPRA amends and adds to CCPA by strengthening rights of California consumers further restricting business use of consumer personal information and establishing a new government agency for enforcement Other states enacting comprehensive consumer privacy laws include Colorado Connecticut Delaware Indiana Iowa Kentucky Montana Nebraska New Hampshire New Jersey Oregon Tennessee Texas Utah and Virginia
Even if no applicable laws or regulations are further enacted we may discontinue use or support of these activities if we become concerned that consumers deem them intrusive or they otherwise adversely affect our goodwill and brand If our marketing activities are curtailed our ability to attract new customers may be adversely affected
We are subject to laws and regulations applicable to our business These laws and regulations may cover taxation data privacy information security our access to student financial aid pricing and availability of educational materials competition and or antitrust content copyrights distribution college distribution mobile communications electronic contracts and other communications consumer protection artificial intelligence the provision of online payment services unencumbered Internet access to our services the design and operation of websites and mobile application including complying with the Americans with Disabilities Act digital content including governmental investigations and litigation relating to the agency pricing model for digital content distribution the characteristics and quality of products and services and labor and employee benefits including the costs associated with complying with the Patient Protection and Affordable Care Act or any legislation enacted in connection with repeal of the Affordable Care Act Changes in applicable federal state local or international laws rules or regulations relating to these matters could increase regulatory compliance requirements in addition to increasing our costs of doing business or otherwise impact our business For example changes in federal and state minimum wage laws could raise the wage requirements for certain of our employees at our retail locations which would increase our selling costs and may cause us to reexamine our wage structure for such employees
We collected sales tax on the majority of the products and services that we sold in our respective prior fiscal years that were subject to sales tax and we generally have continued the same policies for sales tax within the current fiscal year While management believes that the financial statements included elsewhere in this Form 10 K reflect management s best current estimate of any potential additional sales tax liability based on current discussions with taxing authorities we cannot assure you that the outcome of any discussions with any taxing authority will not result in the payment of sales taxes for prior periods or otherwise or that the amount of any such payments will not be materially in excess of any liability currently recorded In the future our businesses may be subject to claims for not collecting sales tax on the products and services we currently sell for which sales tax is not collected In addition our provision for income taxes and our obligation to pay income tax is based on existing federal state and local tax laws Changes to these laws in particular as they relate to depreciation amortization and cost of goods sold could have a significant impact on our income tax provision our projected cash tax liability or both
We contract with certain third parties to offer their digital content Our licensing arrangements with these third parties do not guarantee the continuation or renewal of these arrangements on reasonable terms if at all Some third party content providers currently or in the future may offer competing products and services and could take action to make it more difficult or impossible for us to license our content in the future Other content owners providers or distributors may seek to limit our access to or increase the total cost of such content If we are unable to offer a wide variety of content at reasonable prices with acceptable usage rules our business may be materially adversely affected
We rely heavily on proprietary technology and sophisticated equipment to manage certain aspects of our business including to manage textbook inventory process deliveries and returns of the textbooks and manage warehousing and distribution
We use a proprietary system to source distribute and manage inventory of textbooks and to manage other aspects of our operations including systems to consider the market pricing for textbooks general availability of textbook titles and other factors to determine how to buy textbooks and set prices for textbooks and other content in real time We have invested significant amounts of resources in the hardware and software to develop this system We rely on the expertise of our engineering and software development teams to maintain and enhance the equipment and software used for our distribution operations We cannot be sure that the maintenance and enhancements we make to our distribution operations will achieve the intended results or otherwise be of value to students If we are unable to maintain and enhance our technology to manage textbook sourcing distribution and inventory it could disrupt our business operations and have a material adverse impact on our results
Our wholesale business is also dependent on sophisticated equipment and related software technology for the warehousing and distribution of the vast majority of used textbooks supplied to our retail business and others which is located at MBS warehouse facility in Columbia Missouri Our ability to efficiently manage our wholesale business depends significantly on the reliability and capacity of these systems The failure of these systems to operate effectively problems with maintenance upgrading or transitioning to replacement systems especially if such events were to occur during peak periods could adversely affect our operations the ability to serve our customers and our results of operations In addition substantially all of our wholesale inventory is located in the Columbia warehouse facility We could experience significant interruption in the operation of this facility or damage or destruction of our inventory due to physical damage to the facility caused by natural disasters accidents or otherwise If a material portion of our inventory were to be damaged or destroyed we would likely incur significant financial loss including loss of revenue and harm to our customer relationships
We regard our trademarks service marks copyrights patents trade dress trade secrets proprietary technology and similar intellectual property as important to our success and we rely on trademark copyright and patent law domain name regulations trade secret protection and confidentiality or license agreements to protect our proprietary rights including our use of the
trademark Laws and regulations may not adequately protect our trademarks and similar proprietary rights We may be unable to prevent third parties from acquiring domain names that are similar to infringe upon or diminish the value of our trademarks and other proprietary or licensed rights
We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights The protection of our intellectual property may require the expenditure of significant financial and managerial resources Moreover the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights
Other parties also may claim that we infringe their proprietary rights Because of the changes in Internet commerce and digital content businesses current extensive patent coverage and the rapid rate of issuance of new patents it is possible that certain of our products content and business methods may unknowingly infringe existing patents or intellectual property rights of others Successful intellectual property infringement claims against us could result in monetary liability or a material disruption in the conduct of our business We cannot be certain that our products content and business methods do not or will not infringe valid patents trademarks copyrights or other intellectual property rights held by third parties We expect that infringement claims in our markets will increase in number We may be subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business If we were found to have infringed the intellectual property rights of a third party we could be liable to that party for license fees royalty payments lost profits or other damages and the owner of the intellectual property might be able to obtain injunctive relief to prevent us from using the
technology or software in the future If the amounts of these payments were significant or we were prevented from incorporating certain technology or software into our products our business could be significantly harmed
We may incur substantial expenses in defending against these third party infringement claims regardless of their merit As a result due to the diversion of management time the expense required to defend against any claim and the potential liability associated with any lawsuit any significant litigation could significantly harm our business financial condition and results of operations
Our digital content offerings depend in part on effective digital rights management technology to control access to digital content If the digital rights management technology that we use is compromised or otherwise malfunctions we could be subject to claims and content providers may be unwilling to include their content in our service
In addition the publishing industry has been and we expect in the future will continue to be the target of counterfeiting and piracy We have entered into agreements with major textbook publishers to implement the textbook industry s Anti Counterfeit Best Practices These best practices were developed as a mechanism to assist publishers and distributors in the eradication of counterfeit copies of textbooks in the marketplace While we have agreed to implement the Anti Counterfeit Best Practices and have in place our anti counterfeit policies and procedures which include removing from distribution suspected counterfeit titles for preventing the proliferation of counterfeit textbooks we may inadvertently purchase counterfeit textbooks which may unknowingly be included in the textbooks we offer for sale or rent to students or we may purchase such textbooks through our buyback program As such we may be subject to allegations of selling counterfeit books We have in the past and may continue to receive communications from publishers alleging that certain textbooks sold or rented by us are counterfeit When receiving such communications we cooperate and will continue to cooperate in the future with such publishers in identifying fraudulent textbooks and removing them from our inventory We may implement measures in an effort to protect against these potential liabilities that could require us to spend substantial resources Any costs incurred as a result of liability or asserted liability relating to sales of counterfeit textbooks could harm our business reputation and financial condition
In connection with the Spin Off Barnes Noble Inc granted us an exclusive perpetual fully paid up non transferable and non assignable license to use the trademarks Barnes Noble College B N College Barnes Noble Education and B N Education and the non exclusive perpetual fully paid up non transferable and non assignable license to use the marks Barnes Noble B N and BN solely in connection with the contract management of college and university bookstores and other bookstores associated with academic institutions and related websites as well as education products and services including digital education products and services and related websites These restrictions may materially limit our ability to use the licensed marks in the expansion of our operations in the future In addition we are reliant on Barnes Noble Inc to maintain the licensed trademarks
We are not in compliance with the NYSE s minimum share price requirement and thus are at risk of the NYSE delisting shares of our Common Stock which would have an adverse impact on the trading volume liquidity and market price of shares of our Common Stock
On February 27 2024 we received a letter from NYSE notifying us that for the last 30 consecutive business days the bid price of our common stock had closed below 1 00 per share the minimum closing bid price required by the continued listing requirements of Rule 802 01C of the NYSE Listed Company Manual Pursuant to Rule 802 01C of the NYSE Listed Company Manual a company will be considered to be below compliance standards if the average closing price of a security fell below 1 00 over a period of 30 consecutive trading days A company can regain compliance with the minimum share price requirement at any time during the six month cure period if on the last trading day of any calendar month during the cure period the company has i a closing share price of at least 1 00 and ii an average closing share price of at least 1 00 over the 30 trading day period ending on the last trading day of that month In the event that at the expiration of the six month cure period both a 1 00 closing share price on the last trading day of the cure period and a 1 00 average closing share price over the 30 trading day period ending on the last trading day of the cure period are not attained the NYSE will commence suspension and delisting procedures We have taken remedial actions to cure such deficiency On June 11 2024 we completed a reverse stock split of the Company s outstanding shares of common stock at a ratio of 1 for 100 the Reverse Stock Split which was previously approved by stockholders at a special meeting held on June 5 2024 In connection with the Reverse Stock Split every 100 shares of the common stock issued and outstanding was converted into one share of the Company s common stock However we cannot assure you that we will be able to cure this deficiency or comply with other NYSE continued listing standards A delisting of shares of our Common Stock from the NYSE could negatively impact us as it would
likely reduce the liquidity and market price of shares of our Common Stock reduce the number of investors willing to hold or acquire shares of our Common Stock and negatively impact our ability to access equity markets and obtain financing
Based on the foregoing Immersion TopLids and Vital have considerable influence or collective veto control regarding the outcome of any transaction or action that requires stockholder approval including the election of our Board of Directors mergers acquisitions amendments to our charter and various corporate governance actions
Our Board of Directors is composed of seven members four of whom are executives and members of the Board of Directors of Immersion Corporation Immersion has agreed to maintain at least three directors on our Board of Directors that satisfy the independence standard under NYSE rules applicable to audit committee members However Immersion through its stock ownership may have significant influence over the election of all Board members inclusive of the independent directors
Each of Immersion TopLids and Vital may have interests different than those of other stockholders For example they may delay or prevent a change of control of us even if such a change of control would benefit other stockholders or pursue strategies that are different from the wishes of other investors The significant concentration of stock ownership may adversely affect the trading price of our Common Stock due to investors perception that conflicts of interest may exist or arise
Sales of a substantial number of shares of Common Stock in the public market could occur at any time If our existing stockholders sell substantial amounts of Common Stock in the public market or the market perceives that they intend to do so the market price of our Common Stock could decline The registration of shares of Common Stock for resale creates the possibility of a significant increase in the supply of our Common Stock in the market The increased supply coupled with the potential disparity in purchase prices may lead to heightened selling pressure which could negatively affect the public trading price of our Common Stock
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company These broad market fluctuations could adversely affect the trading price of our Common Stock
Provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By laws and of Delaware law may prevent or delay an acquisition of the Company which could affect the trading price of our Common Stock
Our Amended and Restated Certificate of Incorporation and our Amended and Restated By laws contain provisions which together with applicable Delaware law may discourage delay or prevent a merger or acquisition that our stockholders consider favorable including provisions that
authorize the issuance of blank check preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares of capital stock making a takeover more difficult and expensive
In addition Section 203 of the General Corporation Law of the State of Delaware or the DGCL may affect the ability of an interested stockholder to engage in certain business combinations for a period of three years following the time that the stockholder becomes an interested stockholder
These provisions may discourage delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of the Company including unsolicited takeover attempts even though the transaction may offer our stockholders the opportunity to sell their Common Stock at a price above the prevailing market price
In order to provide the Board with time to make informed decisions that are in the best long term interests of the Company and its stockholders on April 16 2024 our Board adopted a stockholders rights plan such plan which could discourage delay or prevent an acquisition of the Company at a premium price The rights plan provides for preferred stock purchase rights attached to each share of our Common Stock which will cause substantial dilution to a person or group acquiring 10 or more of our stock if the acquisition is not approved by our Board of Directors
As a result the overall effect of the rights plan may be to render more difficult or discourage a merger tender or exchange offer or other business combination involving our Company that is not approved by the Board of Directors even if the offer may be considered beneficial by some stockholders
Our Amended and Restated By laws designate courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors officers or employees
Our Amended and Restated By laws provide that subject to limited exceptions the state and federal courts of the State of Delaware are the sole and exclusive forum for a any derivative action or proceeding brought on our behalf b any action asserting a claim of breach of a fiduciary duty owed by any of our directors officers or other employees to us or our stockholders c any action asserting a claim arising pursuant to any provision of the DGCL our Amended and Restated Certificate of Incorporation or our Amended and Restated By laws or d any other action asserting a claim that is governed by the internal affairs doctrine Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and to have consented to these provisions This provision may limit a stockholder s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors officers or other employees which may discourage such lawsuits against us and our directors officers and employees
Alternatively if a court were to find this provision of our Amended and Restated By laws inapplicable to or unenforceable in respect of one or more of the specified types of actions or proceedings we may incur additional costs associated with resolving such matters in other jurisdictions
The company s information security program is meticulously crafted integrating administrative technical and physical safeguards Embracing a risk based approach we proactively mitigate cybersecurity risks to ensure the confidentiality integrity and availability of our information systems and data assets This comprehensive framework extends to overseeing service provider relationships aligning with the specific risks associated with each engagement
Deploying a multi tiered defense strategy we fortify our defenses with layers of controls designed to identify protect against detect respond to and recover from cybersecurity incidents Central to this effort is our Cyber Security Team entrusted with the critical task of swiftly detecting mitigating and remediating cybersecurity threats Guided by our documented incident response plans we orchestrate a swift and decisive response engaging functional areas internal escalations and stakeholders as dictated by the nature and severity of the incident
Key to our cybersecurity resilience we strategically leverage third party expertise and tools to augment our defenses ensuring a proactive stance against evolving threats Rigorous assessments by third party auditors validate the alignment of specific components of our technology environment with industry standards such as the Payment Card Industry Data Security Standards ensuring robust compliance and resilience
Industry standards such as the National Institute of Standards and Technology s Framework for Improving Critical Infrastructure Cybersecurity inform our program and are the basis our compliance commitment Regular maturity assessments conducted by external experts ensure that our cybersecurity program remains at the forefront of industry best practices tailored to our unique operational landscape
Although cybersecurity threats are an inherent part of the digital landscape we stand resilient While past incidents have been swiftly addressed without material impact on our operations or financial standing we remain vigilant Our Enterprise Risk Management program recognizes the ongoing nature of cybersecurity risks and our commitment to mitigating potential impacts on our operations business strategy and financial health
Our Board of Directors Audit Committee and Legal team oversee the cybersecurity processes of identifying and mitigating cybersecurity risks Reporting directly to our Chief Information Officer our Chief Information Security Officer CISO leads the charge ensuring that our cybersecurity posture remains robust and adaptive Through quarterly updates to the Audit Committee and periodic briefings to the Board of Directors senior management keeps governance structures informed and aligned with our evolving cybersecurity landscape
experience The last two decades have focused on IT security and innovative ways to manage and lead a security team Previously the CISO was the Director of IT Security and Infrastructure at The Children s Place Inc The CISO is experienced in deploying a Zero Trust framework Identity and Access Management programs Email and Web Gateways managing IT compliance for SOX PCI and ADA and has developed and introduced new information security and computer risk management programs based on National Institute of Standards and Technology NIST Cybersecurity Framework across numerous platforms for multiple retail chains
Supported by a dynamic leadership team comprised of seasoned professionals our cybersecurity initiatives are not just policies they re a testament to our commitment to securing customer information and upholding our privacy promises Embedded in our Code of Conduct Ethics and reinforced through our security awareness training program cybersecurity awareness is not just a task it s a shared responsibility woven into the fabric of our corporate culture
For our physical campus retail operations we typically have the exclusive right to operate the official physical school bookstore on college campuses through multi year management service agreements with our schools In turn we pay the school a percentage of store sales and in some cases a minimum fixed guarantee These contracts with colleges and universities are typically five years with renewal options but can range from one to 15 years and are typically cancellable by either party without penalty with 90 to 120 days notice
We are involved in a variety of claims suits investigations and proceedings that arise from time to time in the ordinary course of our business including actions with respect to contracts intellectual property taxation employment benefits personal injuries and other matters We record a liability when we believe that it is both probable that a loss has been incurred and the amount of loss can be reasonably estimated Based on our current knowledge we do not believe that there is a reasonable possibility that the final outcome of any pending or threatened legal proceedings to which we or any of our subsidiaries are a party either individually or in the aggregate will have a material adverse effect on our future financial results However legal matters are inherently unpredictable and subject to significant uncertainties some of which are beyond our control As such there can be no assurance that the final outcome of these matters will not materially and adversely affect our business financial condition results of operations or cash flows
As of April 27 2024 our authorized capital stock consisted of 200 000 000 shares of common stock par value 0 01 per share and 5 000 000 shares of preferred stock par value 0 01 per share Our common stock trades on the New York Stock Exchange NYSE under the symbol BNED
On October 5 2023 our shareholders approved an amendment and restatement of the Equity Incentive Plan to increase the number of shares available for issuance by an additional 4 500 000 of our Common Stock We have reserved an aggregate of 17 909 345 shares of common stock for future grants in accordance with the Barnes Noble Education Inc Equity Incentive Plan See
On June 5 2024 our shareholders approved an amendment to our Amended and Restated Certificate of Incorporation as amended to increase the aggregate number of authorized shares of Common Stock from 200 000 000 shares to 10 000 000 000 shares
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
Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of our Common Stock as of such time the weighted average shares outstanding and basic and diluted earnings loss per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented by a factor of 5 03
On June 11 2024 we completed a reverse stock split of the Company s outstanding shares of common stock at a ratio of 1 for 100 the Reverse Stock Split which was previously approved by stockholders at a special meeting held on June 5 2024 In connection with the Reverse Stock Split every 100 shares of the common stock issued and outstanding was converted into one share of the Company s common stock No change will be made to the trading symbol for the Company s shares of Common Stock BNED in connection with the Reverse Stock Split The Reverse Stock Split is part of the Company s plan to regain compliance with the minimum bid price requirement of 1 00 per share required to maintain continued listing on the NYSE
As of April 27 2024 there were approximately 672 registered holders of record of our common stock A substantially greater number of holders of our common stock are street name or beneficial holders whose shares of record are held by banks brokers and other financial institutions
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 2023 we did not repurchase shares under the stock repurchase program As of April 27 2024 approximately 26 7 million remains available under the stock repurchase program
During the years ended April 27 2024 and April 29 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
We paid no other dividends to common stockholders during the years ended April 27 2024 and April 29 2023 We do not intend to pay dividends on our common stock in the foreseeable future and dividend payments are not permitted under current or future financing arrangements
On April 16 2024 our Board of Directors approved the adoption of a short term stockholder rights plan and declared a dividend distribution of one preferred share purchase right on each outstanding share of the Company s common stock Each right will entitle stockholders to buy one one thousandth of a share of our preferred stock at an established exercise price The dividend was payable to holders of record as of the close of business on April 29 2024 The rights will be exercisable only if a person or group acquires 10 or more of our outstanding common stock and various other criteria are met the Distribution Date Until the Distribution Date the rights will not be exercisable the rights will not be evidenced by separate rights certificates
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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 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
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
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
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
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
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
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
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
We have audited the accompanying consolidated balance sheets of Barnes Noble Education Inc and subsidiaries the Company as of April 27 2024 and April 29 2023 the related consolidated statements of operations equity and cash flows for each of the two years in the period ended April 27 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a 2 collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company at April 27 2024 and April 29 2023 and the results of its operations and its cash flows for each of the two years in the period ended April 27 2024 in conformity with U S generally accepted accounting principles
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud The Company is not required to have nor were we engaged to perform an audit of its internal control over financial reporting As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control over financial reporting Accordingly we express no such opinion
Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that 1 relate to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matters below providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate
Auditing management s estimate of the reserves for non returnable inventory involved especially subjective auditor judgment as such estimates are based on various factors that are affected by current and future market and economic conditions In particular the reserve calculations are sensitive to certain significant assumptions including markdowns sales below cost inventory aging and expected demand
Our procedures included among others evaluating the significant assumptions identified above and testing the accuracy and completeness of the underlying data used in management s inventory reserve calculation We recalculated the reserve using management s methodology and assumptions and we evaluated the methodology and the significant assumptions for reasonableness by comparing them to the related actual historical activity and expected future market and economic conditions We also analyzed the impact of reasonable changes to the significant assumptions on the recorded inventory reserves
As described in Note 2 to the consolidated financial statements the Company tests its long lived assets for impairment if an event occurs or circumstances change that would indicate the carrying amount may not be recoverable If the carrying amount of a long lived asset group exceeds its fair value the asset group is written down to its fair value and an impairment charge is recognized During the fiscal year 2024 the Company recognized an impairment charge of 7 2 million related to long lived assets at certain of its stores
Auditing the Company s impairment of store long lived assets was complex and highly judgmental due to the significant estimation required 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
Our testing of the Company s impairment analysis included among other procedures evaluating the significant assumptions described above and the operating data used to calculate the estimated future cash flows of the stores and to determine fair values We tested the completeness and accuracy of the data used by the Company in its analysis We also compared the significant assumptions used to determine the projected cash flows to historical operating results of the stores management s expectations related to recovery from the pandemic and published third party information regarding overall college and university enrollment trends and we obtained an understanding of the business initiatives supporting the assumptions used to estimate the future cash flows through inquiries of management and inspection of internal and external communications
Unless the context otherwise indicates references in these Notes to the accompanying consolidated financial statements to we us our and the Company refer to Barnes Noble Education Inc or BNED a Delaware corporation References to Barnes Noble College refer to our college bookstore business operated through our subsidiary Barnes Noble College Booksellers LLC References to MBS refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange LLC
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
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
which provide faculty required course materials on or before the first day of class 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 See
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 See
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
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
representing enrollment of nearly 805 000 undergraduate and post graduate students as reported by National Center for Education Statistics as of October 26 2023 an increase of approximately 39 compared to Spring of 2023 During the 52 weeks ended April 27 2024
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
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
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 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 Net income loss is equal to comprehensive income loss on our consolidated statement of operations In the opinion of the Company s management the accompanying consolidated financial statements of the Company contain all adjustments consisting of only normal recurring adjustments necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported
Our fiscal year is comprised of 52 or 53 weeks ending on the Saturday closest to the last day of April The fiscal year periods for each of the last three fiscal years consisted of the 52 weeks ended April 27 2024 Fiscal 2024 and 52 weeks ended April 29 2023 Fiscal 2023
On June 10 2024 subsequent to the end of Fiscal 2024 we completed various transactions including an equity rights offering Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of our Common Stock as of such time the weighted average shares outstanding and basic and diluted earnings loss per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented by a factor of 5 03 On June 11 2024 subsequent to the end of Fiscal 2024 we completed a reverse stock split of our outstanding shares of common stock at a ratio of 1 for 100 in which every 100 shares of the common stock issued and outstanding was converted into one share of our common stock The weighted average common shares and loss per common share reflect the bonus element resulting from the equity rights offering and the reverse stock split for all periods presented on the consolidated statements of operations For additional information see
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
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 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 40 000 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
We received gross proceeds of 95 000 of new equity capital through a 50 000 new equity investment the Private Investment led by Immersion Corporation Immersion and a 45 000 fully backstopped equity rights offering the Rights Offering The Transactions infused approximately 80 000 of net cash proceeds after transaction costs The transaction resulted in Immersion obtaining controlling financial interest
Our existing Term Loan credit agreement lenders TopLids LendCo LLC and Vital Fundco LLC converted approximately 34 000 of outstanding principal and any accrued and unpaid interest into our common stock
We refinanced our Credit Facility providing access to a 325 000 facility maturing in 2028 The refinanced Credit Facility will meaningfully enhance our financial flexibility and reduce our annual interest expense
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 For additional information related to the rights offering new equity investment Term Loan credit agreement debt conversion and Credit Facility refinancing terms see
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 ability to secure inventory on a timely basis as well as shifts in our fiscal calendar dates
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 textbook where revenue is recognized over the rental period and ii ala 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
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 See Revenue Recognition and Deferred Revenue discussion below
In preparing financial statements in conformity with GAAP we are required to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes Actual results could differ from those estimates
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 All corresponding prior year periods presented in our financial statements and related information in the accompanying notes have been reclassified to reflect the Asset Held for Sale and Discontinued Operations presentation
On May 31 2023 we completed the sale of these assets related to our DSS Segment for cash proceeds of 20 000 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 3 545 in Loss from Discontinued Operations Net related to the sale Net cash proceeds from the sale were used for debt repayment and provided additional funds for working capital needs under our Credit Facility The following table summarizes the operating results of the discontinued operations for the periods indicated
a Cost of sales and Gross margin for the DSS Segment includes amortization expense non cash related to content development costs of 0 and 6 594 for the 52 weeks ended April 27 2024 and April 29 2023 respectively
we recognized an impairment loss non cash of 610 both pre tax and after tax comprised of 119 and 491 of property and equipment and operating lease right of use assets respectively on the consolidated statement of operations as part of discontinued operations
As of April 27 2024 we had restricted cash of 18 111 comprised of 17 146 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and 965 in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans
As of April 29 2023 we had restricted cash of 16 712 comprised of 15 790 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and 922 in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans
Receivables represent customer private and public institutional and government billings colleges universities and other financial aid providers credit debit card receivables advances for book buybacks advertising and other receivables due within one year Components of accounts receivables are as follows
Accounts receivable are presented on our consolidated balance sheets net of allowances An allowance for doubtful accounts is determined through an analysis of the aging of accounts receivable and assessments of collectability based on historical trends the financial condition of our customers and an evaluation of economic conditions We write off uncollectible
trade receivables once collection efforts have been exhausted and record bad debt expenses related to textbook rentals that are not returned and we are unable to successfully charge the customer Allowance for doubtful accounts were 867 and 1 156 as of April 27 2024 and April 29 2023 respectively
Merchandise inventories which consist of finished goods are stated at the lower of cost or market Market value of our inventory which is all purchased finished goods is determined based on its estimated net realizable value which is generally the selling price less normally predictable costs of disposal and transportation Reserves for non returnable inventory are based on our history of liquidating non returnable inventory which includes certain significant assumptions including markdowns sales below cost inventory aging and expected demand
Cost is determined primarily by the retail inventory method for our Retail segment Our textbook and trade book inventories for Retail and Wholesale 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
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
The Retail Segment fulfillment order is directed first to our wholesale business before other sources of inventory are utilized The products that we sell originate from a wide variety of domestic and international vendors After internal sourcing the bookstore purchases textbooks from outside suppliers and publishers The Retail Segment s four largest suppliers excluding the supply sourced from our Wholesale Segment accounted for approximately 26 of our merchandise purchased during the 52 weeks ended April 27 2024 For our Wholesale Segment the four largest suppliers excluding textbooks purchased from students at our Retail Segment s bookstores accounted for approximately 24 of merchandise purchases during the 52 weeks ended April 27 2024
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
Implementation costs incurred in a cloud computing arrangement or hosting arrangement that is a service contract are amortized to hosting expense over the term of the arrangement beginning when the module or component of the hosting arrangement is ready for its intended use Implementation costs are included in prepaid expenses and other assets in the consolidated balance sheets and amortized to selling and administrative expense in the consolidated statement of operations Implementation costs incurred in cloud computing arrangements reflected in prepaid and other assets in the consolidated balance sheets were 6 367 and 9 359 as of April 27 2024 and April 29 2023 respectively We had 4 286 and 6 460 of amortization of implementation costs in selling and administrative expense in the consolidated statement of operations for the 52 weeks ended April 27 2024 and April 29 2023 respectively
Property and equipment are carried at cost less accumulated depreciation and amortization Depreciation and amortization is computed using the straight line method over estimated useful lives Maintenance and repairs are expensed as incurred however major maintenance and remodeling costs are capitalized if they extend the useful life of the asset We had 27 281 and 29 401 of depreciation expense in the consolidated statement of operations for the 52 weeks ended April 27 2024 and April 29 2023 respectively
Content development costs are primarily related to development of courseware Content amortization is computed using the straight line method over estimated useful lives Amortization of content development costs is recorded to cost of goods sold We had 0 and 26 of content amortization expense in the consolidated statement of operations for the 52 weeks ended April 27 2024 and April 29 2023 respectively
We do not recognize lease assets or lease liabilities for short term leases i e those with a term of twelve months or less We recognize lease expense on a straight line basis over the lease term for contracts with fixed lease payments including those with fixed annual minimums or over a rolling twelve month period for leases where the annual guarantee resets at the start of each contract year in order to best reflect the pattern of usage of the underlying leased asset We recognize lease expense related to our college and university contracts as cost of sales in our consolidated statement of operations and we recognize lease expense related to our various office spaces as selling and administrative expenses in our consolidated statement of operations For additional information see
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 52 912 202 522 94 191 and 24 703 respectively on our consolidated balance sheet As of April 29 2023 our other long lived assets include property and equipment operating lease right of use assets amortizable intangibles and other noncurrent assets of 68 153 246 972 110 632 and 17 889 respectively on our consolidated balance sheet
We review our long lived assets for impairment whenever events or changes in circumstances including but not limited to contractual changes renewals or amendments are made to agreements with our college university or K 12 schools indicate that the carrying amount of an asset may not be recoverable in accordance with
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
Many college and universities are providing alternatives to traditional in person instruction including online and hybrid learning options Additionally enrollment trends have been negatively impacted at physical campuses Many other events such as parent and alumni weekends and prospective student campus tour activities offer a virtual option These combined events have reduced on campus activity as well as increased competition and disintermediation 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 7 166 both pre tax and after tax comprised of 405 3 600 and 3 161 of property and equipment operating lease right of use assets and amortizable intangibles respectively on the consolidated statements 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 6 008 both pre tax and after tax comprised of 708 1 697 3 599 and 4 of property and equipment operating lease right of use assets amortizable intangibles and other noncurrent assets 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 The significant assumptions used in the income approach 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 For additional information see
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
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
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 s 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 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
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 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 and revenue from other programs
Brand marketing agreements often include multiple performance obligations which are individually negotiated with our customers For these arrangements that contain distinct performance obligations we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price SSP of each distinct performance obligation to the total value of the contract The revenue is recognized as each performance obligation is satisfied typically at a point in time for brand marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions
Our cost of sales primarily includes costs such as merchandise costs textbook rental amortization content development cost amortization warehouse costs related to inventory management and order fulfillment insurance certain payroll costs and management service agreement costs including rent expense related to our college and university contracts and other facility related expenses
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 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
We have granted awards in accordance with the Barnes Noble Education Inc Equity Incentive Plan the Equity Incentive Plan Types of equity awards that can be granted under the Equity Incentive Plan include options restricted stock restricted stock units performance shares performance share units and phantom share units See
The provision for income taxes includes federal state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax basis of assets and liabilities The deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse We regularly review deferred tax assets for recoverability and establish a valuation allowance if determined to be necessary For additional information see
to improve annual income tax disclosure requirements primarily to 1 disclose specific categories in the rate reconciliation 2 provide additional information for reconciling items that meet a quantitative threshold and 3 enhance cash tax payment disclosures This ASU which can be applied either prospectively or retrospectively is effective for annual periods beginning after December 15 2024 with early adoption permitted We are currently assessing this guidance and determining the impact on our consolidated financial statements
to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses This guidance will be effective for the Company for the annual report for the fiscal year ending April 26 2025 and subsequent interim periods Early adoption is permitted and retrospective adoption is required for all prior periods presented We are currently assessing this guidance and determining the impact on our consolidated financial statements
Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services
Contract assets represent the sale of goods or services to a customer before we have the right to obtain consideration from the customer Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional Contract assets unbilled receivables were 0 as of both April 27 2024 and April 29 2023 on our consolidated balance sheets
Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability deferred revenue Deferred revenue consists of the following
unsatisfied performance obligations associated with the premium paid for the sale of treasury shares which are expected to be recognized over the term of the merchandising contracts for Fanatics and Lids respectively as discussed in
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 and is no longer a reportable segment On May 31 2023 we completed the sale of these assets related to our DSS Segment For additional information see
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 We identify our segments in accordance with the way our business is managed focusing on the financial information distributed and the manner in which our chief operating decision maker allocates resources and assesses financial performance The following summarizes the two segments For additional information about this segment s operations see
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
which provide faculty required course materials on or before the first day of class Additionally the Retail Segment offers a suite of digital content and services to colleges and universities including a variety of open educational resource based courseware
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
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
As of April 27 2024 our authorized capital stock consists of 200 000 000 shares of common stock par value 0 01 per share and 5 000 000 shares of preferred stock par value 0 01 per share As of April 27 2024 55 840 166 shares and 53 156 369 shares of our common stock were issued and outstanding respectively and 0 shares of our preferred stock were both issued and outstanding Our common stock trades on the New York Stock Exchange NYSE under the symbol BNED
On October 5 2023 our shareholders approved an amendment and restatement of the Equity Incentive Plan to increase the number of shares available for issuance by an additional 4 500 000 of our Common Stock We have reserved an aggregate of 17 909 345 shares of common stock for future grants in accordance with the Barnes Noble Education Inc Equity Incentive Plan See
On June 5 2024 our shareholders approved an amendment to our Amended and Restated Certificate of Incorporation as amended to increase the aggregate number of authorized shares of Common Stock from 200 000 000 shares to 10 000 000 000 shares
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
On June 11 2024 we completed a reverse stock split of the Company s outstanding shares of common stock at a ratio of 1 for 100 the Reverse Stock Split which was previously approved by stockholders at a special meeting held on June 5 2024 In connection with the Reverse Stock Split every 100 shares of the common stock issued and outstanding was converted into one share of the Company s common stock The Reverse Stock Split reduced the number of shares of the Company s outstanding common stock from approximately 2 620 495 552 shares as of June 11 2024 to approximately 26 204 956 shares subject to adjustment for rounding For additional information see
The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders Holders of shares of our common stock do not have cumulative voting rights in the election of directors The holders of our common stock will be entitled to share ratably in our assets legally available for distribution to our stockholders subject to the prior distribution rights of preferred stock if any then outstanding The holders of our common stock do not have preemptive rights or preferential rights to subscribe for shares of our capital stock
On December 14 2015 our Board of Directors authorized a stock repurchase program of up to 50 000 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 26 669 remains available under the stock repurchase program
During Fiscal 2024 and Fiscal 2023 we also repurchased 147 885 shares and 347 808 shares of our common stock in connection with employee tax withholding obligations for vested stock awards respectively
In December 2020 Fiscal 2021 we entered into a merchandising agreement with Fanatics and Lids which included a strategic equity investment in the Company Fanatics Inc and Lids Holdings Inc jointly as TopLids LendCo LLC TopLids purchased an aggregate 2 307 692 of our common shares issued from treasury shares for 15 000 representing a share price of 6 50 per share The premium price paid above the fair market value of our common stock at closing was
approximately 4 131 and was recorded as a contract liability which is recognized over the term of the merchandising contracts for Fanatics and Lids 211 and 211 respectively in accrued liabilities and 3 287 and 3 498 respectively as of April 27 2024 and April 29 2023 in other long term liabilities our consolidated balance sheet which is expected to be recognized over the term of the merchandising contracts for Fanatics and Lids as discussed in
We paid no other dividends to common stockholders during Fiscal 2024 and Fiscal 2023 We do not intend to pay dividends on our common stock in the foreseeable future and dividend payments are not permitted under current or future financing arrangements See
On April 16 2024 our Board of Directors approved the adoption of a short term stockholder rights plan and declared a dividend distribution of one preferred share purchase right on each outstanding share of the Company s common stock Each right will entitle stockholders to buy one one thousandth of a share of our preferred stock at an established exercise price The dividend was payable to holders of record as of the close of business on April 29 2024 The rights will be exercisable only if a person or group acquires 10 or more of our outstanding common stock and various other criteria are met the Distribution Date Until the Distribution Date the rights will not be exercisable the rights will not be evidenced by separate rights certificates
Basic EPS is computed based upon the weighted average number of common shares outstanding for the year Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year We include participating securities unvested share based payment awards that contain non forfeitable rights to dividends or dividend equivalents in the computation of EPS pursuant to the two class method Our participating securities consist solely of unvested restricted stock awards which have contractual participation rights equivalent to those of stockholders of unrestricted common stock The two class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities During periods of net loss no effect is given to the participating securities because they do not share in the losses of the Company During Fiscal 2024 and Fiscal 2023 average shares of 32 304 and 47 404 respectively were excluded from the diluted earnings per share calculation using the two class method as their inclusion would have been antidilutive
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 For additional information see
Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of our Common Stock as of such time the weighted average shares outstanding and basic and diluted earnings loss per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented by a factor of 5 03
On June 11 2024 we completed a reverse stock split of the Company s outstanding shares of common stock at a ratio of 1 for 100 the Reverse Stock Split which was approved by stockholders at a special meeting held on June 5 2024 In connection with the Reverse Stock Split every 100 shares of the common stock issued and outstanding was converted into one share of the Company s common stock For additional information see
Weighted average shares for both basic and diluted prior to giving effect to the bonus element of the rights offering and the Reverse Stock Split was 52 935 533 for the 52 weeks ended April 27 2024 The weighted average common shares and loss per common share reflect the bonus element resulting from the equity rights offering and the Reverse Stock Split for all periods presented on the consolidated statements of operations
the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties A liability s fair value is defined as the amount that would be paid to transfer the liability to a new obligor not the amount that would be paid to settle the liability with the creditor Assets and liabilities recorded at fair value are measured using a three tier fair value hierarchy which prioritizes the inputs used in measuring fair value These tiers include
Our financial instruments include cash and cash equivalents receivables accrued liabilities and accounts payable The fair values of cash and cash equivalents receivables accrued liabilities and accounts payable approximates their carrying values because of the short term nature of these instruments which are all considered Level 1 The fair value of short term and long term debt approximates its carrying value
Our non financial assets include property and equipment operating lease right of use assets and intangible assets Such assets are reported at their carrying values and are not subject to recurring fair value measurements 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
During the 52 weeks ended April 27 2024 and April 29 2023 we evaluated certain of our store level long lived assets in the Retail segment for impairment and we recognized an impairment loss non cash of 7 166 and 6 008 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 our 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
The following table shows the fair values of our non financial assets and liabilities that were required to be remeasured at fair value on a non recurring basis for each respective period and the total impairments recorded as a result of the remeasurement process
We granted phantom share units as long term incentive awards which are settled in cash based on the fair market value of a share of common stock of the Company at each vesting date The fair value of the liability for the cash settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk free rate and volatility assumptions As of April 27 2024 we recorded a liability of 8 Level 2 input which is reflected in accrued liabilities on the consolidated balance sheet As of April 29 2023 we recorded a liability of 777 Level 2 input which is reflected in accrued liabilities 734 and other long term liabilities 42 on the consolidated balance sheet For additional information see
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
We received gross proceeds of 95 000 of new equity capital through a 50 000 new equity investment the Private Investment led by Immersion Corporation Immersion and a 45 000 fully backstopped equity rights offering the Rights Offering The Transactions infused approximately 80 000 of net cash proceeds after transaction costs The transaction resulted in Immersion obtaining controlling financial interest
Our existing Term Loan credit agreement lenders TopLids LendCo LLC and Vital Fundco LLC converted approximately 34 000 of outstanding principal and any accrued and unpaid interest into our common stock
We refinanced our Credit Facility providing access to a 325 000 facility maturing in 2028 The refinanced Credit Facility will meaningfully enhance our financial flexibility and reduce our annual interest expense
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 400 000 the Credit Facility effective from the March 1 2019 amendment We had the option to request an increase in commitments under the Credit Facility of up to 100 000 subject to certain restrictions Proceeds from the Credit Facility are used for general corporate purposes including seasonal working capital needs The agreement included an incremental first in last out seasonal loan facility the FILO Facility for 100 000 maintaining the maximum availability under the Credit Agreement at 500 000 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
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 See
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
During the 52 weeks ended April 27 2024 we borrowed 563 023 and repaid 552 230 under the Credit Agreement with 164 947 of outstanding borrowings under the Credit Facility as of April 27 2024 During the 52 weeks ended April 29 2023 we borrowed 590 303 and repaid 631 849 under the Credit Agreement with 154 154 of outstanding borrowings as of April 29 2023 comprised entirely of borrowing under the Credit Facility and 0 under the FILO Facility which was repaid on August 1 2022 As of April 27 2024 and April 29 2023 we issued 3 575 and 2 059 respectively in letters of credit under the Credit Facility
On March 8 2023 we amended our existing Credit Agreement to i extend the maturity date of the Credit Agreement by six months to August 29 2024 ii reduce the commitments under the Credit Agreement by 20 000 to 380 000 iii increase the applicable margin with respect to the interest rate under the Credit Agreement to 3 375 per annum in the case of interest accruing based on a Secured Overnight Financing Rate and 2 375 in the case of interest accruing based on an alternative base rate in each case without regard to a pricing grid iv reduce advance rates with respect to the borrowing base x by 500 basis points upon the achievement of certain liquidity events which may include a sale of equity interests or of assets a Specified Event or if such a Specified Event shall not have occurred no later than May 31 2023 see discussion below and y by an additional 500 basis points on September 29 2023 v amend certain negative covenants and add certain additional covenants vi amend the financial maintenance covenant to require Availability as defined in the Credit Agreement to be at all times greater than the greater of 10 of the Aggregate Loan Cap as defined in the Credit Agreement and 32 500 and vii require repayment of the loans under the Credit Agreement upon a Specified Event For additional information related to the
We paid a fee of 0 25 of the outstanding principal amount of the commitments under the Credit Agreement on the amendment closing date and we will pay an additional fee of 1 00 of the outstanding principal amount of the commitments under the Credit Agreement on September 29 2023 see
During the 52 weeks ended April 29 2023 we incurred debt issuance costs totaling 4 081 related to the March 2023 Credit Agreement amendment The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets and subsequently amortized ratably over the term of the Credit Agreement
On May 24 2023 we amended our existing Credit Agreement to i increase the applicable margin with respect to the interest rate under the Credit Agreement to 3 75 per annum in the case of interest accruing based on SOFR and 2 75 in the case of interest accruing based on an alternative base rate in each case without regard to a pricing grid ii defer the reduction of advance rates used to calculate our borrowing capacity by an amount equal to 500 basis points previously required on May 31 2023 to September 1 2023 iii require cash flow reporting and variance testing commencing June 3 2023 and iv defer partial prepayment of the term loan from the DSS segment sale proceeds to September 1 2023 We did not incur debt issuance costs related to the May 2023 Credit Agreement amendment For additional information related to the Credit Agreement amendment see the Company s Report on Form 8 K dated May 24 2023 and filed with the SEC on May 31 2023
On July 28 2023 we amended our existing Credit Agreement to i extend the maturity date of the Credit Agreement to December 28 2024 ii reduce advance rates with respect to the borrowing base by 1000 basis points on September 2 2024 in lieu of the reductions previously contemplated for September 2023 iii subject to the conditions set forth in such amendment add a CARES Act tax refund claim to the borrowing base from April 1 2024 through July 31 2024 iv amend the financial maintenance covenant to require Availability as defined in the Credit Agreement at all times greater than the greater of x 10 of the Aggregate Loan Cap as defined in the Credit Agreement and y A 32 500 minus subject to the conditions set forth in such amendment B a 7 500 for the period of April 1 2024 through and including April 30 2024 b 2 500 for the period of May 1 2024 through and including May 31 2024 and c 0 at all other times v add a minimum Consolidated EBITDA as defined in the Credit Agreement financial maintenance covenant and vi amend certain negative and affirmative covenants and add certain additional covenants all as more particularly set forth in such amendment The amendment also requires that we appoint a Chief Restructuring Officer and that by August 11 2023 we i appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and ii appoint a committee of the board of directors of the Company to consist of three board members two of whom will be the new independent directors The committee s responsibilities will include among other things 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 There can be no guarantee or assurances that any such transaction or transactions be consummated We must pay i a fee of 0 50 of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment as defined in the Credit Agreement on the closing date in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment as defined in the Credit Agreement and ii a fee of 1 00 of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2 2024 and an Event of Default as defined in the Credit Agreement For additional information related to the Credit Agreement amendment see the Company s Report on Form 8 K filed with the SEC on July 28 2023
During the 52 weeks ended April 27 2024 we incurred debt issuance costs totaling 11 516 related to the July 2023 Credit Agreement amendment The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets and subsequently amortized ratably over the term of the Credit Agreement
On October 10 2023 we amended our existing Credit Agreement to revise certain reporting requirements to the administrative agent and lenders under the Credit Agreement The amendment introduced a Specified Liquidity Transaction Fee of 3 800 that would become due and payable at the earlier to occur of a January 31 2024 to the extent a Specified Liquidity Transaction as defined in the Credit Agreement has not been consummated prior to such date or such later date that is up to thirty days thereafter to the extent agreed to in writing by the Administrative Agent in its sole discretion or b an Event of Default under the Credit Agreement During the 52 weeks ended April 27 2024 we incurred debt issuance costs totaling 1 428 related to the October 2023 Credit Agreement amendment The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets and subsequently amortized ratably over the term of the Credit Agreement
On December 12 2023 we amended our existing Credit Agreement to among other things i amend the financial maintenance covenant to require Availability as defined in the Credit Agreement at all times to be greater than the greater of x 10 of the Aggregate Loan Cap as defined in the Credit Agreement and y A 32 500 or subject to the satisfaction of certain conditions relating to the repayment of the Credit Agreement in full B a 20 000 for the period of December 8 2023 through January 12 2024 b 25 000 for the period from January 26 2024 through February 9 2024 c 25 000 for the period of April 1 2024 through April 30 2024 and d 30 000 for the period of May 1 2024 through May 31 2024 and ii revise certain reporting requirements under the Credit Agreement The amendment also revised the Specified Liquidity Transaction Fee introduced in the October 2023 Credit Agreement Amendment such that the 3 800 became due and was paid on January 31 2024 During the 52 weeks ended April 27 2024 we incurred debt issuance costs totaling 4 047 related to the December 2023 Credit Agreement amendment The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets and subsequently amortized ratably over the term of the Credit Agreement For additional information related to the Credit Agreement amendment see the Company s Report on Form 8 K dated December 12 2023 and filed with the SEC on December 13 2023
On March 12 2024 we amended our existing Credit Agreement to among other things i revise certain reporting requirements under the Credit Agreement and ii set certain milestones for liquidity and refinancing contingency plans with respect to which we must execute a binding commitment no later than April 3 2024 as may be extended by the administrative agent to April 10 2024 During the 52 weeks ended April 27 2024 we incurred debt issuance costs totaling 1 929 related to the March 2024 Credit Agreement amendment
On April 16 2024 we amended our existing Credit Agreement to among other things revise certain milestones related to the previously disclosed liquidity and refinancing contingency plans to align such milestones with the Transactions contemplated by the Purchase Agreement as defined in
the Twelfth Amendment to Credit Agreement which milestones include i filing the Form S 1 no later than two 2 business days after the date of such amendment ii obtaining receipt of support letters in support of the Transactions from persons owning not less than 20 of the outstanding voting stock of the Company by no later than May 3 2024 or such later date as agreed to in writing by the administrative agent in its sole discretion iii obtaining receipt of the Securities and Exchange Commission SEC approval with respect to such Form S 1 on or before May 24 2024 or such later date as agreed to in writing by the administrative agent in its sole discretion and iv closing the Transactions contemplated by the Purchase Agreement on or before the date that is 25 days after the receipt of SEC approval with respect to the Form S 1 During the 52 weeks ended April 27 2024 we incurred debt issuance costs totaling 851 related to the April 2024 Credit Agreement amendment
On June 10 2024 subsequent to the end of the quarter we amended and extended the Credit Agreement to provide access to a 325 000 facility the ABL Facility maturing in 2028 The refinanced ABL Facility will meaningfully enhance our financial flexibility and reduce our annual interest expense For information on the refinanced Credit Agreement terms see
On June 7 2022 we entered into a Term Loan Credit Agreement the Term Loan Credit Agreement with TopLids LendCo LLC and Vital Fundco LLC and we entered into an amendment to our existing Credit Agreement which permitted us
The Term Loan Credit Agreement provides for term loans in an amount equal to 30 000 the Term Loan Facility and the loans thereunder the Term Loans and matures on April 7 2025 The proceeds of the Term Loans are being used to finance working capital and to pay fees and expenses related to the Term Loan Facility During the 52 weeks ended April 27 2024 we incurred 2 652 for interest in kind on the Term Loans and repaid 0 under the Term Loan Credit Agreement with 32 652 of outstanding borrowings as of April 27 2024 During the 52 weeks ended April 29 2023 we borrowed 30 000 and repaid 0 under the Term Loan Credit Agreement with 30 000 of outstanding borrowings as of April 29 2023
The Term Loans accrue interest at a rate equal to 11 25 payable quarterly All interest on the Term Loan prior to July 29 2023 was paid in cash Subsequent to July 29 2023 all interest incurred on the Term Loan was incurred in kind as permitted under the July 2023 Term Loan Amendment and is part of the outstanding debt balance The Term Loans do not amortize prior to maturity
The Term Loan Credit Agreement does not contain a financial covenant but otherwise contains representations and warranties covenants and events of default that are substantially the same as those in the Credit Agreement including restrictions on the ability of the Company and its subsidiaries to incur additional debt incur or permit liens on assets make investments and acquisitions consolidate or merge with any other company engage in asset sales and make dividends and distributions The Term Loan Facility is secured by second priority liens on all assets securing the obligations under the Credit Agreement which is all of the assets of the Company and the Guarantors subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith
The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that upon repayment of the Term Loan Credit Agreement and if applicable any replacement credit facility thereof we may incur second lien secured debt in an aggregate principal amount not to exceed 75 000
On March 8 2023 we amended the Term Loan Credit Agreement to i extend the maturity date of the Term Loan Credit Agreement by six months to December 7 2024 ii permit the application of certain proceeds to the repayment of the loans under Credit Agreement and iii amend certain negative covenants and add certain additional covenants to conform to the Credit Agreement In addition the amendment requires the achievement of a Specified Event as described above by no later than May 31 2023 as such date may be extended under the Credit Agreement but no later than August 31 2023 without consent from lenders under the Term Loan Credit Agreement For additional information see the Company s Report on Form 8 K dated March 8 2023 and filed with the SEC on March 9 2023
During the 52 weeks ended April 29 2023 we incurred debt issuance costs totaling 431 related to the March 2023 Term Loan Credit Agreement amendment We paid a fee of 50 on the amendment closing date to the lenders under the Term Loan Credit Agreement The debt issuance costs have been deferred and are presented as a reduction to long term borrowings in the consolidated balance sheets and subsequently amortized ratably over the term of the Term Loan Facility
On July 28 2023 we amended our Term Loan to i extend the maturity date of the Term Loan Agreement to April 7 2025 ii allow for interest to be paid in kind until September 2 2024 iii amend the 1 50 anniversary fee to recur on June 7 of each year that the Term Loan Agreement remains outstanding with 2024 fee deferred to the earlier of September 2 2024 and the Termination Date as defined in the Term Loan Agreement and iv amend certain negative covenants and affirmative and add certain additional covenants We must pay a fee of 50 to the lenders under the Term Loan Agreement on the earlier of September 2 2024 and the Termination Date as defined in the Term Loan Agreement For additional information see the Company s Report on Form 8 K filed with the SEC on July 28 2023
During the 52 weeks ended April 27 2024 we incurred debt issuance costs totaling 499 related to the July 2023 Term Loan Credit Agreement amendment The debt issuance costs have been deferred and are presented as a reduction to long term borrowings in the consolidated balance sheets and subsequently amortized ratably over the term of the Term Loan Facility
Topic 842 Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on campus bookstores at colleges and universities real estate leases for office and warehouse operations and vehicle leases We do not have finance leases or short term leases i e those with a term of twelve months or less
We recognize a right of use ROU asset and lease liability in our consolidated balance sheets for leases with a term greater than twelve months Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year
Payment terms are based on the fixed rates explicit in the lease including minimum annual guarantees and or variable rates based on i a percentage of revenues or sales arising at the relevant premises variable commissions and or ii operating expenses such as common area charges real estate taxes and insurance For contracts with fixed lease payments including those with minimum annual guarantees we recognize lease expense on a straight line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases Our lease agreements do not contain any material residual value guarantees material restrictions or covenants
We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease whichever is later
The decrease in lease expense is primarily due to lower commission rates related to the shift from physical to digital course materials closed stores and the impact of the timing due to contract renewals partially offset by higher sales for contracts based on a percentage of sales
During the 52 weeks ended April 27 2024 we recognized restructuring and other charges totaling 19 409 comprised primarily of 19 651 for costs associated with professional service costs for restructuring as discussed below and process improvements and 1 097 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives 33 is included in accrued liabilities in the consolidated balance sheet as of April 27 2024 partially offset by a 1 339 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 charges include costs associated with the costs of this committee as well as other related legal and advisory 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 and provide additional flexibility for working capital needs For additional information see
During the 52 weeks ended April 29 2023 we recognized restructuring and other charges totaling 10 103 comprised primarily of 4 359 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives 1 712 is included in accrued liabilities in the consolidated balance sheet as of April 29 2023 and 5 744 for costs primarily associated with professional service costs for restructuring and process improvements
Prior to the acquisition of MBS on February 27 2017 MBS was considered a related party as it was majority owned by Leonard Riggio who is a principal owner holding substantial shares of our common stock and other members of the Riggio family Subsequent to the acquisition the consolidated financial statements include the accounts of MBS and all material intercompany accounts and transactions have been eliminated in consolidation
MBS leases its main warehouse and distribution facility located in Columbia Missouri from MBS Realty Partners L P which is majority owned by Leonard Riggio with the remaining ownership by other sellers of MBS The lease was originally entered into in 1991 and included a renewal option which extended the lease through September 1 2023 Effective January 1 2023 MBS amended the lease agreement to lower the rent and extend the term to December 31 2024 Rent payments to MBS Realty Partners L P were approximately 690 and 1 150 during the 52 weeks ended April 27 2024 and April 29 2023 respectively
In December 2020 Fiscal 2021 we entered into the F L Relationship to execute a merchandising agreement with Fanatics and Lids which included a strategic equity investment in the Company Fanatics Inc and Lids Holdings Inc jointly as
TopLids LendCo LLC TopLids purchased an aggregate 2 307 692 of our common shares On June 7 2022 we entered into a Term Loan Credit Agreement with TopLids LendCo LLC and Vital Fundco LLC see discussion below 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 TopLids will own more than 5 of our Common Stock outstanding following the closing of the transactions Total commission revenue from the F L Relationship was 126 886 and 145 416 during the 52 weeks ended April 27 2024 and April 29 2023 respectively For additional information see
On June 7 2022 we entered into a Term Loan Credit Agreement with TopLids LendCo LLC see discussion above and Vital Fundco LLC a subsidiary of Vital Technologies Inc VitalSource We have contracted with VitalSource to provide digitally formatted courseware from all major publishers 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 VitalSource will own more than 5 of our Common Stock outstanding following the closing of the transactions Total purchases from the VitalSource were 331 232 and 249 464 during the 52 weeks ended April 27 2024 and April 29 2023 respectively For additional information see
We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC MBS maintains a profit sharing plan covering substantially all full time employees of MBS For all plans we are responsible to fund the employer contributions directly if any Total employee benefit expense for these plans was 1 687 and 4 391 during the 52 weeks ended April 27 2024 and April 29 2023 respectively Commencing in September 2023 we revised the 401 k retirement savings plan to an annual end of plan year discretionary match in lieu of the current pay period match
We have reserved 17 909 345 shares of our common stock for future grants in accordance with the Barnes Noble Education Inc Equity Incentive Plan Types of equity awards that can be granted under the Equity Incentive Plan include options restricted stock RS restricted stock units RSU performance shares PS performance share units PSU and stock options During the 52 weeks ended April 27 2024 no equity share awards were granted to employees or board members
We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite service period of the award which is generally three years We recognize compensation expense for these awards based on the number of awards expected to vest which includes an estimated average forfeiture rate We calculate the fair value of these awards based on the closing stock price on the date the award was granted For those awards with market conditions we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied
A RS award is an award of common stock that is subject to certain restrictions during a specified period Restricted stock awards are generally subject to forfeiture if employment terminates prior to the release of the restrictions The grantee cannot transfer the shares before the restricted shares vest Shares of unvested restricted stock have the same voting rights as common stock are entitled to receive dividends and other distributions thereon although payment may be deferred until the shares have vested and are considered to be currently issued and outstanding Restricted stock awards will have a minimum vesting period of one year
A RSU is a grant valued in terms of our common stock but no stock is issued at the time of grant Each restricted stock unit may be redeemed for one share of our common stock once vested Restricted stock units are generally subject to forfeiture if employment terminates prior to the release of the restrictions The grantee cannot transfer the units except in very limited circumstances and with the consent of the compensation committee Shares associated with unvested restricted stock units have no voting rights but are entitled to receive dividends and other distributions thereon although payment may be deferred until
Phantom share units were granted to employees Each phantom share represents the economic equivalent to one share of the Company s common stock and will be settled in cash based on the fair market value of a share of common stock at each vesting date in an amount not to exceed a specific value per share The phantom shares vest and settle in three equal installments commencing one year after the date of grant The fair value of the phantom shares was determined using the closing stock price on the date of the award less the fair value of the call option which was estimated using the Black Scholes model The fair value of the liability for the cash settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk free rate and volatility assumptions
As of April 27 2024 we recorded a liability of 8 Level 2 input related to phantom share units grants which is reflected in accrued liabilities on the consolidated balance sheet As of April 29 2023 we recorded a liability of 777 Level 2 input related to phantom share units grants of which 734 and 42 is reflected in accrued liabilities and other long term liabilities respectively on the consolidated balance sheet respectively
For stock options granted with an at market exercise price we determined the grant fair value using the Black Scholes model and for stock options granted with a premium exercise price we determined the grant date fair value using the Monte Carlo simulation model The fair value models for stock options use assumptions that include the risk free interest rate expected volatility expected dividend yield and expected term of the options The risk free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term The expected stock option term represents the weighted average period of time that stock options granted are expected to be outstanding based on vesting schedules and the contractual term of the stock options Volatility is based on the historical volatility of the Company s common stock over a period of time corresponding to the expected stock option term The stock options are exercisable in four equal annual installments commencing one year after the date of grant and have a ten year term Holders are not entitled to receive dividends if any prior to vesting and exercise of the options
On June 11 2024 we completed a reverse stock split of the Company s outstanding shares of common stock at a ratio of 1 for 100 the Reverse Stock Split which was approved by stockholders at a special meeting held on June 5 2024 In connection with the Reverse Stock Split every 100 shares of the common stock issued and outstanding was converted into one share of the Company s common stock For additional information see
On March 27 2020 the Coronavirus Aid Relief and Economic Security Act The CARES Act was enacted We have analyzed the provisions which provide for a technical correction to allow for full expensing of qualified leasehold improvements modifications to charitable contribution and net operating loss limitations NOLs modifications to the deductibility of business interest expense as well as Alternative Minimum Tax AMT credit acceleration The most significant impact of the legislation for the Company was an income tax benefit of 7 164 for the carryback of NOLs to higher
tax rate years recorded in Fiscal 2021 As of April 29 2024 we recognized a current income tax receivable for NOL carrybacks in prepaid and other current assets on the consolidated balance sheet We received a 15 774 refund in Fiscal 2023 and a 7 621 refund in Fiscal 2024 and expect to receive additional refunds of approximately 2 403 in Fiscal 2025
One percentage point on our Fiscal 2024 effective tax rate is approximately 623 The other permanent book tax differences are principally comprised of non deductible officer s compensation and non deductible stock compensation
We account for income taxes using the asset and liability method Deferred taxes are recorded based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards
In assessing the realizability of the deferred tax assets management considered whether it is more likely than not that some or all of the deferred tax assets would be realized In evaluating our ability to utilize our deferred tax assets we considered all available evidence both positive and negative in determining future taxable income on a jurisdiction by jurisdiction basis As of April 27 2024 we recorded a valuation allowance of 81 174 compared to 56 962 as of April 29 2023
As of April 27 2024 we had state net operating loss carryforwards NOLs of approximately 457 609 which will begin to expire in 2026 state tax credit carryforwards totaling 430 which will begin to expire in 2024 federal tax credit carryforward of 1 131 which will begin to expire in 2040 and federal NOLs of approximately 265 522 which have an indefinite carryforward period
As of April 27 2024 we recorded 201 of foreign withholding tax related to repatriations of earnings from certain foreign subsidiaries If additional earnings in these foreign subsidiaries were repatriated in the future additional income and withholding tax expense would be incurred Additional income and withholding tax expense on any future repatriated earnings is estimated to be less than 100
We are subject to U S federal income tax as well as income tax in jurisdictions of each state having an income tax The tax years that remain subject to examination are primarily Fiscal 2018 and forward Some earlier years remain open for a small minority of states
Under Sections 382 and 383 of the Internal Revenue Code of 1986 as amended or the Code if a corporation undergoes an ownership change generally defined as a cumulative change in our ownership by 5 percent shareholders that exceeds 50
percentage points over a rolling three year period the corporation s ability to use its pre change net operating losses and certain other pre change tax attributes to offset its post change income and taxes may be limited Similar rules may apply under state tax laws As a result of the rights offering backstop commitment private investment and debt conversion completed on June 10 2024 we may have experienced an ownership changes as defined by Sections 382 and 383 The Company intends to perform a study to determine if an ownership change has occurred If it is determined that an ownership change has occurred under Section 382 and 383 we expect any corresponding annual limitations to severely impact the future utilization of our tax attributes including our 265 522 NOL carryforward For additional information see
We are involved in a variety of claims suits investigations and proceedings that arise from time to time in the ordinary course of our business including actions with respect to contracts intellectual property taxation employment benefits personal injuries and other matters The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on our consolidated financial position results of operations or cash flows
We generally operate our physical bookstores pursuant to multi year school management contracts under which a school designates us to operate the official school physical bookstore on campus and we provide the school with regular payments that represent a percentage of store sales and in some cases include a minimum fixed guaranteed payment We account for these service agreements for our physical bookstores under lease accounting We recognize lease assets and lease liabilities on the consolidated balance sheets for substantially all fixed lease arrangements excluding variable obligations with a term greater than twelve months For additional information on lease expense and minimum fixed lease obligations excluding variable commissions see
b Includes 4 633 4 274 3 413 and 7 089 of restructuring and other charges for the 13 weeks ended July 29 2023 October 28 2023 January 27 2024 and April 27 2024 respectively and 19 409 for the 52 weeks ended April 27 2024
c Includes 0 0 5 798 and 1 368 of impairment loss non cash for the 13 weeks ended July 29 2023 October 28 2023 January 27 2024 and April 27 2024 respectively and 7 166 for the 52 weeks ended April 27 2024
d Includes 8 254 10 664 10 620 and 10 827 of interest expense for the 13 weeks ended July 29 2023 October 28 2023 January 27 2024 and April 27 2024 respectively and 40 365 for the 52 weeks ended April 27 2024 The increase in interest expense is primarily due to higher borrowings higher interest rates and increased amortization of deferred financing costs
e On June 10 2024 subsequent to the end of Fiscal 2024 we completed various transactions including an equity rights offering Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of our Common Stock as of such time the weighted average shares outstanding and basic and diluted earnings loss per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented by a factor of 5 03
On June 11 2024 subsequent to the end of Fiscal 2024 we completed a reverse stock split of our outstanding shares of common stock at a ratio of 1 for 100 in which every 100 shares of the common stock issued and outstanding was converted into one share of our common stock
The weighted average common shares and loss per common share reflect the bonus element resulting from the equity rights offering and the reverse stock split for all periods presented on the consolidated statements of operations For additional information see
b Includes 375 260 4 127 and 5 341 of restructuring and other charges for the 13 weeks ended July 30 2022 October 29 2022 January 28 2023 and April 29 2023 respectively and 10 103 for the 52 weeks ended April 29 2023
d Includes 3 868 4 886 6 918 and 7 011 of interest expense for the 13 weeks ended July 30 2022 October 29 2022 January 28 2023 and April 29 2023 respectively and 22 683 for the 52 weeks ended April 29 2023
e On June 10 2024 subsequent to the end of Fiscal 2024 we completed various transactions including an equity rights offering Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of our Common Stock as of such time the weighted average shares outstanding and basic and diluted earnings loss per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented by a factor of 5 03
The weighted average common shares and loss per common share reflect the bonus element resulting from the equity rights offering and the reverse stock split for all periods presented on the consolidated statements of operations For additional information see
On June 5 2024 our shareholders approved an amendment to our Amended and Restated Certificate of Incorporation as amended to increase the aggregate number of authorized shares of Common Stock from 200 000 000 shares to 10 000 000 000 shares and approved the transactions the Transactions as outlined below
On June 10 2024 subsequent to the end of Fiscal 2024 we completed various Transactions 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
For additional information related to the Transactions see the Company s Report on Form 8 K dated June 11 2024 For information related to the Credit Agreement and Term Loan Credit Agreement prior to the execution of these Transaction see
We received gross proceeds of 95 000 of new equity capital through a 50 000 new equity investment the Private Investment led by Immersion Corporation Immersion and a 45 000 fully backstopped equity rights offering the Rights Offering The Transactions infused approximately 80 000 of net cash proceeds after transaction costs The transaction resulted in Immersion obtaining controlling financial interest See
Our existing Term Loan Credit Agreement lenders TopLids LendCo LLC TopLids and Vital Fundco LLC VitalSource converted approximately 34 000 of outstanding principal and any accrued and unpaid interest into shares of our common stock See
We amended and extended our existing asset based loan facility the Credit Facility providing access to a 325 000 revolving loan facility the Restated ABL Facility maturing in 2028 The amended ABL Facility will meaningfully enhance our financial flexibility and reduce our annual interest expense See
Immersion and VitalSource purchased approximately 45 000 and 5 000 respectively in shares of our Common Stock at the Subscription Price defined below in a private placement exempt from the registration requirements under the Securities Act and separate from the Rights Offering the Private Investment The Private Investment is in addition to shares of Common Stock purchased by Immersion pursuant to the Backstop Commitment discussed below
Through the Rights Offering we issued 900 000 000 shares of our common stock at a cash subscription price the Subscription Price of 0 05 per share In the Rights Offering we distributed to each holder of Common Stock one non transferable subscription right each a Subscription Right for every share of Common Stock owned by such holder on May 14 2024 the Record Date and each Subscription Right entitled the holder to purchase 17 shares of Common Stock Each holder that fully exercised their Subscription Rights was entitled to Over Subscription Rights to subscribe for additional shares of Common Stock that remain unsubscribed as a result of any unexercised Subscription Rights which allowed such holder to subscribe for additional shares of Common Stock up to the number of shares purchased under such holder s basic Subscription Right at 0 05 per share We received approximately 32 100 in gross proceeds from the exercise of Subscriptions Rights and Over Subscription Rights from the Company s stockholders
For those Subscription Rights which remained unexercised upon the expiration of the Rights Offering after accounting for all Over Subscription Rights exercised the standby purchasers led by Immersion Outerbridge Capital Management LLC Outerbridge and Selz Family 2011 Trust Selz collectively purchased the unexercised Subscription Rights at the Subscription Price Backstop Commitment We received approximately 12 900 in gross proceeds for the exercise of Subscription Rights not subscribed for by the Company s stockholders We paid Immersion and Selz approximately 2 850
and 350 respectively comprised of commitment fees in consideration for the Backstop Commitment and expense reimbursements for all out of pocket costs fees and expenses incurred in connection with the Transactions and we paid Outerbridge approximately 1 250 for expense reimbursements for all out of pocket costs fees and expenses incurred in connection with the Transactions
The Rights Offering was offered to all existing stockholders at an exercise price that was less than the fair value of our Common Stock as of such time the weighted average shares outstanding and basic and diluted earnings loss per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented by a factor of 5 03
On June 10 2024 the Closing Date we amended and restated and extended the maturity of our existing asset based Credit Facility with Bank of America N A as administrative agent collateral agent and swing line lender and other lenders from time to time party thereto such amended and restated credit facility the Restated ABL Facility Pursuant to the Restated ABL Facility the lenders thereunder have committed to provide a four year asset backed revolving credit facility in an aggregate committed principal amount of up to 325 000 The Restated ABL Facility has a maturity date of June 9 2028
Interest under the Restated ABL Facility accrues at the election of the Company either x based on the Secured Overnight Financing Rate SOFR which is subject to a floor of 2 50 per annum plus a spread of 3 50 per annum or y at an alternate base rate which is subject to a floor of 3 50 per annum plus a spread of 2 50 per annum provided that in the event the Company meets certain financial metrics for a consecutive six month period beginning and ending after the one year anniversary of the Closing Date the foregoing spreads shall be reduced by 0 25 per annum
The Credit Agreement contains customary negative covenants that limit the Company s ability to incur or assume additional indebtedness grant or permit liens make investments make restricted payments and other specified payments merge with other entities dispose of or acquire assets or engage in transactions with affiliates among other things Additionally the Restated ABL Facility includes the following financial maintenance covenants
following the date that is six months following the Closing Date the Company is required to maintain a minimum Availability as defined in the Credit Agreement of x 25 000 for the first thirty 30 months after the Closing Date and y 30 000 after the date that is thirty 30 months after the Closing Date
commencing with the month ending May 31 2025 the Company is required to maintain a Consolidated Fixed Charge Coverage Ratio as defined in the Restated ABL Facility of not less than 1 10 to 1 00 which will be tested monthly on the last day of each fiscal month for the trailing 12 month period and
commencing with the quarter ending October 31 2024 the Company is required to maintain a minimum Consolidated EBITDA as defined in the Restated ABL Facility which will be tested quarterly on the last day of each fiscal quarter for a the trailing six month period for the first test date b the trailing nine month period of the second test date and c for the trailing 12 month period thereafter
The Credit Agreement contains customary events of default including for non payment of obligations owing under the Restated ABL Facility material breaches of representations and warranties failure to perform or observe covenants default on other material indebtedness customary ERISA events of default bankruptcy and insolvency material judgments invalidity of liens on collateral change of control or cessation of business The Credit Agreement also contains customary affirmative covenants and representations and warranties
In connection with the Restated ABL Facility the 1 00 fee payable in connection with the eighth amendment to the Restated ABL Facility prior to its having been restated is due and payable x 50 on September 2 2024 and y 50 on June 10 2025
On June 11 2024 we completed a reverse stock split of the Company s outstanding shares of common stock at a ratio of 1 for 100 the Reverse Stock Split which was previously approved by stockholders at a special meeting held on June 5 2024 In connection with the Reverse Stock Split every 100 shares of the common stock issued and outstanding was converted into one share of the Company s common stock No change will be made to the trading symbol for the Company s shares of Common Stock BNED in connection with the Reverse Stock Split The Reverse Stock Split is part of the Company s plan to regain compliance with the minimum bid price requirement of 1 00 per share required to maintain continued listing on the NYSE
The Reverse Stock Split reduced the number of shares of the Company s outstanding common stock from approximately 2 620 495 552 shares as of the date June 11 2024 when including issuances pursuant to the Transactions to approximately 26 204 956 shares subject to adjustment for rounding
The Reverse Stock Split affected all issued and outstanding shares of Common Stock All outstanding options and restricted stock units and other securities entitling their holders to purchase or otherwise receive shares of Common Stock were adjusted as a result of the Reverse Stock Split as required by the terms of each security The number of shares available to be awarded under the Company s equity compensation plans will also be appropriately adjusted Following the Reverse Stock Split the par value of the Common Stock will remain unchanged at 0 01 per share The Reverse Stock Split will not change the authorized number of shares of Common Stock or preferred stock No fractional shares will be issued in connection with the reverse split instead any fractional shares as a result of the Reverse Stock Split will be rounded up to the next whole number of post split shares of Common Stock
All other schedules are omitted because the conditions requiring their filing do not exist or because the required information is provided in the consolidated financial statements including the notes thereto
Management of the Company established and maintains disclosure controls and procedures that are designed to ensure that material information relating to the Company and its subsidiaries required to be disclosed in the reports that are filed or submitted under the Exchange Act are recorded processed summarized and reported within the time periods specified in the SEC s rules and forms Such information is accumulated and communicated to management including the Company s Chief Executive Officer and Principal Financial Officer as appropriate to allow timely decisions regarding required disclosure As of the end of the period covered by this report the Company s management conducted an evaluation as required under Rules 13a 15 b and 15d 15 b under the Exchange Act under the supervision and with the participation of the principal executive officer and principal financial officer of the Company s disclosure controls and procedures as such term is defined in Rules 13a 15 e and 15d 15 e under the Exchange Act A control system no matter how well designed and operated can provide only reasonable not absolute assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company s periodic reports Based on management s evaluation and considering the items noted below the principal executive officer and principal financial officer concluded that as of the end of the period covered by this report the Company s disclosure controls and procedures were effective at the reasonable assurance level as of April 27 2024
Management is responsible for establishing and maintaining adequate internal control over financial reporting As defined in Exchange Act Rule 13a 15 f internal control over financial reporting is a process designed by or under the supervision of the principal executive and principal financial officer and effected by the board of directors management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that i pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company ii provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and iii that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company and iv provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the Company s assets that could have a material effect on the financial statements
Under the supervision and with the participation of management including the Chief Executive Officer and Principal Financial Officer the Company conducted an evaluation of the effectiveness of the Company s internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO 2013 framework Based upon the Company s evaluation under this framework management concluded that the Company s internal control over financial reporting was effective as of April 27 2024
There have been no changes in the Company s internal control over financial reporting during the most recent quarter ended April 27 2024 that have materially affected or are reasonably likely to materially affect the Company s internal control over financial reporting
The management of Barnes Noble Education Inc is responsible for the contents of the Consolidated Financial Statements which are prepared in conformity with accounting principles generally accepted in the United States of America The Consolidated Financial Statements necessarily include amounts based on judgments and estimates Financial information elsewhere in the Annual Report is consistent with that in the Consolidated Financial Statements
The Company maintains a comprehensive accounting system which includes controls designed to provide reasonable assurance as to the integrity and reliability of the financial records and the protection of assets An internal audit staff is employed to regularly test and evaluate both internal accounting controls and operating procedures including compliance with the Company s Code of Business Conduct and Ethics The Audit Committee of the Board of Directors composed of directors who are not members of management meets regularly with management the independent registered public accountants and the internal auditors to ensure that their respective responsibilities are properly discharged
Ernst Young LLP and the internal auditors have full and free independent access to the Audit Committee The role of Ernst Young LLP an independent registered public accounting firm is to provide an objective examination of the Consolidated Financial Statements and the underlying transactions in accordance with the standards of the Public Company Accounting Oversight Board The report of Ernst Young LLP appears on page 63 of this report on Form 10 K for the year ended April 27 2024
The Company has included the Section 302 certifications of the Chief Executive Officer and the Principal Financial Officer of the Company as Exhibits 31 1 and 31 2 to its Annual Report on Form 10 K for Fiscal 2024 filed with the Securities and Exchange Commission and the Company will submit to the New York Stock Exchange a certificate of the Chief Executive Officer of the Company certifying that he is not aware of any violation by the Company of New York Stock Exchange corporate governance listing standards
During the period covered by this Annual Report on Form 10 K no director or officer of the Company adopted or terminated a Rule 10b5 1 trading arrangement or non Rule 10b5 1 trading arrangement as each term is defined in Item 408 a of Regulation S K
of this Annual Report on Form 10 K The remaining information with respect to directors executive officers the code of ethics and corporate governance of the Company is incorporated herein by reference to the Company s definitive Proxy Statement relating to the Company s 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the Company s fiscal year ended April 27 2024 the Proxy Statement
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Barnes Noble Education Inc filed as Exhibit 3 1 to Report on Form 8 K filed with the SEC on September 25 2017 and incorporated herein by reference
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Barnes Noble Education Inc filed as Exhibit 3 1 to the Current Report on Form 8 K filed with the SEC on June 11 2024 and incorporated herein by reference
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Barnes Noble Education Inc filed as Exhibit 3 2 to the Current Report on Form 8 K filed with the SEC on June 11 2024 and incorporated herein by reference
Second Amended and Restated By Laws as Amended Effective as of October 5 2023 of Barnes Noble Education Inc filed as Exhibit 3 1 to Report on Form 8 K filed with the SEC on October 12 2023 and incorporated herein by reference
Certificate of Designation Preferences and Rights of Series A Junior Participating Preferred Stock of Barnes Noble Education Inc dated as of March 25 2020 filed as Exhibit 3 1 to Report on Form 8 K filed with the SEC on March 26 2020 and incorporated herein by reference
Rights Agreement by and between the Company and Computershare Trust Company N A as rights agent which includes as Exhibit A the Form of Rights Certificate dated as of August 3 2015 filed as Exhibit 4 1 to the Company s Current Report on Form 8 K filed with the SEC on April 16 2024 and incorporated herein by reference
Form of Subscription Agent Agreement among Barnes Noble Education Inc Computershare Inc and Computershare Trust Company N A filed as Exhibit 4 3 to Registration Statement on Form S 1 filed with the SEC on April 18 2024 and incorporated herein by reference
Credit Agreement dated as of August 3 2015 by and among Barnes Noble Education Inc as borrower the lenders party thereto Bank of America N A as administrative agent and the other agents party thereto filed as Exhibit 10 5 to Report on Form 8 K filed with the SEC on August 3 2015 and incorporated herein by reference
First Amendment to Credit Agreement dated as of February 27 2017 by and among the Company the Lenders and the Agent filed as Exhibit 10 1 to Report on Form 8 K filed with the SEC on February 28 2017 and incorporated herein by reference
Second Amendment Waiver and Consent to Credit Agreement dated as of March 1 2019 among Barnes Noble Education Inc as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 1 to Report on Form 8 K filed with the SEC on March 5 2019 and incorporated herein by reference
Third Amendment and Waiver to Credit Agreement and First Amendment to Security Agreement dated as of March 31 2021 among Barnes Noble Education Inc as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 1 to Report on Form 8 K filed with the SEC on April 5 2021 and incorporated herein by reference
Fourth Amendment and Waiver to Credit Agreement dated as of March 7 2022 among Barnes Noble Education Inc as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 1 to Report on Form 10 Q filed with the SEC on March 8 2022 and incorporated herein by reference
Term Loan Credit Agreement dated as of June 7 2022 among Barnes Noble Education Inc as borrower the guarantors party thereto TopLids LendCo LLC and Vital Fundco LLC as lenders and TopLids LendCo LLC as administrative agent and collateral agent filed as Exhibit 10 1 to Report on Form 8 K filed with the SEC on June 10 2022 and incorporated herein by reference
Limited Waiver Agreement dated as of June 28 2022 among Barnes Noble Education Inc as borrower the guarantors party thereto TopLids LendCo LLC and Vital Fundco LLC as lenders and TopLids LendCo LLC as administrative agent and collateral agent for the lenders to the Term Loan Credit Agreement dated as of June 7 2022 filed as Exhibit 10 7 to Annual Report on Form 10 K filed with the SEC on June 29 2022 and incorporated herein by reference
Fifth Amendment to Credit Agreement dated as of June 7 2022 among Barnes Noble Education Inc as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 2 to Report on Form 8 K filed with the SEC on June 10 2022 and incorporated herein by reference
Limited Waiver Agreement dated as of June 28 2022 among Barnes Noble Education Inc as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 9 to Annual Report on Form 10 K filed with the SEC on June 29 2022 and incorporated herein by reference
Sixth Amendment to Credit Agreement dated as of March 8 2023 among the Company as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 10 to Annual Report on Form 10 K filed with the SEC on July 31 2023 and incorporated herein by reference
First Amendment to Term Loan Credit Agreement dated as of March 8 2023 among the Company as borrower certain subsidiaries of the Company party thereto as guarantors TopLids LendCo LLC and Vital Fundco LLC as lenders and TopLids LendCo LLC as administrative agent and collateral agent for the lenders to the Term Loan Credit Agreement dated as of June 7 2022 referenced in the Report on Form 8 K filed with the SEC on March 9 2023 and filed as Exhibit 10 11 to Report on Form 10 K filed with the SEC on July 31 2023 and incorporated herein by reference
Seventh Amendment to Credit Agreement dated as of May 24 2023 among the Company as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 referenced in the Report on Form 8 K filed with the SEC on May 31 2023 filed as Exhibit 10 12 to Report on Form 10 K filed with the SEC on July 31 2023 and incorporated herein by reference
Second Amendment to Term Loan Credit Agreement dated as of May 24 2023 among the Company as borrower certain subsidiaries of the Company party thereto as guarantors TopLids LendCo LLC and Vital Fundco LLC as lenders and TopLids LendCo LLC as administrative agent and collateral agent for the lenders to the Term Loan Credit Agreement dated as of June 7 2022 referenced in the Report on Form 8 K filed with the SEC on May 31 2023 and filed as Exhibit 10 13 to Report on Form 10 K filed with the SEC on July 31 2023 and incorporated herein by reference
Eighth Amendment to Credit Agreement dated as of July 28 2023 among the Company as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 referenced in the Report on Form 8 K filed with the SEC on July 28 2023 and filed as Exhibit 10 14 to Report on Form 10 K filed with the SEC on July 31 2023 and incorporated herein by reference
Third Amendment to Term Loan Credit Agreement dated as of July 28 2023 among the Company as borrower certain subsidiaries of the Company party thereto as guarantors TopLids LendCo LLC and Vital Fundco LLC as lenders and TopLids LendCo LLC as administrative agent and collateral agent for the lenders to the Term Loan Credit Agreement dated as of June 7 2022 referenced in the Report on Form 8 K filed with the SEC on July 28 2023 and filed as Exhibit 10 15 to Report on Form 10 K filed with the SEC on July 31 2023 and incorporated herein by reference
Ninth Amendment to Credit Agreement dated as of October 10 2023 among the Company as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 1 to the Company s Quarterly Report on Form 10 Q filed with the SEC on December 6 2023 and incorporated herein by reference
Tenth Amendment to Credit Agreement dated as of December 12 2023 among the Company as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015 filed as Exhibit 10 1 to the Company s Current Report on Form 8 K filed with the SEC on December 13 2023 and incorporated herein by reference
Eleventh Amendment to Credit Agreement dated as of March 12 2024 among the Company as the lead borrower the other borrowers party thereto the lenders party thereto and Bank of America N A as administrative agent and collateral agent for the lenders to the Credit Agreement dated as of August 3 2015
Twelfth Amendment to Credit Agreement by and among Bank of America N A the Lenders party thereto Barnes Noble Education Inc the other borrowers party thereto and the other parties party thereto as Guarantors dated April 16 2024 filed as Exhibit 10 2 to the Company s Current Report on Form 8 K filed with the SEC on April 16 2024 and incorporated herein by reference
Amended and Restated Credit Agreement dated as of June 10 2024 by and among Barnes Noble Education Inc as borrower the lenders party thereto Bank of America N A as administrative agent and the other agents party thereto filed as Exhibit 10 1 to the Current Report on Form 8 K filed with the SEC on June 11 2024 and incorporated herein by reference
Trademark License Agreement dated as of August 2 2015 between Barnes Noble Education Inc and Barnes Noble Inc filed as Exhibit 10 4 to Report on Form 8 K filed with the SEC on August 3 2015 and incorporated herein by reference
Barnes Noble Education Inc Amended and Restated Equity Incentive Plan amended and restated as of September 23 2021 filed as Exhibit 10 1 to Report on Form 10 Q filed with the SEC on November 11 2021 and incorporated herein by reference
Barnes Noble Education Inc Form of Non Qualified Stock Options Award Agreement filed as Exhibit 10 16 to Annual Report on Form 10 K filed with the SEC on June 30 2021 and incorporated herein by reference
Amended and Restated Employment Agreement dated July 19 2017 between Barnes Noble Education Inc and Michael P Huseby filed as Exhibit 10 2 to Report on Form 8 K filed with the SEC on July 20 2017 and incorporated herein by reference
Performance Incentive Agreement dated September 14 2023 between Michael P Huseby and Barnes Noble Education Inc filed as Exhibit 10 3 to the Company s Current Report on Form 8 K filed with the SEC on September 14 2023 and incorporated herein by reference
Letter Agreement between Michael P Huseby and Barnes Noble Education Inc dated April 15 2024 and filed as Exhibit 10 3 to the Company s Current Report on Form 8 K filed with the SEC on April 16 2024 and incorporated herein by reference
Amended and Restated Employment Letter effective as of June 19 2019 between Barnes Noble Education Inc Barnes Noble College Booksellers LLC and Michael C Miller filed as Exhibit 10 24 to Annual Report on Form 10 K filed with the SEC on June 25 2019 and incorporated herein by reference
Retention Agreement Amendment dated September 8 2023 between Michael C Miller and Barnes Noble Education Inc filed as Exhibit 10 1 to the Company s Current Report on Form 8 K filed with the SEC on September 14 2023 and incorporated herein by reference
Employment Letter dated August 28 2023 between Barnes Noble Education Inc and Kevin Watson filed as Exhibit 10 2 to the Company s Current Report on Form 8 K filed with the SEC on September 6 2023 and incorporated herein by reference
Amendment to Offer Letter Agreement dated January 31 2024 with Kevin Watson filed as Exhibit 10 1 to the Company s Current Report on Form 8 K filed with the SEC on February 6 2024 and incorporated herein by reference
Amended and Restated Employment Letter dated June 19 2019 between B N Education LLC a subsidiary of Barnes Noble Education Inc and Jonathan Shar filed as Exhibit 10 2 to Form 10 Q filed with the SEC on September 2 2021 and incorporated herein by reference
Retention Agreement Amendment dated September 8 2023 between Jonathan Shar and Barnes Noble Education Inc filed as Exhibit 10 2 to the Company s Current Report on Form 8 K filed with the SEC on September 14 2023 and incorporated herein by reference
Form of Retention Agreement dated as of July 14 2022 of Barnes Noble College Booksellers LLC relating to Retention Agreements entered into with each of Michael C Miller and Jonathan Shar filed as Exhibit 10 1 to Report on Form 8 K filed with the SEC on July 18 2022 and incorporated herein by reference
Form of Retention Agreement of Barnes Noble College Booksellers LLC relating to Retention Agreements entered into with each of Michael C Miller and Jonathan Shar filed as Exhibit 10 1 to Report on Form 8 K filed with the SEC on May 1 2023 and incorporated herein by reference
Independent Director Agreement dated August 11 2023 between Steven G Panagos and Barnes Noble Education Inc filed as Exhibit 10 1 to the Company s Current Report on Form 8 K filed with the SEC on August 11 2023 and incorporated herein by reference
Independent Director Agreement dated August 11 2023 between Raphael T Wallander and Barnes Noble Education Inc filed as Exhibit 10 2 to the Company s Current Report on Form 8 K filed with the SEC on August 11 2023 and incorporated herein by reference
Standby Securities Purchase and Debt Conversion Agreement among the Company Toro 18 Holdings LLC Vital Fundco LLC TopLids LendCo LLC Outerbridge Capital Management LLC and Selz Family 2011 Trust dated April 16 2024 filed as Exhibit 10 1 to the Company s Current Report on Form 8 K filed with the SEC on April 16 2024 and incorporated herein by reference
Certification by the Chief Executive Officer pursuant to Rule 17 CFR 240 13a 14 a 15 d 14 a under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Certification by the Chief Financial Officer pursuant to Rule 17 CFR 240 13a 14 a 15 d 14 a under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Certification of Chief Executive Officer pursuant to Rule 13a 14 b under the Securities Exchange Act of 1934 and 18 U S C Section 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Rule 13a 14 b under the Securities Exchange Act of 1934 and 18 U S C Section 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
Certain exhibits and schedules have been omitted pursuant to Item 601 b 10 iv of Regulation S K under the Securities Act of 1933 as amended because they are both i not material and ii the type of information that the Registrant treats as confidential The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 Barnes Noble Education Inc has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	Barnes & Noble Education, Inc. Vist SEC web-site
Category	RETAIL-MISCELLANEOUS SHOPPING GOODS STORES
Trading Symbol	BNED