What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-09-03 compared with 2020-03-03 · 210 added, 228 removed, 371 unchanged (54% of the section changed)

5 unchanged sentences

13 weeks ended

39 weeks ended

2020 July 27,

Product sales and other $ 193,210 $ 302,227

Rental income 10,804 17,430

Total sales 204,014 319,657

Cost of sales:

2 unchanged sentences

Total cost of sales 173,152 248,000

Gross profit 30,862 71,657

Selling and administrative expenses 70,043 97,691

2 unchanged sentences

Restructuring and other charges 5,671 1,466

Transaction costs

Operating (loss) income

Operating loss ( 58,915 ) ( 43,812 )

Interest expense, net 2,653 2,532

(Loss) income before income taxes

Income tax (benefit) expense

Net (loss) income

(Loss) Earnings per share of common stock:

Loss before income taxes ( 61,568 ) ( 46,344 )

Income tax benefit ( 14,916 ) ( 14,189 )

Net loss $ ( 46,652 ) $ ( 32,155 )

Loss per share of common stock:

Basic $ ( 0.96 ) $ ( 0.68 )

Diluted $ ( 0.96 ) $ ( 0.68 )

Weighted average shares of common stock outstanding:

Basic 48,411 47,582

Diluted 48,411 47,582

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In thousands, except per share data)

2020 July 27,

(unaudited) (unaudited) (audited)

Current assets:

8 unchanged sentences

Intangible assets, net 170,466 189,183 175,125

Goodwill 4,700 4,700 4,700

Deferred tax assets, net 8,459 — 7,805

Other noncurrent assets 33,646 40,457 35,307

Total assets $ 1,360,796 $ 1,502,421 $ 1,156,432

LIABILITIES AND STOCKHOLDERS' EQUITY

14 unchanged sentences

authorized, 5,000 shares;

issued and outstanding, none

0 shares issued and 0 shares outstanding

Common stock, $ 0.01 par value;

13 unchanged sentences

13 weeks ended

2020 July 27,

Cash flows from operating activities:

Adjustments to reconcile net income to net cash flows from operating activities:

Net loss $ ( 46,652 ) $ ( 32,155 )

Adjustments to reconcile net loss to net cash flows from operating activities:

Depreciation and amortization expense 14,063 15,879

7 unchanged sentences

Changes in other operating assets and liabilities, net ( 17,515 ) ( 33,295 )

Net cash flows provided by operating activities

Net cash flows used in operating activities ( 54,839 ) ( 40,243 )

Cash flows from investing activities:

Purchases of property and equipment ( 7,055 ) ( 8,309 )

Acquisition of businesses, net of cash acquired

Net change in other noncurrent assets 1,605 2,204

4 unchanged sentences

Purchase of treasury shares ( 342 ) ( 40 )

Net cash flows used in financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net cash flows provided by financing activities 59,518 40,560

Net decrease in cash, cash equivalents and restricted cash ( 771 ) ( 5,788 )

Cash, cash equivalents and restricted cash at beginning of period 9,008 14,768

12 unchanged sentences

(In thousands)

Treasury Stock

Balance at April 28, 2018

Stock-based compensation expense

Balance at July 28, 2018

Stock-based compensation expense

Vested equity awards

Shares repurchased for tax withholdings for vested stock awards

Balance at October 27, 2018

Stock-based compensation expense

Balance at January 26, 2019

Treasury Stock

Common Stock Paid-In Accumulated Treasury Stock Total

Shares Amount Capital Deficit Shares Amount Equity

Balance at April 27, 2019 51,030 $ 510 $ 726,331 $ ( 244,577 ) 3,467 $ ( 31,636 ) $ 450,628

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Shares repurchased for tax withholdings for vested stock awards

12 ( 40 ) ( 40 )

( 32,155 ) ( 32,155 )

Balance at July 27, 2019

51,086 $ 511 $ 728,651 $ ( 276,732 ) 3,479 $ ( 31,676 ) $ 420,754

Common Stock Paid-In Accumulated Treasury Stock Total

Shares Amount Capital Deficit Shares Amount Equity

Balance at May 2, 2020 52,140 $ 521 $ 732,958 $ ( 282,827 ) 3,842 $ ( 32,901 ) $ 417,751

Stock-based compensation expense

Vested equity awards

514 5 ( 5 ) —

Shares repurchased for tax withholdings for vested stock awards

Balance at October 28, 2019

Stock-based compensation expense

Balance at January 25, 2020

179 ( 342 ) ( 342 )

( 46,652 ) ( 46,652 )

Balance August 1, 2020

52,654 $ 526 $ 734,474 $ ( 329,479 ) 4,021 $ ( 33,243 ) $ 372,278

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

Unless the context otherwise indicates, references in these Notes to the accompanying condensed consolidated financial statements to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc.

or "BNED", a Delaware corporation.

References to “Barnes & Noble College” or "BNC" refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC.

References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC.

References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC.

References to “Student Brands” refer to our direct-to-student subscription-based writing services business operated through our subsidiary Student Brands, LLC.

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended April 27, 2019, which includes consolidated financial statements for the Company for each of the three fiscal years ended April 27, 2019 , April 28, 2018 and April 29, 2017 (Fiscal 2019 , Fiscal 2018 and Fiscal 2017 , respectively), the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 13 weeks ended July 27, 2019, and the unaudited condensed consolidated financial statements in our Form 10-Q for the 26 weeks ended October 26, 2019.

Description of Business

Barnes & Noble Education, Inc.

is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States.

(“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States.

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

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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 partners and stable, long-term contracts, and our well-recognized brands.

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 general merchandise e-commerce capabilities, increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect the changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, as we improve our e-commerce capabilities through investments we are making in new systems, processes and people.

Prior to the fourth quarter of Fiscal 2019, we had three reportable segments:

BNC, MBS, and Digital Student Solutions (“DSS”).

During the fourth quarter of Fiscal 2019, in an effort to streamline our retail go-to-market strategy, reinforce our company branding, and more efficiently focus our product development efforts, we realigned our business and sales organization into the following three reportable segments:

We believe the BNC and MBS brands are synonymous with innovation in bookselling and campus retail, and, are widely recognized and respected brands in the United States.

Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important for leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

We have three reportable segments:

Retail, Wholesale and DSS.

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Financial Statements and Supplementary Data - Note 6.

Segment Reporting in our Annual Report on Form 10-K for the year ended April 27, 2019 .

Segment Reporting in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020 .

In Fiscal 2020, we retained Morgan Stanley & Co.

LLC to serve as a financial advisor in connection with our review of strategic opportunities.

The review was designed to accelerate the execution of customer-focused strategic initiatives and enhance value for our shareholders, including, but not limited to, continued execution of our current business plan, new partnerships, joint ventures and other potential opportunities.

On August 24, 2020, we announced that we had concluded our review of strategic opportunities.

After extensive evaluation and deliberation, and in consultation with its financial and legal advisors, the Board unanimously determined that the continued execution of the Company’s current business plan is the best path forward for the Company and its shareholders.

COVID-19 Business Impact

Our business experienced an unprecedented and significant 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.

By mid-March, during our fiscal fourth quarter, we closed the majority of our physical campus stores to protect the health and safety of our customers and employees.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

While our campus stores were closed, we continued to serve institutions and students through our campus websites, providing free shipping on all orders and an expanded digital content offering to provide immediate access to course materials to students at our campuses that closed due to COVID-19.

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.

Colleges and universities in the United States continue to adjust their plans for the upcoming fall term, with some implementing shortened semesters or choosing to remain fully virtual in order to best protect students and faculty.

The first quarter is historically a low revenue period and our first quarter results were significantly impacted by the COVID-19 pandemic.

As many schools shifted from an on-campus to a remote learning model, we were able to serve students through our Custom Store Solutions “CSS” model, virtual bookstores, individual school websites and digital offerings to ensure students were equipped with their course materials to continue their education, wherever they may be.

The COVID-19 impact on higher education remains a fluid situation, and we are committed to supporting our campus partners through our flexible offerings and our ability to quickly pivot to ensure uninterrupted service as institutions manage the safety of their campuses.

Summary of Significant Accounting Policies

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

(Thousands of dollars, except share and per share data)

seasonal nature of the business, the results of operations for the 13 and 39 weeks ended January 25, 2020 are not indicative of the results expected for the 53 weeks ending May 2, 2020 (Fiscal 2020).

Due to the seasonal nature of the business, the results of operations for the 13 weeks ended August 1, 2020 are not indicative of the results expected for the 52 weeks ending May 1, 2021 (Fiscal 2021).

For certain of our retail operations, sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters.

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Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

Textbook Rental Inventories

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At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost.

Effective April 28, 2019, we adopted Accounting Standards Codification ("ASC") Topic 842, Leases , and recognized lease assets and lease liabilities on the condensed consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments.

We recognize lease assets and lease liabilities on the condensed consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments as required by Accounting Standards Codification ("ASC") Topic 842, Leases .

We do not recognize lease assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less).

We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset.

As a result of adopting ASC Topic 842, we recorded an initial operating lease right-of-use asset of $277,006 (inclusive of prepaid assets and accrued liabilities related to existing leases) and an operating lease liability of $294,727 as of April 28, 2019 for all leases that were not completed and with lease terms in excess of twelve months at that date.

For additional information, see Note 5.

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For additional information, see Note 4.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

(Thousands of dollars, except share and per share data)

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores.

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Our payment terms are generally 30 days and do not extend beyond one year.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

Service and other revenue

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

Selling and administrative expenses also include stock-based compensation and general office expenses, such as merchandising, procurement,

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

(Thousands of dollars, except share and per share data)

field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business.

Selling and administrative expenses also include stock-based compensation and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business.

Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

Evaluation of Goodwill and Other Long-Lived Assets

As of January 25, 2020 , we had $0 , $0 and $4,700 of goodwill on our condensed consolidated balance sheet related to our Retail, Wholesale and DSS reporting units, respectively.

As of August 1, 2020, we had $ 0 , $ 0 and $ 4,700 of goodwill on our condensed consolidated balance sheet related to our Retail, Wholesale and DSS reporting units, respectively.

In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value.

We completed our annual goodwill impairment test as of the first day of the third quarter of Fiscal 2020.

In performing the valuation, we used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions.

The fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit;

During the third quarter of Fiscal 2020, we completed our annual goodwill impairment test and concluded that the fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit;

therefore, no goodwill impairment was recognized.

During the 13 and 39 weeks ended January 26, 2019, we completed our annual goodwill impairment test for Fiscal 2019 and concluded that the fair value of the MBS and DSS reporting units, as they existed at that time, each exceeded their respective carrying values and no goodwill impairment was recognized.

In the fourth quarter of Fiscal 2019, due to the change in our reporting units identified as a result of the change in our reportable segments, we recognized a total goodwill impairment (non-cash impairment loss) of $49,282, consisting of the full carrying value of the goodwill allocated to the Retail and Wholesale reporting units.

In performing the valuation, we used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions.

Our other long-lived assets include property and equipment and amortizable intangibles.

As of January 25, 2020 , we had $101,055 and $179,596 of property and equipment and amortizable intangible assets, net of depreciation and amortization, respectively, on our condensed consolidated balance sheet.

As of August 1, 2020, we had $ 94,102 and $ 170,466 of property and equipment and amortizable intangible assets, net of depreciation and amortization, respectively, on our condensed consolidated balance sheet.

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

During the 39 weeks ended January 25, 2020 , we recorded an impairment loss (non-cash) of $433 in the Retail segment related to net capitalized development costs for a project which are not recoverable.

As of January 25, 2020 , other long-term liabilities includes $32,847 related to the long-term tax payable associated with the LIFO reserve.

During the fourth quarter of Fiscal 2020, in conjunction with COVID-19 related campus store closures, we evaluated certain of our long-lived assets associated with our Retail and Wholesale segments for impairment.

Based on the results of the tests, for the Retail segment, we recognized an impairment loss of $587 during the fourth quarter of Fiscal 2020, related to store-level assets in restructuring and other charges.

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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

During the 13 weeks ended August 1, 2020, COVID-19 related closed campus stores began to re-open with sales fulfilled either from the stores, from our Wholesale operations, or drop ship programs, as well as online direct-to-student services.

We believe indicators of impairment do not exist and the carrying amount of our long-lived assets and property and equipment are recoverable and the fair value of the DSS reporting unit continues to exceed the carrying value of the reporting unit resulting in no goodwill impairment during the quarter.

During the 13 weeks ended July 27, 2019, we recorded an impairment loss (non-cash) of $ 433 in the Retail segment related to net capitalized development costs for a project which are not recoverable.

As of August 1, 2020, other long-term liabilities includes $ 25,748 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.

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Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740):

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13 , Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The ASU replaces the existing incurred loss impairment model for trade receivables with an expected loss model which requires the use of forward-looking information to calculate expected credit loss estimates.

These changes may result in earlier recognition of credit losses.

We adopted this guidance during the first quarter of Fiscal 2021 with no cumulative-effect adjustment to retained earnings.

The guidance does not have a material impact on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

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Additionally, the guidance seeks to further simplify the accounting for income taxes by:

1) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements (although the entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority), 4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

(Thousands of dollars, except share and per share data)

the interim period that includes the enactment date and 5) making minor improvements for income tax accounting related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.

This guidance will be effective for fiscal years and interim periods beginning after December 15, 2020.

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We are currently assessing whether we will early adopt this guidance, and the impact on our condensed consolidated financial statements is not currently estimable.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"), which requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance to determine which implementation costs to capitalize as an asset (as prepaid expense) related to the service contract and which costs to expense.

The ASU requires upfront implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract to be amortized to hosting expense over the term of the arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use.

We have adopted this standard effective April 28, 2019 (first day of this fiscal year) prospectively for all implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract after the date of adoption.

Under previous accounting guidance, we capitalized certain implementation costs, primarily related to digital and consumer data platforms, to property and equipment on the condensed consolidated balance sheets and depreciated these implementation costs to depreciation and amortization expense in the consolidated statement of operations over the term of the service contract once the asset was ready for its intended use.

The adoption of this standard will impact our condensed consolidated financial statements to the extent that implementation costs which were previously capitalized and depreciated as described above, will be included in prepaid expenses and other assets in the condensed consolidated balance sheets and amortized to selling and administrative expense in the consolidated statement of operations under this adopted guidance.

We expect to incur additional costs to implement cloud computing arrangements during the remainder of Fiscal 2020 and expect the implementation costs capitalized to prepaid expense in the condensed consolidated balance sheet will increase accordingly.

In June 2016, the FASB issued ASU 2016-13 , Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

These changes may result in earlier recognition of credit losses.

Early adoption is permitted and the guidance requires a modified retrospective method of adoption through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

This guidance is effective for annual periods beginning after December 15, 2019.

We plan to adopt this guidance during the first quarter of Fiscal 2021 and we are currently in the process of evaluating the impact of this update.

We believe the adoption of the guidance will not have a material impact on our condensed consolidated financial statements.

Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services.

Summary of Significant Accounting Pronouncements for additional information related to our revenue recognition policies and Note 6.

Segment Reporting for a description of each segment's product and service offerings.

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

Summary of Significant Accounting Policies for additional information related to our revenue recognition policies and Note 6.

Segment Reporting for a description of each segment's product and service offerings.

Disaggregation of Revenue

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13 weeks ended

39 weeks ended

January 25, 2020

January 26, 2019

January 25, 2020

January 26, 2019

August 1, 2020 July 27, 2019

Product Sales $ 141,826 $ 246,375

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DSS Sales (b)

$ 5,872 $ 5,374

Eliminations (c)

Service and other revenue primarily relates to brand partnerships and other service revenues.

DSS sales primarily relate to direct-to-student subscription-based revenue.

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

$ ( 40,928 ) $ ( 32,682 )

Total Sales $ 204,014 $ 319,657

(a) Service and other revenue primarily relates to brand partnerships and other service revenues.

(b) DSS sales primarily relate to direct-to-student subscription-based revenue.

(c) The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale .

Contract Assets and Contract Liabilities

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Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional.

Contract assets (unbilled receivables) were $0 as of January 25, 2020, January 26, 2019 and April 27, 2019 on our condensed consolidated balance sheets.

Contract assets (unbilled receivables) were $ 0 as of August 1, 2020, July 27, 2019 and May 2, 2020 on our condensed consolidated balance sheets.

Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue).

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Deferred revenue is recognized ratably over the terms of the related rental or subscription periods, or when the contracted services are provided to our partnership marketing customers.

Deferred revenue of $60,708 , $69,662 , and $20,418 is recorded within Accrued Liabilities on our condensed consolidated balance sheets for the periods ended January 25, 2020, January 26, 2019 and April 27, 2019, respectively.

Deferred revenue of $ 16,270 , $ 14,188 , and $ 13,373 is recorded within Accrued Liabilities on our condensed consolidated balance sheets for the periods ended August 1, 2020, July 27, 2019 and May 2, 2020, respectively.

The following table presents changes in contract liabilities:

13 weeks ended

January 25, 2020

January 26, 2019

August 1, 2020 July 27, 2019

Deferred revenue at the beginning of period $ 13,373 $ 20,418

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Deferred revenue balance at the end of period $ 16,270 $ 14,188

As of January 26, 2019, we expect to recognize $60,708 of the deferred revenue balance within the next 12 months.

As of August 1, 2020, we expect to recognize $ 16,270 of the deferred revenue balance within the next 12 months.

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

Effective the first quarter of Fiscal 2020 (April 28, 2019), we adopted FASB ASC 842, Leases (Topic 842), which requires us to recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements.

We adopted this standard using a modified retrospective basis, with no restatement of prior periods.

We elected the package of practical expedients permitted under the transition guidance for existing or expired contracts and did not reassess whether such contracts contain leases, the lease classification or the initial direct costs.

Additionally, we utilized the historical lease term and did not utilize the practical expedient allowing the use of hindsight in determining the lease term and in assessing impairment of its right-of-use (“ROU”) assets.

Additionally, we elected to apply the available practical expedient allowing for the election of an accounting policy by class of underlying asset to combine lease and non-lease components for all of our asset classes.

We recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements as required by FASB ASC 842, Leases (Topic 842).

Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities;

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We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).

We recognize a ROU asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months.

We recognize a right of use ("ROU") asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months.

Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised.

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We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.

The following table summarizes lease expense for the 13 and 39 weeks ended January 25, 2020 :

13 weeks ended

The following table summarizes lease expense:

13 weeks ended

January 25, 2020

August 1, 2020 July 27, 2019

Variable lease expense $ 7,407 $ 16,589

1 unchanged sentence

Net lease expense $ 17,203 $ 34,494

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of January 25, 2020 :

January 25, 2020

The decrease in lease expense is primarily due to lower sales for contracts based on a percentage of revenue and the impact of the timing and reduction of minimum contractual guarantees.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of August 1, 2020:

August 1, 2020

Remainder of Fiscal 2021 $ 140,218

Fiscal 2022 52,489

Fiscal 2023 44,574

Fiscal 2024 36,159

Fiscal 2025 29,706

Thereafter 88,023

Total lease payments 391,169

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Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

Future lease payment obligations related to leases that were entered into, but did not commence as of January 25, 2020 , were not material.

Future lease payment obligations related to leases that were entered into, but did not commence as of August 1, 2020, were not material.

The following summarizes additional information related to our operating leases:

January 25, 2020

Weighted average remaining lease term (in years)

August 1, 2020

Weighted average remaining lease term (in years) 5.4 years

Weighted average discount rate 4.4 %

3 unchanged sentences

Segment Reporting

Prior to the fourth quarter of Fiscal 2019, we had three reportable segments:

BNC, MBS, and DSS.

We have three reportable segments:

Retail, Wholesale and DSS.

The Retail Segment combines the operations of the former BNC segment with MBS Direct (from the former MBS segment), the Wholesale Segment is comprised of the MBS wholesale business (from the former MBS segment), and the DSS Segment remains unchanged.

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

2 unchanged sentences

For additional information about each segment's operations, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the year ended April 27, 2019 .

Business in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020 .

The Retail Segment operates 1,442 college, university, and K-12 school bookstores, comprised of 772 physical bookstores and 670 virtual bookstores.

Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore, with the majority of these agreements providing us exclusive rights to sell course materials and supplies, including physical and digital products.

Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products.

The majority of the physical campus bookstores have school-branded e-commerce sites which we operate and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

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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 400 college bookstores.

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.

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.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

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

Corporate Services

Corporate Services represent unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

Intercompany Eliminations

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• 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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

(Thousands of dollars, except share and per share data)

Our international operations are not material and the majority of the revenue and total assets are within the United States.

1 unchanged sentence

13 weeks ended

39 weeks ended

January 25, 2020

January 26, 2019

2020 July 27,

Retail $ 158,776 $ 274,656

Wholesale 80,294 72,309

DSS 5,872 5,374

Elimination ( 40,928 ) ( 32,682 )

Total Sales $ 204,014 $ 319,657

Retail $ 16,135 $ 62,139

Wholesale 16,757 14,918

DSS 4,746 4,414

Elimination ( 6,776 ) ( 9,814 )

Total Gross Profit $ 30,862 $ 71,657

Depreciation and Amortization

Retail $ 10,570 $ 11,977

Wholesale 1,295 1,565

DSS 2,165 2,304

Corporate Services 33 33

1 unchanged sentence

Operating Loss (Income)

Retail $ ( 54,816 ) $ ( 35,042 )

Wholesale 11,671 8,594

DSS ( 1,455 ) ( 2,003 )

Corporate Services ( 7,552 ) ( 5,550 )

Total Operating (Loss) Income

13 weeks ended

39 weeks ended

January 25, 2020

January 26, 2019

The following is a reconciliation of segment Operating (Loss) Income to consolidated (Loss) Income Before Income Taxes:

Total Operating Income

Interest Expense, net

(Loss) Income Before Income Taxes

Elimination ( 6,763 ) ( 9,811 )

Total Operating Loss $ ( 58,915 ) $ ( 43,812 )

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

13 weeks ended

2020 July 27,

The following is a reconciliation of segment Operating Loss to consolidated Loss Before Income Taxes:

Total Operating Loss $ ( 58,915 ) $ ( 43,812 )

Interest Expense, net 2,653 2,532

Loss Before Income Taxes $ ( 61,568 ) $ ( 46,344 )

Equity and Earnings Per Share

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Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.

During the 39 weeks ended January 25, 2020, we did not repurchase shares of our Common Stock under the program and as of January 25, 2020 , approximately $26,669 remains available under the stock repurchase program.

During the 39 weeks ended January 25, 2020, we repurchased 374,733 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

During the 13 weeks ended August 1, 2020, we did not repurchase shares of our Common Stock under the program and as of August 1, 2020, approximately $ 26,669 remains available under the stock repurchase program.

During the 13 weeks ended August 1, 2020, we repurchased 178,669 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

5 unchanged sentences

During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

During the 13 weeks ended January 25, 2020 and January 26, 2019 average shares of 3,682,169 and 1,412,951 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 39 weeks ended January 25, 2020 and January 26, 2019, average shares of 1,348,949 and 2,844,886 , respectively, were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive.

During the 13 weeks ended August 1, 2020 and July 27, 2019 average shares of 2,665,779 and 3,746,663 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

The following is a reconciliation of the basic and diluted earnings (loss) per share calculation:

13 weeks ended

(shares in thousands) August 1,

2020 July 27,

Numerator for basic and diluted earnings per share:

Net loss available to common shareholders $ ( 46,652 ) $ ( 32,155 )

Denominator for basic and diluted earnings per share:

Basic and diluted weighted average shares of Common Stock 48,411 47,582

Loss per share of Common Stock:

Basic $ ( 0.96 ) $ ( 0.68 )

Diluted $ ( 0.96 ) $ ( 0.68 )

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

The following is a reconciliation of the basic and diluted earnings (loss) per share calculation:

13 weeks ended

39 weeks ended

(shares in thousands)

Numerator for basic and diluted earnings per share:

Net (loss) income available to common shareholders

Less allocation of earnings to participating securities

Net (loss) income available to common shareholders

Numerator for diluted earnings per share:

Net (loss) income available to common shareholders

Allocation of earnings to participating securities

Less diluted allocation of earnings to participating securities

Net (loss) income available to common shareholders

Denominator for basic earnings per share:

Basic weighted average shares of Common Stock

Denominator for diluted earnings per share:

Basic weighted average shares of Common Stock

Average dilutive restricted stock units

Average dilutive performance shares

Average dilutive restricted shares

Average dilutive performance share units

Diluted weighted average shares of Common Stock

(Loss) Earnings per share of Common Stock:

Fair Values of Financial Instruments

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The fair value of short-term and long-term debt approximates its carrying value.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

(Thousands of dollars, except share and per share data)

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended March 1, 2019, under which the lenders committed to provide us with a 5 -year asset-backed revolving credit facility in an aggregate committed principal amount of $400,000 (the “Credit Facility”).

We have the option to request an increase in commitments under the Credit Facility of up to $ 100,000 , subject to certain restrictions.

1 unchanged sentence

The agreement includes an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $ 100,000 incremental facility maintaining the maximum availability under the Credit Agreement at $ 500,000 .

As of January 25, 2020, we are in compliance with all debt covenants under the Credit Agreement.

On March 2, 2020, we were granted a waiver to the condition to the upcoming draw under the FILO Facility, scheduled for April 2020, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $90,000.

In connection with the waiver, the applicable margin for credit extensions made under the FILO Facility after March 2, 2020 through the end of 2020 was increased by 0.50% (to 3.25% per annum for LIBO rate loans and 2.25% for base rate loans).

For additional information including interest terms and covenant requirements related to the Credit Facility, refer to Part II - Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the year ended April 27, 2019.

During the 39 weeks ended January 25, 2020 , we borrowed $383,400 and repaid $451,000 under the Credit Agreement, with $65,900 of outstanding borrowings as of January 25, 2020, comprised entirely of outstanding borrowings under the Credit Facility.

During the 39 weeks ended January 26, 2019 , we borrowed $374,000 and repaid $500,300 under the Credit Agreement, with $70,100 of outstanding borrowings as of January 26, 2019, comprised entirely of outstanding borrowings under the Credit Facility.

As of both January 25, 2020 and January 26, 2019 , we have issued $4,759 in letters of credit under the Credit Facility.

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

During the 13 weeks ended August 1, 2020, we borrowed $ 186,700 and repaid $ 126,840 under the Credit Agreement, with $ 234,560 of outstanding borrowings as of August 1, 2020, comprised entirely of borrowings under the Credit Facility.

During the 13 weeks ended July 27, 2019, we borrowed $ 120,300 and repaid $ 79,700 under the Credit Agreement, with $ 174,100 of outstanding borrowings as of July 27, 2019, comprised of $ 74,100 and $ 100,000 under the Credit Facility and FILO Facility, respectively.

As of both August 1, 2020 and July 27, 2019, we have issued $ 4,759 in letters of credit under the Credit Facility.

Supplementary Information

1 unchanged sentence

During the 39 weeks ended January 25, 2020 , we recognized an impairment loss (non-cash) of $433 in the Retail segment related to net capitalized development costs for a project which are not recoverable.

During the 13 weeks ended July 27, 2019, we recognized an impairment loss (non-cash) of $ 433 in the Retail segment related to net capitalized development costs for a project which are not recoverable.

Restructuring and other charges

During the 13 and 39 weeks ended January 25, 2020 , we recognized expenses totaling $205 and $3,240 , respectively, comprised primarily of $0 and $791 , respectively, for severance and other employee termination and benefit costs associated with several management changes and the elimination of various positions as part of cost reduction objectives, and $205 and $2,449 , respectively, for professional service costs related to restructuring, process improvements, and shareholder activist activities.

During the 13 and 39 weeks ended January 26, 2019, we recognized restructuring and other charges totaling $2,500 for severance and other employee termination and benefit costs associated with management changes.

In February 2020, we implemented a cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

For additional information, see Note 15.

Subsequent Event .

Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS.

MBS maintains a profit sharing plan covering substantially all full-time employees of MBS.

For all plans, we are responsible to fund the employer contributions directly.

Total employee benefit expense for these plans was $844 and $1,509 during the 13 weeks ended January 25, 2020 and January 26, 2019 , respectively.

Total employee benefit expense for these plans was $3,683 and $4,978 for the 39 weeks ended January 25, 2020 and January 26, 2019 , respectively.

During the 13 weeks ended August 1, 2020, we recognized restructuring and other charges totaling $ 5,671 comprised of $ 3,396 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 10,562 is included in accrued liabilities in the consolidated balance sheet as of August 1, 2020), $ 2,103 for professional service costs related to restructuring, process improvements, and shareholder activist activities, and $ 172 related to liabilities for a facility closure.

During the 13 weeks ended July 27, 2019, we recognized restructuring and other charges totaling $ 1,466 comprised of $ 631 for severance and other employee termination and benefit costs associated with several management changes and the

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

elimination of various positions as part of cost reduction objectives, and $ 735 related to professional service costs related to restructuring and process improvements.

Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS.

MBS maintains a profit sharing plan covering substantially all full-time employees of MBS.

For all plans, we are responsible to fund the employer contributions directly.

Total employee benefit expense for these plans was $ 0 and $ 1,538 during the 13 weeks ended August 1, 2020 and July 27, 2019, respectively.

Effective April 2020, due to the significant impact as a result of COVID-19 related campus store closures, we have temporarily suspended employer matching contributions into our 401(k) plans through the end of December 2020 (the first 9 months of Fiscal 2021).

Stock-Based Compensation

3 unchanged sentences

For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model.

During the 39 weeks ended January 25, 2020 , we granted the following awards under the Equity Incentive Plan:

190,480 restricted stock units ("RSU") awards and 38,096 restricted stock ("RS") awards with a one-year vesting period to the current Board of Directors ("BOD") members for annual compensation.

709,517 performance share unit ("PSU") awards to employees that will vest based upon the achievement of pre-established performance goals related to absolute total shareholder returns ("TSR") determined by the Company's common stock price and Company Adjusted EBITDA measured over a two-year performance period (Fiscal 2020 - Fiscal 2021) with one additional year of time-based vesting.

The number of PSU awards that will vest range from 0%-150% of the target award based on actual performance.

1,350,674 RSU awards to employees with a three-year vesting period.

During the 13 weeks ended August 1, 2020, no awards were granted under the Equity Incentive Plan.

We recognized stock-based compensation expense for equity-based awards in selling and administrative expenses as follows:

13 weeks ended

39 weeks ended

2020 July 27,

Restricted stock expense $ 30 $ 30

3 unchanged sentences

Stock-based compensation expense $ 1,521 $ 2,321

Total unrecognized compensation cost related to unvested awards as of January 25, 2020 was $10,103 and is expected to be recognized over a weighted-average period of 1.8 years.

Approximately $1,821 of the unrecognized compensation cost is related to performance shares and performance share units, which is subject to attaining the stated performance metrics.

We recorded income tax benefit of $(3,182) on a pre-tax loss of $(4,875) during the 13 weeks ended January 25, 2020 , which represented an effective income tax rate of 65.3% and income tax benefit of $(294) on pre-tax income of $475 during the 13 weeks ended January 26, 2019 , which represented an effective income tax rate of (61.9)% .

The effective tax rate for the 13 weeks ended January 26, 2019 is higher as compared to the prior year comparable period due to permanent differences.

We recorded income tax expense of $1,683 on a pre-tax income of $3,766 during the 39 weeks ended January 25, 2020 , which represented an effective income tax rate of 44.7% and income tax expense of $2,680 on pre-tax income of $24,524 during the 39 weeks ended January 26, 2019 , which represented an effective income tax rate of 10.9% .

The effective tax rate for the 39 weeks ended January 26, 2019 is higher as compared to the prior year comparable period due to permanent differences.

Total unrecognized compensation cost related to unvested awards as of August 1, 2020 was $ 4,884 and is expected to be recognized over a weighted-average period of 1.5 years.

We recorded income tax benefit of $( 14,916 ) on a pre-tax loss of $( 61,568 ) during the 13 weeks ended August 1, 2020, which represented an effective income tax rate of 24.2 % and income tax benefit of $( 14,189 ) on pre-tax loss of $( 46,344 ) during the 13 weeks ended July 27, 2019, which represented an effective income tax rate of 30.6 %.

The effective tax rate for the 13 weeks ended August 1, 2020 is lower as compared to the prior year comparable period due to permanent differences.

Legal Proceedings

1 unchanged sentence

The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on our condensed consolidated financial position, results of operations, or cash flows.

On or about January 22, 2020, a purported class action complaint was filed in the United States District Court for the District of Delaware against the Company, along with several publishers, another collegiate bookstore retailer, and an industry association

Between January 22, 2020 and July 23, 2020, thirteen purported class action complaints were filed in the United States District Court for the District of Delaware, the United States District Court for the District of New Jersey, and the United States District Court for the Northern District of Illinois against the Company, along with several publishers, another collegiate bookstore retailer, and an industry association.

The plaintiffs are retailers of collegiate course materials or current or former college students.

Although the specific allegations vary, they claim, on their own behalf and on behalf of the purported classes,

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 25, 2020 and January 26, 2019

For the 13 weeks ended August 1, 2020 and July 27, 2019

(Thousands of dollars, except share and per share data)

by Campus Book Company, Inc., BJJ Corporation, CBSKY, Inc., CBSNM, Inc., and Renttext.com, Inc.

The plaintiffs claim, on their own behalf and on behalf of the purported class, that the Company and the other defendants violated Section 1 of the Sherman Act (15 U.S.C.

that the Company and the other defendants violated Section 1 of the Sherman Act (15 U.S.C.

§ 1), Section 2 of the Sherman Act (15 U.S.C.

1 unchanged sentence

§13(a)), and various state antitrust and unfair trade practices laws for alleged activities in connection with inclusive access and the sale of course materials to universities and their students.

The United States Judicial Panel on Multidistrict Litigation has consolidated these and other related cases in a consolidated proceeding before the Hon.

Cote of the United States District Court for the Southern District of New York.

We intend to vigorously defend this matter and are currently unable to estimate any potential losses.

Subsequent Event

In February 2020, we implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

Certain elements of this plan have recently been implemented, while other actions are planned for Fiscal 2021, which begins in May 2020.

We anticipate meaningful annualized cost savings from this program, the majority of which are expected to be realized beginning in Fiscal 2021.

As a result of the personnel and related elements of this program, we expect to recognize a restructuring charge of $10,000 to $15,000 during the fourth quarter of Fiscal 2020.

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-Q

Item 1. Financial Statements