What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-06-29 compared with 2021-06-30 · 527 added, 203 removed, 620 unchanged (54% of the section changed)

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References to “MBS” refer to our subsidiary MBS Textbook Exchange, LLC.

References to “Student Brands” refer to our subsidiary Student Brands, LLC.

Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April.

“Fiscal 2021” means the 52 weeks ended May 1, 2021, “Fiscal 2020” means the 53 weeks ended May 2, 2020, and “Fiscal 2019” means the 52 weeks ended April 27,2019.

“Fiscal 2022” means the 52 weeks ended April 30, 2022, “Fiscal 2021” means the 52 weeks ended May 1, 2021, and “Fiscal 2020” means the 53 weeks ended May 2, 2020.

Description of business

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We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions.

We operate 1,417 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content and tools within a dynamic omni channel retail environment.

We operate 1,427 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

Additionally, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

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 expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our recent Fanatics Partnership, increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect 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 our partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

and Fanatics Lids College, Inc.

We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

(“Fanatics”) and Fanatics Lids College, Inc.

(“FLC”) (collectively referred to herein as the “FLC Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect gross 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 FLC Partnership.

Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo and emblematic general merchandise business.

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For a discussion of our business, see Part I - Item 1.

First Day Inclusive Access Programs

We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes.

We offer our BNC First Day ® inclusive access programs, consisting of First Day and First Day Complete , in which course materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of class.

• Through First Day , digital course materials are adopted by a faculty member for a single course, and students receive their materials through their learning management system.

• First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials.

The First Day Complete model drives substantially greater unit sell-through for the bookstore.

Offering courseware sales through our inclusive access First Day and First Day Complete models is a key, and increasingly 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 courseware 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 expect these programs to allow us to ultimately reverse historical long-

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term trends in courseware revenue declines, which has occurred at those schools where such programs have been adopted.

During Fiscal 2022, First Day total revenue increased 91% from the prior year period.

Partnership with Fanatics and FLC

In December 2020, we entered into a new merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

(“Fanatics”) and Fanatics Lids College, Inc.

In December 2020, we entered into the FLC Partnership.

Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform.

Coupled with FLC, 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.

Coupled with Lids (FLC's parent company), 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.

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jointly made a strategic equity investment in BNED.

On April 4, 2021, as contemplated under the merchandising partnership agreement, FLC purchased our logo and emblematic general merchandise inventory.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize

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commission revenue earned for these sales on a net basis.

On April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement, we sold our logo and emblematic general merchandise inventory to FLC, which was finalized during the first quarter of Fiscal 2022.

As contemplated by the FLC Partnership's e-commerce agreement, we began to transition certain of our e-commerce sites to Fanatics e-commerce sites for logo and emblematic products during the first quarter of Fiscal 2022.

As the logo and emblematic general merchandise sales are fulfilled by FLC 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 4, 2021.

For additional information, see Part II - Item 8.

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COVID-19 Business Impact

Our business experienced an unprecedented and significant impact as a result of COVID-19 related campus store closures.

Our business experienced an unprecedented and significant negative impact as a result of COVID-19 related campus store closures.

Beginning in March 2020, colleges and universities nationwide began to close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders.

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We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration.

Our Fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools adjusted their learning model and on-campus activities in response to the pandemic.

Fewer students returned to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

While many athletic conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s general merchandise business.

Additionally, sales were impacted by overall enrollment declines in higher education.

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies - Other Long-Lived Assets related to the impairment loss (non-cash) recognized during Fiscal 2021.

To mitigate the impact of the business disruption, we have taken steps to significantly reduce costs, including periodically furloughing the majority of our Retail workforce during non-rush seasonal sales periods.

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

Certain elements of this plan were implemented in late Fiscal 2020, while other actions occurred in Fiscal 2021.

We have achieved meaningful annualized cost savings from this program.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve.

We cannot accurately predict the duration or extent of the impact of COVID-19 on enrollments, university budgets, athletics and other areas that directly affect our business operations .

Although most schools expect to return to a traditional on-campus environment for learning in the upcoming Fall semester, as well as host traditional on campus sporting activities, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine when our operations can begin returning to normal levels of business.

We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations .

Although most four year schools returned to a traditional on-campus environment for learning in the Fall semester, as well as hosted traditional on campus sporting activities, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities.

In early January, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually), thus reducing and/or delaying sales later into the quarter or shifting some sales to our fourth quarter.

We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine how to operate our bookstores in the safest manner for our employees and customers.

If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations.

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The following discussion provides information regarding the three segments.

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Retail Segment

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Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 350 college bookstores.

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The Digital Student Solutions ("DSS") Segment includes direct-to-student products and services to assist students to study more effectively and improve academic performance.

The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby ® , a direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

The Digital Student Solutions ("DSS") Segment includes products and services to assist students to study more effectively and improve academic performance.

The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby ® , an institutional and direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

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.

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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.

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Our selling and administrative expenses consist primarily of store payroll and store operating expenses.

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All material intercompany accounts and transactions have been eliminated in consolidation.

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Results of Operations - Summary

Our Fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and on-campus activities in response to the pandemic.

Our Fiscal 2022, Fiscal 2021 and Fiscal 2020 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and on-campus activities in response to the pandemic.

See "Overview" for more information.

A detailed discussion of Fiscal 2019 items and year-over-year comparisons between Fiscal 2020 and Fiscal 2019 can be found in Part II Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended May 2, 2020 filed with the SEC on July 14, 2020.

Dollars in thousands 52 weeks ended

May 1, 2021 53 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 27, 2019

Product sales and other $ 1,398,046 $ 1,299,740 $ 1,671,200

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Net loss $ (68,857) $ (139,810) $ (38,250)

Adjusted Earnings (non-GAAP) (b)

Adjusted Earnings (non-GAAP) (d)

$ (55,614) $ (96,523) $ (21,126)

Adjusted EBITDA (non-GAAP) (b)

Adjusted EBITDA (non-GAAP) (d)

Retail $ 8,679 $ (66,827) $ 36,227

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Total Adjusted EBITDA (non-GAAP) $ (4,792) $ (65,625) $ 42,159

(a) In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

(a) We identified certain out of period adjustments related primarily to Income tax benefit, as well as Restructuring and other charges, for the 52 weeks ended May 1, 2021.

The adjustments increased our fiscal year 2021 reported net loss by $8.0 million but did not have an impact on Adjusted EBITDA (non-GAAP), cash flows or liquidity.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

(b) In Fiscal 2022, Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

(b) Adjusted Earnings and Adjusted EBITDA are a non-GAAP financial measures.

(c) Effective April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics.

As the logo and emblematic general merchandise sales are fulfilled by FLC 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 sales on a gross basis in the periods prior to April 4, 2021.

For Retail Gross Comparable Store Sales details, see below .

(d) Adjusted Earnings and Adjusted EBITDA are a non-GAAP financial measures.

See Adjusted Earnings (non-GAAP) and Adjusted EBITDA (non-GAAP) discussion below.

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The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales:

52 weeks ended

May 1, 2021 53 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 27, 2019

Product sales and other 91.3 % 90.6 % 90.3 %

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Total sales 100.0 100.0 100.0

Cost of sales:

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales (a)

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(a) Represents the percentage these costs bear to the related sales, instead of total sales.

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Results of Operations - 52 weeks ended May 1, 2021 compared with the 53 weeks ended May 2, 2020

52 weeks ended, May 1, 2021 (a)

Results of Operations - 52 weeks ended April 30, 2022 compared with the 52 weeks ended May 1, 2021

52 weeks ended, April 30, 2022 (a)

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations (b)

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Total sales 1,439,664 112,246 35,666 — (56,176) 1,531,400

Cost of sales:

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales

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Restructuring and other charges

2,118 (2,131) — 957 — 944

Operating loss $ (37,305) $ 495 $ (6,801) $ (24,030) $ 225 $ (67,416)

53 weeks ended, May 2, 2020 (a)

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52 weeks ended, May 1, 2021 (a) - Restated (c)

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations (b)

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Total sales 1,330,470 165,825 27,374 — (89,779) 1,433,890

Cost of sales:

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales

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Restructuring and other charges

5,514 (1,595) 571 6,188 — 10,678

Operating loss $ (155,310) $ 14,732 $ (8,132) $ (28,376) $ 192 $ (176,894)

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Segment Reporting.

(c) We identified certain out of period adjustments related to Restructuring and other charges for the 52 weeks ended May 1, 2021.

The adjustments increased our fiscal year 2021 reported net loss by $8.0 million but did not have an impact on Adjusted EBITDA (non-GAAP), cash flows or liquidity.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

The following table summarizes our sales:

52 weeks ended

Dollars in thousands April 30, 2022 May 1, 2021 %

Product sales and other 1,398,046 1,299,740 7.6%

Rental income 133,354 134,150 (0.6)%

Total Sales $ 1,531,400 $ 1,433,890 6.8%

Our total sales increased by $97.5 million, or 6.8%, to $1,531.4 million during the 52 weeks ended April 30, 2022 from $1,433.9 million during the 52 weeks ended May 1, 2021.

The sales increase is primarily related to re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

The increase is offset by the negative impact on sales primarily due to lower enrollments, primarily at community colleges and by international students, the continuation of remote and hybrid class offerings and lower logo and emblematic sales as they are reflected in sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021.

For additional information, see Retail Sales discussion below.

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The components of the sales variances for the 52 week period are reflected in the table below.

Sales variances 52 weeks ended

Dollars in millions April 30, 2022 May 1, 2021

New stores $ 67.2 $ 64.2

Closed stores (42.3) (35.4)

Comparable stores (a)

Textbook rental deferral (1.8) (3.3)

Service revenue (b)

Retail Sales subtotal:

$ 109.2 $ (382.4)

Wholesale Sales $ (53.6) $ (32.5)

DSS Sales $ 8.3 $ 3.7

Eliminations (d)

$ 33.6 $ (6.0)

Total sales variance:

$ 97.5 $ (417.2)

(a) In December 2020, we entered into merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

(“Fanatics”) and Fanatics Lids College, Inc.

(“FLC”) (collectively referred to herein as the “FLC Partnership”).

Effective April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics.

As the logo and emblematic general merchandise sales are fulfilled by FLC 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 sales on a gross basis in the periods prior to April 4, 202 1.

For Retail Gross Comparable Store Sales details, see below.

(b) Service revenue includes brand partnerships, shipping and handling, and revenue from other programs.

(c) Other includes inventory liquidation sales to third parties, marketplace sales and certain accounting adjusting items related to return reserves, and other deferred items.

(d) Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale.

See discussion of intercompany activities and eliminations below.

Retail total sales increased by $109.2 million, or 8.2%, to $1,439.7 million during the 52 weeks ended April 30, 2022 from $1,330.5 million during the 52 weeks ended May 1, 2021.

Retail added 92 new stores and closed 82 stores during the 52 weeks ended April 30, 2022, ending the period with a total of 1,427 stores.

Fiscal 2022 Fiscal 2021

Physical Virtual Physical Virtual

Number of stores at beginning of period 769 648 772 647

Opened 57 35 40 58

Closed 21 61 43 57

Number of stores at end of period 805 622 769 648

The comparability of Products and other sales, specifically logo and emblematic sales, is impacted by the recognition of logo and emblematic sales on a net basis in our consolidated financial statements during the 52 weeks ended April 30, 2022, as compared to on a gross basis prior to April 4, 2021.

See the Retail Gross Comparable Store Sales discussion below.

Additionally, Product and other sales and Rental income are impacted by the growth of First Day Complete, comparable store sales, new store openings and store closings, as well as the impact from the COVID-19 pandemic.

Sales were impacted by overall enrollment declines in higher education.

Although most four year schools returned to a traditional on-campus environment for learning in the Fall 2021 semester, as well as hosted traditional on campus sporting activities, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, and the continuation of remote and hybrid class offerings.

While many college athletic conferences resumed their sport activities, other on campus events, such as parent's weekends or alumni events, continue to be

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either eliminated or severely restricted, which further impacted our general merchandise business.

Product and other sales for Retail increased by $110.0 million, or 9.2%, to $1,306.3 million during the 52 weeks ended April 30, 2022 from $1,196.3 million during the 52 weeks ended May 1, 2021.

During the 52 weeks ended April 30, 2022, course material sales increased by $54.4 million or 8.1% to $710.7 million, and general merchandise sales increased by $59.0 million or 11.8% to $558.8 million, offset by a decrease in service and other revenue of $2.4 million or 6.1% to $36.8 million.

Course material rental income for Retail decreased by $0.8 million, or 0.6%, to $133.4 million during the 52 weeks ended April 30, 2022 from $134.2 million during the 52 weeks ended May 1, 2021.

The overall Retail sales increase is primarily related to re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

Course material sales were also impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings.

During the 52 weeks ended April 30, 2022, Retail Gross Comparable Store course material sales increased by 2.3%, as compared to a 15.2% decline a year ago, when the majority of our stores had temporarily closed due to the COVID-19 pandemic.

See Retail Gross Comparable Store Sales discussion below.

The increase in course material sales was reflective of the growth of First Day inclusive access programs, digital and eTextbook revenue increases, due to a shift to lower cost options and more affordable solutions, including digital offerings.

For the 2022 Spring term, First Day Complete was offered through 76 campus bookstores compared to 14 campus bookstores in the prior year, at schools with over 380,000 in total undergraduate enrollment, up from approximately 62,000 in total undergraduate enrollment in the 2021 Spring term.

Revenue for both of our First Day models increased to $234.2 million during Fiscal 2022, as compared to $122.7 million in the prior year period.

During the 52 weeks ended April 30, 2022, logo and emblematic sales are reflected in sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis prior to April 4, 2021.

See Retail Gross Comparable Store Sales discussion below.

During the 52 weeks ended April 30, 2022, Retail Gross Comparable Store general merchandise sales increased by 76.1%, as compared to a 45.9% decline a year ago.

Both results during both periods benefited greatly from the return to an on campus learning experience and the resumption of many activities and events.

Sales for general merchandise, including on-campus cafe and convenience products, and trade merchandise have increased compared to the prior year, when sales were impacted by the temporary store closings due to the COVID-19 pandemic.

However, general merchandise sales are still impacted by fewer students returning to campus, as many schools implemented a remote or hybrid learning model and curtailed on-campus classes and activities.

Retail Gross Comparable Store Sales

To supplement the Total Sales table presented above, the Company uses Retail Gross Comparable Store Sales as a key performance indicator.

Retail Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented.

For Retail Gross Comparable Store Sales, sales for logo and emblematic general merchandise fulfilled by FLC, Fanatics and digital agency sales are included on a gross basis for consistent year-over-year comparison.

As the logo and emblematic general merchandise sales are fulfilled by FLC 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 sales on a gross basis in the periods prior to April 4, 2021.

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.

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Retail Gross Comparable Store Sales variances for Retail by category for the 52 week period are as follows:

Dollars in millions 52 weeks ended

April 30, 2022 May 1, 2021

Textbooks (Course Materials) $ 21.2 2.3 % $ (158.4) (15.2) %

General Merchandise 212.5 76.1 % (235.3) (45.9) %

Trade Books 7.0 63.0 % (20.9) (64.3) %

Total Retail Gross Comparable Store Sales $ 240.7 19.6 % $ (414.6) (26.1) %

Wholesale sales decreased by $53.6 million, or 32.3%, to $112.2 million during the 52 weeks ended April 30, 2022 from $165.8 million during the 52 weeks ended May 1, 2021.

The decrease is primarily due to lower gross sales impacted by the COVID-19 pandemic, including supply constraints resulting from the lack of on campus textbook buyback opportunities during the prior fiscal year, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, partially offset by lower returns and allowances.

During the prior year period, the Wholesale operations assumed direct-to-student fulfillment of course material orders for the Retail Segment campus bookstores that were not fully operational due to COVID-19 campus store closures, whereas the sales shifted back to the physical bookstores in the current period.

DSS total sales increased by $8.3 million, or 30.3%, to $35.7 million during the 52 weeks ended April 30, 20221 from $27.4 million during the 52 weeks ended May 1, 2021.

Sales increased primarily due to an increase in subscription sales.

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 75.7% during the 52 weeks ended April 30, 2022 compared to 82.4% during the 52 weeks ended May 1, 2021.

Our gross margin increased by $120.1 million, or 47.5%, to $372.8 million, or 24.3% of sales, during the 52 weeks ended April 30, 2022 from $252.7 million, or 17.6% of sales, during the 52 weeks ended May 1, 2021.

During the 52 weeks ended April 30, 2022 and May 1, 2021, we recognized a merchandise inventory loss and write-off of $0.4 million and $15.0 million, respectively, in cost of goods sold in the Retail Segment discussed below.

Excluding the merchandise inventory loss and write-off, cost of goods sold and gross margin was 75.6% and 24.4%, respectively, of sales during the 52 weeks ended April 30, 2022 compared to 81.3% and 18.7%, respectively, of sales during the 52 weeks ended May 1, 2021.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 1.

Organization and Note 2.

Summary of Significant Accounting Policies - Merchandise Inventories.

The following table summarizes the Retail cost of sales:

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Related Sales May 1, 2021 % of

Related Sales

Product and other cost of sales

$ 1,040,022 79.6% $ 1,047,613 87.6%

Rental cost of sales

76,659 57.5% 87,240 65.0%

Total Cost of Sales

$ 1,116,681 77.6% $ 1,134,853 85.3%

The following table summarizes the Retail gross margin:

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Related Sales May 1, 2021 % of

Related Sales

Product and other gross margin $ 266,288 20.4% $ 148,707 12.4%

Rental gross margin 56,695 42.5% 46,910 35.0%

Gross Margin $ 322,983 22.4% $ 195,617 14.7%

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For the 52 weeks ended April 30, 2022, the Retail gross margin as a percentage of sales increased as discussed below:

• Product and other gross margin increased (800 basis points), driven primarily by a favorable sales mix (410 basis points) due to higher general merchandise sales and higher margin rates (445 basis points) due to lower inventory reserves and lower markdowns, partially offset by an inventory merchandise loss of $0.4 million related to the finalization of the sale of our logo and emblematic general merchandise inventory below cost to FLC which occurred in the fourth quarter in Fiscal 2021.

The increase in margin was also partially offset by higher contract costs as a percentage of sales related to our college and university contracts (60 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin increased (750 basis points), driven primarily by lower contract costs as a percentage of sales related to our college and university contracts (750 basis points) and a favorable rental mix (50 basis points), partially offset by lower rental margin rates (50 basis points).

The cost of sales and gross margin for Wholesale were $92.5 million, or 82.4% of sales, and $19.8 million, or 17.6% of sales, respectively, during the 52 weeks ended April 30, 2022.

The cost of sales and gross margin for Wholesale were $131.1 million, or 79.1% of sales, and $34.7 million, or 20.9% of sales, respectively, during the 52 weeks ended May 1, 2021.

The gross margin decreased to 17.6% during the 52 weeks ended April 30, 2022 from 20.9% during the 52 weeks ended May 1, 2021.

The decrease was primarily due to the unfavorable impact of returns and allowances and higher markdowns, partially offset by a favorable sales mix.

Gross margin for the DSS segment was $29.9 million, or 83.9% of sales, during the 52 weeks ended April 30, 2022 and $22.3 million, or 81.5% of sales, during the 52 weeks ended May 1, 2021.

The gross margins are driven primarily by high margin subscription service revenue earned.

Intercompany Eliminations

During the 52 weeks ended April 30, 2022 and 52 weeks ended May 1, 2021, sales eliminations were $56.2 million and $89.8 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 30, 2022 and 52 weeks ended May 1, 2021, the cost of sales eliminations were $56.2 million and $89.8 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 both 52 weeks periods ended April 30, 2022 and 52 weeks ended May 1, 2021, the gross margin eliminations was $0.1 million.

The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.

Selling and Administrative Expenses

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Sales May 1, 2021 % of

Selling and Administrative Expenses $ 383,440 25.0% $ 338,280 23.6%

During the 52 weeks ended April 30, 2022, selling and administrative expenses increased by $45.2 million, or 13.4%, to $383.4 million from $338.3 million during the 52 weeks ended May 1, 2021.

The variances by segment are discussed by segment below.

The increase in selling and administrative expenses is primarily related to re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

For Retail, selling and administrative expenses increased by $37.0 million, or 13.3%, to $315.1 million during the 52 weeks ended April 30, 2022 from $278.1 million during the 52 weeks ended May 1, 2021.

This increase was primarily due to a $34.5 million increase in stores payroll and operating expenses including comparable stores, virtual stores and new/closed stores payroll and operating expenses, and a $2.5 million increase in corporate payroll, infrastructure and product development costs.

The payroll increase is primarily related to re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

Index to Form 10-K Index to FS

For Wholesale, selling and administrative expenses decreased by $0.1 million, or 0.5%, to $16.0 million during the 52 weeks ended April 30, 2022 from $16.1 million during the 52 weeks ended May 1, 2021.

The decrease in selling and administrative expenses was primarily driven by lower compensation expense and lower operating costs.

For DSS, selling and administrative expenses increased by $7.4 million to $29.5 million during the 52 weeks ended April 30, 2022 from $22.1 million during the 52 weeks ended May 1, 2021.

The increase in costs was primarily driven by higher compensation expense, higher operating costs invested in the business associated with product development and sales infrastructure costs aimed at increasing revenue.

Corporate Services

Corporate Services' selling and administrative expenses increased by $0.9 million, or 4.2%, to $23.0 million during the 52 weeks ended April 30, 2022 from $22.1 million during the 52 weeks ended May 1, 2021.

The increase was primarily due to higher professional services costs.

Depreciation and Amortization Expense

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Sales May 1, 2021 % of

Depreciation and Amortization Expense $ 49,381 3.2% $ 52,967 3.7%

Depreciation and amortization expense decreased by $3.6 million, or 6.8%, to $49.4 million during the 52 weeks ended April 30, 2022 from $53.0 million during the 52 weeks ended May 1, 2021.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2022 and Fiscal 2021.

See impairment loss discuss below.

Impairment loss (non-cash)

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets .

For information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies and Note 6.

Fair Value Measurements .

During the 52 weeks ended April 30, 2022, 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 $6.4 million (both pre-tax and after-tax), comprised of $0.7 million, $1.8 million, $3.7 million and $0.2 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively.

During the 52 weeks ended May 1, 2021, 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 $27.6 million, $20.5 million after-tax, comprised of $5.1 million, $13.3 million, $6.3 million and $2.9 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively.

Restructuring and other charges

During the 52 weeks ended April 30, 2022, we recognized restructuring and other charges totaling $1.0 million, comprised primarily of $1.3 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives and $1.8 million for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure, partially offset by a $2.1 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).

During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling $10.7 million (Restated), comprised primarily of $6.6 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, $5.7 million for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with Fanatics and FLC partnership agreements and shareholder activist activities, and liabilities for a facility closure, partially offset by a $1.6 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).

Index to Form 10-K Index to FS

Operating Loss

52 weeks ended 52 weeks ended - Restated (a)

Dollars in thousands April 30, 2022 % of

Sales May 1, 2021 % of

Operating Loss $ (67,416) (4.4)% $ (176,894) (12.3)%

(a) We identified certain out of period adjustments related to Restructuring and other charges for the 52 weeks ended May 1, 2021.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

Our operating loss was $(67.4) million during the 52 weeks ended April 30, 2022 compared to operating loss of $(176.9) million during the 52 weeks ended May 1, 2021.

This operating loss increase was due to the matters discussed above.

For the 52 weeks ended April 30, 2022, excluding the $0.4 million of merchandise inventory loss and write-off, $1.0 million of restructuring and other charges and the $6.4 million impairment loss (non-cash), all discussed above, operating loss was $(59.6) million (or (3.9)% of sales).

For the 52 weeks ended May 1, 2021, excluding the $15.0 million of merchandise inventory loss and write-off, $10.7 million of restructuring and other charges and the $27.6 million impairment loss (non-cash), all discussed above, operating loss was $(123.6) million (or (8.6)% of sales).

Interest Expense, Net

52 weeks ended

Dollars in thousands April 30, 2022 May 1, 2021

Interest Expense, Net $ 10,096 $ 8,087

Net interest expense increased by $2.0 million to $10.1 million during the 52 weeks ended April 30, 2022 from $8.1 million during the 52 weeks ended May 1, 2021 primarily due to higher borrowings compared to the prior year.

Income Tax Benefit

52 weeks ended 52 weeks ended - Restated (a)

Dollars in thousands April 30, 2022 Effective Rate May 1, 2021 Effective Rate

Income Tax Benefit

$ ( 8,655 ) 11.2% $ ( 45,171 ) 24.4%

(a) We identified certain out of period adjustments related primarily to Income tax benefit for the 52 weeks ended May 1, 2021.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

We recorded an income tax benefit of $(8.7) million on a pre-tax loss of $(77.5) million during the 52 weeks ended April 30, 2022, which represented an effective income tax rate of 11.2% and an income tax benefit of $(45.2) million on a pre-tax loss of $(185.0) million during the 52 weeks ended May 1, 2021, which represented an effective income tax rate of 24.4%.

The effective tax rate for the 52 weeks ended April 30, 2022 is significantly lower as compared to the prior year comparable period due to the change in pre-tax loss and the change in the assessment of the realization of deferred tax assets as compared to prior year loss carrybacks.

Impact of U.S.

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 $7.2 million for the carryback of NOLs to higher tax rate years, recorded in Fiscal 2021.

As of May 1, 2021, we recognized a current income tax receivable for NOL carrybacks of $30.5 million in prepaid and other current assets on the consolidated balance sheet.

We received a $7.8 million refund in the second quarter of Fiscal 2022 and expect to receive additional refunds of approximately $22.7 million.

Index to Form 10-K Index to FS

52 weeks ended

Dollars in thousands April 30, 2022 May 1, 2021

Net Loss $ ( 68,857 ) $ (139,810)

(a) We identified certain out of period adjustments related primarily to Income tax benefit, as well as Restructuring and other charges, for the 52 weeks ended May 1, 2021.The adjustments increased our fiscal year 2021 reported net loss by $8.0 million but did not have an impact on Adjusted EBITDA (non-GAAP), cash flows or liquidity.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

As a result of the factors discussed above, we reported a net loss of $(68.9) million during the 52 weeks ended April 30, 2022, compared with a net loss of $(139.8) million during the 52 weeks ended May 1, 2021.

Adjusted Earnings (non-GAAP) is $(55.6) million during the 52 weeks ended April 30, 2022, compared with $(96.5) million during the 52 weeks ended May 1, 2021.

See Adjusted Earnings (non-GAAP) discussion below.

Results of Operations - 52 weeks ended May 1, 2021 (Restated) compared with the 53 weeks ended May 2, 2020

52 weeks ended, May 1, 2021 - Restated (a) (b)

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations (c)

Product sales and other $ 1,196,320 $ 165,825 $ 27,374 $ — $ (89,779) $ 1,299,740

Rental income 134,150 — — — — 134,150

Total sales 1,330,470 165,825 27,374 — (89,779) 1,433,890

Cost of sales:

Product and other cost of sales

1,047,613 131,142 5,056 — (89,822) 1,093,989

Rental cost of sales 87,240 — — — — 87,240

Total cost of sales 1,134,853 131,142 5,056 — (89,822) 1,181,229

Gross profit 195,617 34,683 22,318 — 43 252,661

Selling and administrative expenses

278,149 16,085 22,116 22,079 (149) 338,280

Depreciation and amortization expense

39,634 5,461 7,763 109 — 52,967

$ (122,166) $ 13,137 $ (7,561) $ (22,188) $ 192 (138,586)

Impairment loss (non-cash) 27,630

Restructuring and other charges

Operating loss $ (176,894)

Index to Form 10-K Index to FS

53 weeks ended, May 2, 2020 (b)

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations (c)

Product sales and other $ 1,533,029 $ 198,353 $ 23,661 $ — $ (83,843) 1,671,200

Rental income 179,863 — — — — 179,863

Total sales 1,712,892 198,353 23,661 — (83,843) 1,851,063

Cost of sales:

Product and other cost of sales

1,224,798 158,548 4,348 — (83,992) 1,303,702

Rental cost of sales 104,812 — — — — 104,812

Total cost of sales 1,329,610 158,548 4,348 — (83,992) 1,408,514

Gross profit 383,282 39,805 19,313 — 149 442,549

Selling and administrative expenses

347,869 18,238 19,172 19,403 (210) 404,472

Depreciation and amortization expense

47,099 5,963 8,670 128 — 61,860

$ (11,686) $ 15,604 $ (8,529) $ (19,531) $ 359 (23,783)

Impairment loss (non-cash) 433

Restructuring and other charges

Operating loss $ (42,783)

(a) We identified certain out of period adjustments related to Restructuring and other charges for the 52 weeks ended May 1, 2021.

The adjustments increased our fiscal year 2021 reported net loss by $8.0 million but did not have an impact on Adjusted EBITDA (non-GAAP), cash flows or liquidity.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

(b) In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

Financial Statements and Supplementary Data - Note 5.

Segment Reporting.

The following table summarizes our sales:

8 unchanged sentences

The components of the variances are reflected in the table below.

Index to Form 10-K Index to FS

Sales variances 52 weeks ended

24 unchanged sentences

Number of stores at end of period 769 648 772 647

Index to Form 10-K Index to FS

Product and other sales for Retail decreased by $336.7 million, or 22.0%, to $1,196.3 million during the 52 weeks ended May 1, 2021 from $1,533.0 million during the 53 weeks ended May 2, 2020.

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Effective April 4, 2021, as per the FLC merchandising partnership agreement, logo and emblematic general merchandise sales were fulfilled by FLC and we recognized commission revenue earned for these sales on a net basis.

Additionally, general merchandise sales for Retail decreased primarily due to lower emblematic apparel sales (as many athletic events were canceled due to COVID-19), lower supply product sales and lower graduation product sales (primarily due to COVID-19 related campus closures).

Index to Form 10-K Index to FS

We have made continued progress in the development of our next generation e-commerce platform, which launched in Fiscal 2021 to deliver increased high-margin general merchandise sales.

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Our gross margin decreased by $189.9 million, or 42.9%, to $252.7 million, or 17.6% of sales, during the 52 weeks ended May 1, 2021 from $442.5 million, or 23.9% of sales, during the 53 weeks ended May 2, 2020.

Index to Form 10-K Index to FS

During the 52 weeks ended May 1, 2021, we recognized a merchandise inventory loss and write-off of $15.0 million in cost of goods sold in the Retail Segment discussed below.

4 unchanged sentences

Summary of Significant Accounting Policies - Merchandise Inventories.

Index to Form 10-K Index to FS

The following table summarizes the Retail cost of sales:

29 unchanged sentences

These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

Index to Form 10-K Index to FS

During the 52 weeks ended May 1, 2021 and 53 weeks ended May 2, 2020, the cost of sales eliminations were $89.8 million and $84.0 million, respectively.

Index to Form 10-K Index to FS

The $0.1 million of gross margin elimination reflects the net impact of the sales eliminations and cost of sales eliminations during both the 52 weeks ended May 1, 2021 and 53 weeks ended May 2, 2020, respectively.

28 unchanged sentences

Fair Value Measurements .

Index to Form 10-K Index to FS

During the 52 weeks ended May 1, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

1 unchanged sentence

During the 53 weeks ended May 2, 2020, we recognized an impairment loss (non-cash) of $0.4 million in the Retail segment related to net capitalized development costs for a project which are not recoverable.

Index to Form 10-K Index to FS

Restructuring and other charges

During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling $10.0 million, comprised primarily of $5.9 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, $5.2 million for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with Fanatics and FLC partnership agreements and shareholder activist activities, and $0.5 million related to liabilities for a facility closure, partially offset by a $1.6 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).

During the 53 weeks ended May 2, 2020, we recognized restructuring and other charges totaling $18.6 million comprised primarily of $12.7 million for severance and other employee termination and benefit costs associated with several management changes, the elimination of various positions as part of cost reduction objectives, and professional service costs for process improvements, $2.8 million for professional service costs for shareholder activist activities, $2.7 million in an actuarial loss related to a frozen retirement benefit plan (non-cash), and $0.6 million for a store level asset impairment charge, offset by $0.2 million related to reduction of liabilities for a facility closure.

Operating Loss

52 weeks ended 53 weeks ended

52 weeks ended - Restated (a)

53 weeks ended

Dollars in thousands May 1,

1 unchanged sentence

$ (176,894) (12.3)% $ (42,783) (2.3)%

(a) We identified certain out of period adjustments related to Restructuring and other charges for the 52 weeks ended May 1, 2021.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

Our operating loss was $(176.9) million during the 53 weeks ended May 1, 2021 compared to operating loss of $(42.8) million during the 53 weeks ended May 2, 2020.

8 unchanged sentences

Income Tax Benefit

52 weeks ended 53 weeks ended

52 weeks ended - Restated (a)

53 weeks ended

Dollars in thousands May 1,

3 unchanged sentences

$ (45,171) 24.4% $ (11,978) 23.8%

(a) We identified certain out of period adjustments related to Restructuring and other charges for the 52 weeks ended May 1, 2021.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

We recorded an income tax benefit of $(45.2) million on a pre-tax loss of $(185.0) million during the 52 weeks ended May 1, 2021, which represented an effective income tax rate of 24.4% and an income tax benefit of $(12.0) million on a pre-tax loss of $(50.2) million during the 53 weeks ended May 2, 2020, which represented an effective income tax rate of 23.8%.

18 unchanged sentences

Net Loss $ (139,810) $ (38,250)

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

As a result of the factors discussed above, we reported a net loss of $(139.8) million during the 52 weeks ended May 1, 2021, compared with a net loss of $(38.3) million during the 53 weeks ended May 2, 2020.

1 unchanged sentence

See Adjusted Earnings (non-GAAP) discussion below.

Non-GAAP Measures - Adjusted Earnings, Adjusted EBITDA and Free Cash Flow

To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the measure of Adjusted Earnings, Adjusted EBITDA, 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 adjusted for certain reconciling items that are subtracted from or added to net income.

We define Adjusted EBITDA as net income 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.

We define Free Cash Flow as Adjusted EBITDA 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 and the reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below.

Index to Form 10-K Index to FS

Use of Non-GAAP Measures - Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow

To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the measure of Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations.

We define Adjusted Earnings as net income adjusted for certain reconciling items that are subtracted from or added to net income (loss).

We define Adjusted EBITDA as net income (loss) 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).

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), the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss), and the reconciliation of Adjusted EBITDA by Segment to net income (loss) 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.

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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 and manage our operations.

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 do not reflect the ordinary earnings of our operations.

Our Board of Directors and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure for performance incentive plans.

We believe that the inclusion of Adjusted Earnings and Adjusted EBITDA results provides investors useful and important information regarding our operating results.

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 results 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.

Index to Form 10-K Index to FS

Adjusted Earnings (non-GAAP)

Consolidated Adjusted Earnings (non-GAAP)

Dollars in thousands 52 weeks ended

May 1, 2021 53 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 27, 2019

$ (68,857) $ (139,810) $ (38,250)

3 unchanged sentences

Reconciling items, pre-tax

Impairment loss (non-cash) (b)

Impairment loss (non-cash) (c)

$ 6,411 $ 27,630 $ 433

2 unchanged sentences

5,454 5,034 4,082

Restructuring and other charges (e)

Restructuring and other charges (c)

944 10,678 18,567

Transaction costs (f)

Reconciling items, pre-tax 13,243 58,302 23,082

Pro forma income tax impact (g)

Pro forma income tax impact (c)(e)

— 15,015 5,958

Reconciling items, after-tax $ 13,243 $ 43,287 $ 17,124

Adjusted EBITDA (non-GAAP)

Index to Form 10-K Index to FS

Consolidated Adjusted EBITDA (non-GAAP)

Dollars in thousands 52 weeks ended

May 1, 2021 53 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 27, 2019

$ (68,857) $ (139,810) $ (38,250)

2 unchanged sentences

Income tax benefit (8,655) (45,171) (11,978)

Impairment loss (non-cash) (b)

Impairment loss (non-cash) (c)

6,411 27,630 433

2 unchanged sentences

5,454 5,034 4,082

Restructuring and other charges (e)

Restructuring and other charges (c)

944 10,678 18,567

Transaction costs (f)

Adjusted EBITDA (non-GAAP) $ (4,792) $ (65,625) $ 42,159

(a) In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

(a) We identified certain out of period adjustments related primarily to Income tax benefit, as well as Restructuring and other charges, for the 52 weeks ended May 1, 2021.

The adjustments increased our fiscal year 2021 reported net loss by $8.0 million but did not have an impact on Adjusted EBITDA (non-GAAP), cash flows or liquidity.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

(b) In Fiscal 2022, 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

(b) See Management Discussion and Analysis - Results of Operations - Impairment Loss discussion above.

(d) Earnings are adjusted for amortization expense (non-cash) related to content development costs which are included in cost of goods sold.

(e) See Management Discussion and Analysis - Restructuring and Other Charges discussion above.

(f) Transaction costs are costs incurred for business development and acquisitions.

(g) Represents the income tax effects of the non-GAAP items.

(e) Represents the income tax effects of the non-GAAP items.

The following is Adjusted EBITDA by segment for Fiscal 2022, Fiscal 2021, and Fiscal 2020:

Adjusted EBITDA - by Segment 52 weeks ended May 1, 2021 (a)

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Sales $ 1,330,470 $ 165,825 $ 27,374 $ — $ (89,779) $ 1,433,890

Cost of sales (b)

Adjusted EBITDA - by Segment 52 weeks ended April 30, 2022 (a)

Dollars in thousands Retail Wholesale DSS Corporate Services (b)

Eliminations Total

Net (loss) income $ (37,305) $ 495 $ (6,801) $ (25,471) $ 225 $ (68,857)

Depreciation and amortization expense 36,635 5,418 7,257 71 — 49,381

Interest expense, net — — — 10,096 — 10,096

Income tax benefit — — — (8,655) — (8,655)

Impairment loss (non-cash) (c)

6,411 — — — — 6,411

Gross profit 211,322 34,683 26,607 — 43 272,655

Selling and administrative expenses

Merchandise inventory loss and write-off (b)

434 — — — — 434

Content amortization (non-cash) (d)

386 — 5,068 — — 5,454

Restructuring and other charges (c)

2,118 (2,131) — 957 — 944

Adjusted EBITDA (non-GAAP) $ 8,679 $ 3,782 $ 5,524 $ (23,002) $ 225 $ (4,792)

Index to Form 10-K Index to FS

Adjusted EBITDA - by Segment 53 weeks ended May 2, 2020 (a)

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Sales $ 1,712,892 $ 198,353 $ 23,661 $ — $ (83,843) $ 1,851,063

Cost of sales (c)

Adjusted EBITDA - by Segment 52 weeks ended May 1, 2021 (a) - Restated (e)

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Eliminations Total

Net (loss) income $ (155,310) $ 14,732 $ (8,132) $ 8,708 $ 192 $ (139,810)

Depreciation and amortization expense 39,634 5,461 7,763 109 — 52,967

Interest expense, net — — — 8,087 — 8,087

Income tax benefit — — — (45,171) — (45,171)

Impairment loss (non-cash) (c)

27,630 — — — — 27,630

Gross profit 384,096 39,805 22,581 — 149 446,631

Selling and administrative expenses

Merchandise inventory loss and write-off (b)

14,960 — — — — 14,960

Content amortization (non-cash) (d)

745 — 4,289 — — 5,034

Restructuring and other charges (c)

5,514 (1,595) 571 6,188 — 10,678

Adjusted EBITDA (non-GAAP) $ (66,827) $ 18,598 $ 4,491 $ (22,079) $ 192 $ (65,625)

Adjusted EBITDA - by Segment 52 weeks ended April 27, 2019

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Sales $ 1,889,008 $ 223,374 $ 21,339 $ — $ (99,078) $ 2,034,643

Cost of sales (d)

Adjusted EBITDA - by Segment 53 weeks ended May 2, 2020 (a)

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Eliminations Total

Net (loss) income $ (24,445) $ 12,909 $ (8,529) $ (18,544) $ 359 $ (38,250)

Depreciation and amortization expense 47,099 5,963 8,670 128 — 61,860

Interest expense, net — — — 7,445 — 7,445

Income tax benefit — — — (11,978) — (11,978)

Impairment loss (non-cash) (c)

433 — — — — 433

Gross profit 452,324 56,341 20,673 — (516) 528,822

Selling and administrative expenses

Merchandise inventory loss and write-off (b)

Content amortization (non-cash) (d)

814 — 3,268 — — 4,082

Restructuring and other charges (c)

12,326 2,695 — 3,546 — 18,567

Adjusted EBITDA (non-GAAP) $ 36,227 $ 21,567 $ 3,409 $ (19,403) $ 359 $ 42,159

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The impact of which affects the comparability of our results of operations and cash flows.

(b) For the 52 weeks ended May 1, 2021, gross margin excludes $0.7 million and $4.3 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 52 weeks ended May 1, 2021, gross margin also excludes a merchandise inventory loss and write-off of $15.0 million in the Retail Segment.

See Management Discussion and Analysis - Results of Operations - Cost of Sales and Margin discussion above.

(c) For the 53 weeks ended May 2, 2020, gross margin excludes $0.8 million and $3.7 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

(d) For the 52 weeks ended April 27, 2019, gross margin excludes $0.5 million and $0.6 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

(b) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement which funds 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.

(d) Earnings are adjusted for amortization expense (non-cash) related to content development costs which are included in cost of goods sold.

(e) We identified certain out of period adjustments related primarily to Income tax benefit, as well as Restructuring and other charges, for the 52 weeks ended May 1, 2021.

The adjustments increased our fiscal year 2021 reported net loss by $8.0 million but did not have an impact on Adjusted EBITDA (non-GAAP), cash flows or liquidity.

Refer to Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for further information.

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Free Cash Flow (non-GAAP)

Dollars in thousands 52 weeks ended

May 1, 2021 53 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 27, 2019

Adjusted EBITDA (non-GAAP) $ (65,625) $ 42,159 $ 104,942

Net cash flows provided by (used in) operating activities $ 2,060 $ 32,895 $ (8,676)

Capital expenditures (a)

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Dollars in thousands 52 weeks ended

May 1, 2021 53 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 27, 2019

Physical store capital expenditures $ 16,206 $ 10,382 $ 13,926

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Total Capital Expenditures $ 43,533 $ 37,223 $ 36,192

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Liquidity and Capital Resources

Our primary sources of cash are net cash flows from operating activities, funds available under a credit agreement and short-term vendor financing.

As of May 1, 2021, we had $177.6 million of borrowings outstanding under the Credit Agreement.

Our primary sources of cash are net cash flows from operating activities, funds available under our credit agreement and short-term vendor financing.

As of April 30, 2022, we had $225.7 million of borrowings outstanding under the Credit Agreement.

See Financing Arrangements discussion below.

We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-term vendor financing will provide adequate resources to fund our operating and financing needs for the foreseeable future.

We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-term financings will provide adequate resources to fund our operating and financing needs for the foreseeable future.

Our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store openings, and any potential acquisitions of other brands or companies including digital properties.

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COVID-19 Business Impact

Our Fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools adjusted their learning model and on-campus activities in response to the pandemic.

Fewer students returned to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

Additionally, sales were impacted by overall enrollment declines in higher education.

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies - Other Long-Lived Assets related to the impairment loss (non-cash) recognized during Fiscal 2021.

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

Certain elements of this plan were implemented in late Fiscal 2020, while other actions occurred in Fiscal 2021.

We have achieved meaningful annualized cost savings from this program.

During Fiscal 2022, our business continued to be significantly negatively impacted by the COVID-19 pandemic.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve.

We cannot accurately predict the duration or extent of the impact of COVID-19 on enrollments, university budgets, athletics and other areas that directly affect our business operations .

Sale of Treasury Shares and Merchandise Inventory

In December 2020, we entered into a new merchandising partnership with Fanatics and FLC which included a strategic equity investment in the Company.

Fanatics, Inc.

and Lids Holdings, Inc.

jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $15.0 million, 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 $4.1 million and was recognized as a contract liability ($0.2 million in accrued liabilities and $3.9 million in other long-term liabilities on our consolidated balance sheet) which is expected to be earned over the term of the merchandising contracts for Fanatics and FLC.

On April 4, 2021, as contemplated by the merchandising partnership agreement, we closed on the sale of our logo and emblematic general merchandise inventory to FLC and received proceeds of $41.8 million, and recognized a merchandise inventory loss on the sale of $10.3 million in cost of goods sold during the 52 weeks ended May 1, 2021 in the statement of operations for the Retail Segment.

The final inventory purchase price will be determined during the first quarter of Fiscal 2022.

For additional information regarding the merchandising partnership, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 1.

Organization - Partnership with Fanatics and FLC, Note 2.

Summary of Significant Accounting Policies - Merchandise Inventories, and Note 6.

Equity and Earnings Per Share - Sale of Treasury Shares.

We will continue to assess our operations and will continue to consider the guidance of local governments and

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our campus partners to determine how to operate our bookstores in the safest manner for our employees and customers.

Please see our Part II - Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview for further discussion.

Sources and Uses of Cash Flow

See "Overview" for more information.

A detailed year-over-year comparisons between Fiscal 2020 and Fiscal 2019 can be found in Part II Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the year ended May 2, 2020 filed with the SEC on July 14, 2020.

Dollars in thousands Fiscal 2022 Fiscal 2021 Fiscal 2020

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Net cash flows used in investing activities (42,661) (36,888) (37,019)

Net cash flows provided by (used in) financing activities 11,799 39,935 (68,272)

Net cash flows provided by financing activities 45,721 11,799 39,935

Cash, cash equivalents, and restricted cash at end of period $ 21,934 $ 16,814 $ 9,008

As of April 30, 2022 and May 1, 2021, we had restricted cash of $11.5 million and $8.8 million, respectively, comprised of $10.6 million and $7.9 million, respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement and $0.9 million as of the end of both periods in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities

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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.

For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter selling season when textbooks and other course materials are sold for retail distribution.

When a school adopts our First Day inclusive access offerings, cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, 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.

For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter selling season when they 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.

For our DSS segment, cash flows are not seasonal as cash flows from operating activities are typically consistent throughout the year.

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.

Our quarterly cash flows also may fluctuate depending on the timing of the start of the various school’s 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 provided by operating activities during Fiscal 2022 were $2.1 million compared to $32.9 million during Fiscal 2021.

This decrease in cash provided by operating activities of $30.8 million was primarily due to $41.8 million of proceeds received in Fiscal 2021 for the sale of logo merchandise inventory to FLC and changes in working capital, including higher accounts receivables outstanding and higher inventory purchases, partially offset by improved earnings in the current year period compared to the prior year period and lower tax payments of $14.0 million compared to the prior year period.

Our operations were highly impacted by COVID-19 related campus store closures in the prior year period, resulting in lower operating costs and lower inventory purchases in the prior year.

Cash flows provided by operating activities during Fiscal 2021 were $32.9 million compared to cash flow used in operating activities of $(8.7) million during Fiscal 2020.

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Cash flows used in investing activities during Fiscal 2022 were $(42.7) million compared to $(36.9) million during Fiscal 2021.

The increase in cash used in investing activities is primarily due to higher capital expenditures and contractual capital investments associated with content development, digital initiatives, enhancements to internal systems and websites, renewing

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existing contracts and new store construction.

Capital expenditures totaled $(43.5) million and $(37.2) million during Fiscal 2022 and Fiscal 2021, respectively.

Cash flows used in investing activities during Fiscal 2021 were $(36.9) million compared to $(37.0) million during Fiscal 2020.

Cash used in investing activities is primarily for capital expenditures and contractual capital investments associated with content development, digital initiatives, enhancements to internal systems and websites, renewing existing contracts and new store construction and lower payments to acquire businesses and the change in other noncurrent assets for contractual obligations.

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Cash flows provided by financing activities during Fiscal 2022 were $45.7 million compared to $11.8 million during Fiscal 2021.

The net change of $33.9 million is primarily due to higher net borrowings under the credit agreement, offset by proceeds from the sale of treasury shares of $10.9 million during Fiscal 2021.

Cash flows provided by financing activities during Fiscal 2021 were $11.8 million compared to $39.9 million during Fiscal 2020.

This net change of $28.1 million is primarily due to higher net borrowings under the credit agreement and the sale of treasury shares of $10.9 million (discussed above), partially offset by the payment of deferred financing costs of $1.1 million.

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The agreement includes an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100 million incremental facility maintaining the maximum availability under the Credit Agreement at $500 million.

On March 31, 2021, we were granted a waiver to the availability test condition to the current draw under the FILO Facility.

On March 4, 2022, we were granted a waiver to the condition to the upcoming draw under the FILO Facility, scheduled for April 2022, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110.0 million.

Under the waiver amendment, the commitment under the FILO Facility of $25.0 million was increased to $40.0 million, with all remaining terms unchanged.

On June 7, 2022, subsequent to the end of Fiscal 2022, we entered into a Term Loan Credit Agreement with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to the Credit Agreement.

Part II - Item 8.

Financial Statements and Supplementary Data - Note 16.

Subsequent Event for details.

On June 28, 2022, we obtained limited waivers with respect to the Credit Agreement and the Term Loan Credit Agreement, pursuant to which the requisite lenders thereunder waived any potential default or event of default under such agreements solely to the extent arising from the restatement of Fiscal 2021 consolidated financial statements as described in Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies.

During the 52 weeks ended April 30, 2022, we borrowed $632.2 million and repaid $584.1 million under the Credit Agreement, with $225.7 million of outstanding borrowings as of April 30, 2022.

During the 52 weeks ended May 1, 2021, we borrowed $722.6 million and repaid $719.7 million under the Credit Agreement, with $177.6 million of outstanding borrowings as of May 1, 2021.

During the 53 weeks ended May 2, 2020, we

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borrowed $600.9 million and repaid $559.7 million under the Credit Agreement, with $174.7 million of outstanding borrowings as of May 2, 2020.

During 52 weeks ended April 27, 2019, we borrowed $521.2 million and repaid $584.1 million under the Credit Agreement, and had outstanding borrowings of $33.5 million and $100.0 million under the Credit Facility and FILO Facility, respectively, as of April 27, 2019.

As of both May 1, 2021 and May 2, 2020, we have issued $4.8 million in letters of credit under the Credit Facility.

During the 52 weeks ended May 1, 2021, we incurred debt issuance costs totaling $1.1 million related to the March 31, 2021 Credit Facility amendment.

During the 53 weeks ended May 2, 2020, we borrowed $600.9 million and repaid $559.7 million under the Credit Agreement, with $174.7 million of outstanding borrowings as of May 2, 2020.

As of both April 30, 2022 and May 1, 2021, we have issued $4.8 million in letters of credit under the Credit Facility.

During the 52 weeks ended April 30, 2022 and May 1, 2021, we incurred debt issuance costs totaling $0.3 million and $1.1 million related to the March 4, 2022 waiver and March 31, 2021 Credit Facility 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.

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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).

Interest under the Credit Facility accrues, at our election, at a LIBOR or alternate base rate, plus, in each case, an applicable interest rate margin, which is determined by reference to the level of excess availability under the Credit Facility.

Loans will initially bear interest at LIBOR plus 2.00% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 1.00% per annum, in the alternative, and thereafter the interest rate will fluctuate between LIBOR plus 2.00% per annum and LIBOR plus 1.50% per annum (or between the alternate base rate plus 1.000% per annum and the alternate base rate plus 0.50% per annum), based upon the excess availability under the Credit Facility at such time.

Loans under the FILO Facility will bear interest at a rate equal to the LIBOR rate, plus 3.750%.

In connection with the waiver, the applicable margin for credit extensions made under the FILO Facility after March 31, 2021 through the end of 2021 was increased by 0.50% (to 3.75% per annum for LIBO rate loans and 2.75% for base rate loans).

Interest under the Credit Facility accrues, at our election, at a Secured Overnight Financing Rate ("SOFR") or alternate base rate, plus, in each case, an applicable interest rate margin, which is determined by reference to the level of excess availability under the Credit Facility.

Loans will initially bear interest at SOFR plus 2.00% per annum, in the case of SOFR borrowings, or at the alternate base rate plus 1.00% per annum, in the alternative, and thereafter the interest rate will fluctuate between SOFR plus 2.00% per annum and SOFR plus 1.50% per annum (or between the alternate base rate plus 1.000% per

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annum and the alternate base rate plus 0.50% per annum), based upon the excess availability under the Credit Facility at such time.

Loans under the FILO Facility will bear interest at a rate equal to the SOFR rate, plus 3.750%.

The FILO Facility will be available solely during the draw period each year, from April 1 through July 31.

We are required to borrow 100% of the aggregate commitments under the FILO Facility on April 1 of each year, and the loans must be repaid in full (including interest and fees) on July 31 of each year.

The commitments under the FILO Facility will decrease from $50.0 million to $25.0 million on August 1, 2021.

The commitments under the FILO Facility decreased from $50.0 million to $25.0 million on August 1, 2021.

We will pay a commitment fee of 0.375% on the daily unused portion of the FILO Facility.

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The Credit Facility also contains customary affirmative covenants and representations and warranties.

We are in compliance with all covenants, representations and warranties under the Credit Facility as of May 1, 2021.

We are in compliance with all covenants, representations and warranties under the Credit Facility as of April 30, 2022.

Income Tax Implications on Liquidity

As of May 1, 2021, other long-term liabilities includes $25.3 million related to the long-term tax payable associated with the LIFO reserve.

The LIFO reserve is impacted by changes in the consumer price index (“CPI”) and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle.

At the end of the most recent tax year, inventory levels declined as compared to the prior year resulting in approximately $0.7 million of the LIFO reserve becoming currently payable.

Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remaining long-term tax payable associated with the LIFO reserve could be payable within the next twelve months.

We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.

For the fiscal year ended April 30, 2022, the Company intends to file an application to change its tax year from January to April under the automatic consent provisions.

As a result of the tax year-end change, there is no longer a long-term tax payable associated with the LIFO reserve in other long-term liabilities.

We have filed our federal income tax returns for the tax year ended January 2021, as well claims for refunds for cash taxes paid in prior years.

We received a $7.8 million refund in the second quarter of Fiscal 2022 and expect to receive additional refunds of approximately $22.6 million.

Share Repurchases

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During Fiscal 2022, Fiscal 2021, and Fiscal 2020, we did not purchase shares under the stock repurchase program.

As of May 1, 2021, approximately $26.7 million remains available under the stock repurchase program.

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As of April 30, 2022, approximately $26.7 million remains available under the stock repurchase program.

During Fiscal 2022, Fiscal 2021, and Fiscal 2020, we also repurchased 239,751 shares, 414,174 shares, and 374,733 shares of our common stock, respectively, in connection with employee tax withholding obligations for vested stock awards.

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Contractual Obligations

The following table sets forth our contractual obligations as of May 1, 2021 (in millions):

The following table sets forth our contractual obligations (in millions):

Payments Due by Period

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40.0 40.0 — — —

Term Loans (a)

30.0 — 30.0 — —

Lease obligations (excluding imputed interest) (b)

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22.3 11.6 10.2 0.5 —

Other long-term liabilities reflected on the balance sheet under GAAP (d) (e)

Other long-term liabilities reflected on the balance sheet under GAAP (d)

Total $ 645.7 $ 342.0 $ 144.8 $ 67.7 $ 91.2

(a) As of May 1, 2021, we had a total of $177.6 million of outstanding borrowings under the Credit Facility and FILO Facility.

(a) As of April 30, 2022, we had a total of $225.7 million of outstanding borrowings under the Credit Facility and FILO Facility.

See Financing Arrangements discussion above for information about future borrowings and payments under the FILO Credit Facility.

On June 7, 2022, subsequent to the end of Fiscal 2022, we entered into a Term Loan Credit Agreement and we entered an amendment to the Credit Agreement.

Part II - Item 8.

Financial Statements and Supplementary Data - Note 16.

Subsequent Event for details.

(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.

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(d) Other long-term liabilities excludes $25.3 million of tax liabilities related to the long-term tax payable associated with the LIFO reserve for which we cannot make a reasonably reliable estimate of the amount and period of payment.

See Income Tax Implications on Liquidity discussed above.

(e) Other long-term liabilities excludes expected payments related to employee benefit plans.

(d) Other long-term liabilities excludes expected payments related to employee benefit plans.

See Part II - Item 8.

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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.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021.

We do not have gift card or customer loyalty programs.

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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 $6.0 million in Fiscal 2021.

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in actual non-returnable inventory would have affected pre-tax earnings by approximately $5.6 million in Fiscal 2022.

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.

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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

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regarding shortage rates are incorrect, we may be exposed to losses or gains that could be material.

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 $0.05 million in Fiscal 2022.

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Evaluation of Other Long-Lived Assets Impairment

As of May 1, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $89.2 million, $240.5 million, $150.9 million, and $29.1 million, respectively, on our consolidated balance sheet.

As of April 30, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $94.1 million, $286.6 million, $129.6 million, and $24.0 million, respectively, on our consolidated balance sheet.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and consider market participants in accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets .

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If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value.

Fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities.

Many of the trends observed during the Fall semester continued into the Spring semester, as fewer students have returned to campus for the Spring semester, many colleges and universities continued with remote learning models and on-campus classes and activities have been further curtailed, including many athletic conferences that have been either eliminated or severely restricted.

These combined events impacted the Company’s course materials and general merchandise business.

Our business has been significantly negatively impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning models and on-campus activities.

Many of the trends observed during the Fall 2021 semester continued into the Spring 2022 semester, as fewer students have returned to campus for the Spring semester.

As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron

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variant further impacting students return to campus and on-campus activities.

These combined events continue to impact the Company’s course materials and general merchandise business.

During the third quarter of Fiscal 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

During the third quarter of Fiscal 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

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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.

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These long-lived assets were not recoverable and had a de minimis fair value, as determined using an income approach (Level 3 input), resulting in a non-cash impairment charge for the full carrying value of those long-lived assets.

During the fourth quarter of Fiscal 2019, in conjunction with the change to reporting segments and the interim goodwill impairment test noted below, as well as operational changes in certain long-lived asset groups, we evaluated certain of our long-lived assets for impairment and recognized an impairment loss of $8.4 million, comprised of $8.1 million of intangible assets, primarily acquired technology, and $0.3 million of property and equipment related to our LoudCloud and Promoversity operations.

These long-lived assets were not recoverable and had a de minimis fair value, as determined using the relief-from-royalty and income approaches (Level 3 input), resulting in a non-cash impairment charge for the full carrying value of those long-lived assets.

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.

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therefore, no goodwill impairment was recognized.

During the third quarter of Fiscal 2019, we completed our annual goodwill impairment test and concluded that the fair value of the MBS and DSS reporting units, as they existed at that time, each exceeded their respective carrying values and no goodwill impairment was recognized.

In the fourth quarter of Fiscal 2019, due to the change in our reporting units identified as a result of the change in our reportable segments, we recognized a total goodwill impairment (non-cash impairment loss) of $49.3 million associated with the MBS reporting unit (as it existed at that date) and allocated $20.5 million of goodwill to the Retail Segment and $28.7 million of goodwill to the Wholesale Segment.

Application of the goodwill impairment test requires judgment, including:

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Under the income approach, we calculate the fair value of the reporting unit based on the present value of estimated future cash flows.

Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital and tax rates.

We also make certain forecasts about future

Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating

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economic conditions, interest rates, market data, and other observable trends, such as comparable store sales trends, recent changes in publisher relationships, and development of innovative digital products and services in the rapidly changing education landscape.

results, business plans, expected growth rates, cost of capital and tax rates.

We also make certain forecasts about future economic conditions, interest rates, market data, and other observable trends, such as comparable store sales trends, recent changes in publisher relationships, and development of innovative digital products and services in the rapidly changing education landscape.

The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows.

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Our actual results could differ materially from our current estimates.

Recent Accounting Pronouncements

Financial Statements and Supplementary Data — Note 3.

Recent Accounting Pronouncements for information related to new accounting pronouncements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis