What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-09-02 compared with 2021-03-09 · 222 added, 363 removed, 388 unchanged (60% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

13 weeks ended 39 weeks ended

2021 January 25,

2020 January 30,

2021 January 25,

13 weeks ended

2021 August 1,

Product sales and other $ 227,770 $ 193,210

8 unchanged sentences

Depreciation and amortization expense 12,624 14,063

Impairment loss (non-cash) 27,630 — 27,630 433

Restructuring and other charges 2,623 5,671

Operating (loss) income ( 64,702 ) ( 2,971 ) ( 116,884 ) 9,648

Operating loss ( 41,453 ) ( 58,915 )

Interest expense, net 2,494 2,653

(Loss) income before income taxes ( 67,013 ) ( 4,875 ) ( 122,760 ) 3,766

Income tax (benefit) expense ( 18,724 ) ( 3,182 ) ( 35,334 ) 1,683

Net (loss) income $ ( 48,289 ) $ ( 1,693 ) $ ( 87,426 ) $ 2,083

(Loss) Income per share of common stock:

Loss before income taxes ( 43,947 ) ( 61,568 )

Income tax expense (benefit) 399 ( 14,916 )

Net loss $ ( 44,346 ) $ ( 46,652 )

Loss per share of common stock:

Basic $ ( 0.86 ) $ ( 0.96 )

8 unchanged sentences

(In thousands, except per share data)

2021 January 25,

2021 August 1,

(unaudited) (unaudited) (audited)

44 unchanged sentences

13 weeks ended

2021 January 25,

2021 August 1,

Cash flows from operating activities:

Net (loss) income $ ( 87,426 ) $ 2,083

Adjustments to reconcile net (loss) income to net cash flows from operating activities:

Net loss $ ( 44,346 ) $ ( 46,652 )

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

Depreciation and amortization expense 12,624 14,063

1 unchanged sentence

Amortization of deferred financing costs 362 270

Impairment loss (non-cash) 27,630 433

Merchandise inventory loss 434 —

Deferred taxes — ( 654 )

3 unchanged sentences

Changes in other operating assets and liabilities, net 19,717 ( 17,515 )

Net cash flows provided by operating activities 41,586 92,007

Net cash flows used in operating activities ( 17,462 ) ( 53,149 )

Cash flows from investing activities:

5 unchanged sentences

Repayments of borrowings under Credit Agreement ( 45,620 ) ( 126,840 )

Sale of treasury shares 10,869 —

Purchase of treasury shares ( 1,215 ) ( 342 )

Net cash flows used in financing activities ( 13,925 ) ( 68,865 )

Net increase (decrease) in cash, cash equivalents and restricted cash 1,673 ( 4,206 )

Net cash flows provided by financing activities 24,885 59,518

Net decrease in cash, cash equivalents and restricted cash ( 3,597 ) ( 771 )

Cash, cash equivalents and restricted cash at beginning of period 16,814 9,008

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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

Stock-based compensation expense

Vested equity awards

Shares repurchased for tax withholdings for vested stock awards

12 ( 40 ) ( 40 )

Net loss ( 32,155 ) ( 32,155 )

Balance at July 27, 2019 51,086 $ 511 $ 728,651 $ ( 276,732 ) 3,479 $ ( 31,676 ) $ 420,754

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

Stock-based compensation expense

3 unchanged sentences

179 ( 342 ) ( 342 )

Net income 35,931 35,931

Balance at October 26, 2019 52,139 $ 521 $ 730,501 $ ( 240,801 ) 3,842 $ ( 32,901 ) $ 457,320

Stock-based compensation expense

Net loss ( 46,652 ) ( 46,652 )

Balance at January 25, 2020 52,139 $ 521 $ 732,320 $ ( 242,494 ) 3,842 $ ( 32,901 ) $ 457,446

Balance August 1, 2020 52,654 $ 526 $ 734,474 $ ( 329,479 ) 4,021 $ ( 33,243 ) $ 372,278

Common Stock Paid-In Accumulated Treasury Stock Total

7 unchanged sentences

Net loss ( 44,346 ) ( 44,346 )

Balance August 1, 2020 52,654 $ 526 $ 734,474 $ ( 329,479 ) 4,021 $ ( 33,243 ) $ 372,278

Stock-based compensation expense

Vested equity awards

662 7 ( 7 ) —

Shares repurchased for tax withholdings for vested stock awards

231 ( 539 ) ( 539 )

Net income 7,515 7,515

Balance October 31, 2020 53,316 $ 533 $ 735,647 $ ( 321,964 ) 4,252 $ ( 33,782 ) $ 380,434

Stock-based compensation expense

Vested equity awards

Sale of treasury shares ( 3,784 ) ( 2,308 ) 14,653 10,869

Shares repurchased for tax withholdings for vested stock awards

4 ( 13 ) ( 13 )

Net loss ( 48,289 ) ( 48,289 )

Balance at January 30, 2021 53,327 $ 533 $ 733,019 $ ( 370,253 ) 1,948 $ ( 19,142 ) $ 344,157

Balance July 31, 2021 53,665 $ 536 $ 735,376 $ ( 458,960 ) 2,078 $ ( 20,357 ) $ 256,595

See accompanying notes to condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

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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 fiscal year ended May 2, 2020, which includes consolidated financial statements for the Company for each of the three fiscal years ended May 2, 2020, April 27, 2019 and April 28, 2018 (Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively), the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 13 weeks ended August 1, 2020, and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 26 weeks ended October 31, 2020.

Description of Business

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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, 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.

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 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 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 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.

We believe the Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States.

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

We have three reportable segments:

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For additional information related to our strategies, operations and segments, see Part I - Item 1.

Business and Part II - Item 8.

Financial Statements and Supplementary Data - Note 6.

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

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021 .

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.

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

We will leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites.

FLC will manage in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores.

FLC has agreed to purchase our logo and emblematic general merchandise inventory, which we expect to be finalized during our fiscal 2021 fourth quarter.

We will maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores.

We will also work closely with our campus partners to ensure that each campus store will maintain unique aspects of in-store merchandising, including localized product

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.

We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores.

We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

assortments and specific styles and designs that reflect each campus’s brand.

We expect Fanatics and FLC to go live with this partnership beginning in the second calendar quarter of 2021.

Additionally, Fanatics, Inc.

reflect each campus’s brand.

We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites.

FLC manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores.

In December 2020, Fanatics, Inc.

and Lids Holdings, Inc.

jointly made a $ 15,000 strategic equity investment in BNED and received 2,307,692 common shares of BNED in exchange.

We expect to use these proceeds to for general corporate purposes.

For additional information, see Note 7.

Equity and Earnings Per Share.

Wolfram|Alpha Agreement

In December 2020, we entered into an agreement with Wolfram|Alpha to develop a math solver as a new feature in our bartleby suite of homework help and learning solutions.

Powered by Wolfram|Alpha’s best-in-class computation engine, the math solver will allow students to access an interactive digital calculator that provides real-time, step-by-step explanations for even the most advanced math problems.

jointly made a strategic equity investment in BNED.

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.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

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

Equity and Earnings Per Share in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

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 2020 fourth quarter, we closed the majority of our physical campus stores to protect the health and safety of our customers and employees.

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 each academic term, with some implementing shortened semesters or choosing to remain fully virtual in order to best protect students and faculty.

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.

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

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

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

Summary of Significant Accounting Policies - Evaluation of Goodwill and Other Long-Lived Assets related to the impairment loss (non-cash) recognized during the 13 weeks ended January 30, 3021.

Since the fourth quarter of Fiscal 2020, our business has been significantly negatively impacted by the COVID-19 pandemic, resulting in an unprecedented material decline in revenue.

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 the COVID-19 virus, including the Delta variant, on enrollments, university budgets, athletics and other areas that directly affect our business operations .

Although most schools currently 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 and events, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

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.

There is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

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.

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.

Please see our Part II - Item 2.

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

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.

Due to the seasonal nature of the business, the results of operations for the 13 and 39 weeks ended January 30, 2021 are not indicative of the results expected for the 52 weeks ending May 1, 2021 (Fiscal 2021).

Due to the seasonal nature of the business, the results of operations for the 13 weeks ended July 31, 2021 are not indicative of the results expected for the 52 weeks ending April 30, 2022 (Fiscal 2022).

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.

Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution.

Our DSS segment sales and operating profit are realized relatively consistently throughout the year.

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution.

Our DSS segment sales and operating profit are realized relatively consistently throughout the year.

Use of Estimates

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Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation.

Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory.

Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand.

Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment.

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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.

The Retail Segment fulfillment order is directed first to our wholesale business before other sources of inventory are utilized.

The products that we sell originate from a wide variety of domestic and international vendors.

After internal sourcing, the bookstore purchases textbooks from outside suppliers and publishers.

As contemplated by the FLC Partnership merchandising agreement, we sold our logo and emblematic general merchandise inventory to FLC and received proceeds of $ 41,773 , and recognized a merchandise inventory loss on the sale of $ 10,262 in cost of goods sold during the 52 weeks ended May 1, 2021 for the Retail Segment.

The final inventory sale price was determined during the first quarter of Fiscal 2022.

During the 13 weeks ended July 31, 2021, we received additional proceeds of $ 1,906 , and recognized a merchandise inventory loss on the sale of $ 434 in cost of goods sold for the Retail Segment.

Textbook Rental Inventories

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For additional information, see Note 3.

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

Wholesale product revenue is recognized upon shipment of physical

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

textbooks at which point title passes and risk of loss is transferred to the customer.

Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer.

Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

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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.

Effective April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement, logo and emblematic general merchandise sales were fulfilled by FLC.

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.

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 general merchandise sales on a gross basis in the prior year.

We do not have gift card or customer loyalty programs.

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The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Cost of Sales

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.

Selling and Administrative Expenses

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

Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

subscription-based services business.

Cost of Sales

Selling and Administrative Expenses

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

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 30, 2021, 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 July 31, 2021, 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 2021.

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;

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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 .

As of January 30, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 87,405 , $ 242,937 , $ 155,536 , and $ 27,195 , respectively, on our condensed consolidated balance sheet.

Our fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning models and on-campus activities during the Spring semester of fiscal 2021.

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 big athletic conferences that have been either eliminated or severely restricted.

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

During the 13 weeks ended January 30, 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 $ 27,630 , $ 20,506 after-tax, comprised of $ 5,085 , $ 13,328 , $ 6,278 and $ 2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

For additional information, see Note 8.

Fair Value Measurements .

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 were not recoverable.

As of January 30, 2021, other long-term liabilities includes $ 25,748 related to the long-term tax payable associated with the LIFO reserve.

As of July 31, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 91,080 , $ 289,102 , $ 146,035 , and $ 27,405 , respectively, on our condensed consolidated balance sheet.

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.

We believe many of the negative trends impacting our results, such as fewer students returning to campus and fewer restrictions for athletic conferences, will be marginally reversed in the upcoming Fall semester.

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

Although most schools currently 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 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.

We will continue to evaluate our other long-lived assets for indicators of impairment.

As of July 31, 2021, other long-term liabilities includes $ 25,335 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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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.

Recent Accounting Pronouncements

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

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

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.

The guidance seeks to simplify the accounting for income taxes by removing the following exceptions:

1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, 2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary and 4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

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 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.

We adopted ASU 2019-12 during the current quarter (third quarter of fiscal 2021).

As a result of adopting this standard, we did not record a cumulative adjustment and there was not 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.

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The following table disaggregates the revenue associated with our major product and service offerings:

13 weeks ended 39 weeks ended

January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Product Sales $ 338,495 $ 400,170 $ 998,158 $ 1,320,587

Rental Income 38,111 48,614 92,568 119,729

Service and Other Revenue (a)

13 weeks ended

July 31, 2021 August 1, 2020

Product Sales (a)

$ 189,058 $ 141,826

Rental Income 13,024 10,804

Service and Other Revenue (b)

Retail Total Sales $ 210,469 $ 158,776

Wholesale Sales $ 44,484 $ 80,294

DSS Sales (b)

DSS Sales (c)

$ 8,303 $ 5,872

Eliminations (c)

Eliminations (d)

$ ( 22,462 ) $ ( 40,928 )

Total Sales $ 240,794 $ 204,014

(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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

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

(a) Effective April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement, logo and emblematic general merchandise sales were fulfilled by FLC.

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

(d) 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

1 unchanged sentence

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 30, 2021, January 25, 2020 and May 2, 2020 on our condensed consolidated balance sheets.

Contract assets (unbilled receivables) were $ 0 as of July 31, 2021, August 1, 2020 and May 1, 2021 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).

2 unchanged sentences

• unsatisfied performance obligations associated with partnership marketing services, which are recognized when the contracted services are provided to our partnership marketing customers;

• unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the merchandising contracts for Fanatics and FLC as discussed in Note 1.

Organization - Partnership with Fanatics and FLC and Note 7.

Equity and Earnings Per Share - Sale of Treasury Shares.

Deferred revenue of $ 47,166 , $ 60,708 , and $ 13,373 is recorded in accrued liabilities and $ 3,956 , $ 0 , and $ 0 is recorded in other long-term liabilities on our condensed consolidated balance sheets for the periods ended January 30, 2021, January 25, 2020 and May 2, 2020, respectively.

As of January 30, 2021, we expect to recognize $ 47,166 of the deferred revenue balance within the next 12 months.

• unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the e-commerce and merchandising contracts for Fanatics and FLC, respectively .

Deferred revenue of $ 16,028 , $ 16,270 , and $ 13,469 is recorded in accrued liabilities and $ 4,561 , $ 0 , and $ 4,670 is recorded in other long-term liabilities on our condensed consolidated balance sheets for the periods ended July 31, 2021,

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

August 1, 2020 and May 1, 2021, respectively.

As of July 31, 2021, we expect to recognize $ 16,028 of the deferred revenue balance within the next 12 months.

The following table presents changes in contract liabilities:

13 weeks ended

January 30, 2021 January 25, 2020

July 31, 2021 August 1, 2020

Deferred revenue at the beginning of period $ 18,139 $ 13,373

2 unchanged sentences

Deferred revenue balance at the end of period $ 20,589 $ 16,270

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;

real estate leases for office and warehouse operations;

and vehicle leases.

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

We recognize a right of use ("ROU") asset and lease liability in our 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.

Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on:

i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance.

For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases.

Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

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

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable.

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

The following table summarizes lease expense:

13 weeks ended 39 weeks ended

January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Variable lease expense $ 27,399 $ 23,402 $ 62,081 $ 54,412

Operating lease expense 28,127 37,188 87,558 137,148

Net lease expense $ 55,526 $ 60,590 $ 149,639 $ 191,560

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 January 30, 2021:

January 30, 2021

Remainder of Fiscal 2021 $ 84,074

Fiscal 2022 52,998

Fiscal 2023 45,682

Fiscal 2024 37,980

Fiscal 2025 31,605

Thereafter 88,819

Total lease payments 341,158

imputed interest ( 45,081 )

Operating lease liabilities at period end $ 296,077

Future lease payment obligations related to leases that were entered into, but did not commence as of January 30, 2021, were not material.

The following summarizes additional information related to our operating leases:

January 30, 2021

Weighted average remaining lease term (in years) 5.5 years

Weighted average discount rate 4.7 %

Supplemental cash flow information:

Cash payments for lease liabilities within operating activities $ 75,851

ROU assets obtained in exchange for lease liabilities from initial recognition $ 108,873

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

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

Segment Reporting

8 unchanged sentences

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.

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

The Retail Segment also offers inclusive access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class.

9 unchanged sentences

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

• These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

(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.

Summarized financial information for our reportable segments is reported below:

13 weeks ended 39 weeks ended

2021 January 25,

2020 January 30,

2021 January 25,

13 weeks ended

July 31, 2021 August 1, 2020

Retail $ 210,469 $ 158,776

3 unchanged sentences

Total Sales $ 240,794 $ 204,014

Retail $ 53,523 $ 99,790 $ 165,170 $ 322,869

$ 48,143 $ 16,135

Wholesale 10,405 16,757

8 unchanged sentences

Total Depreciation and Amortization $ 12,624 $ 14,063

Operating (Loss) Income

Operating Loss

Retail $ ( 31,356 ) $ ( 54,816 )

3 unchanged sentences

Elimination ( 5,537 ) ( 6,763 )

Total Operating (Loss) Income $ ( 64,702 ) $ ( 2,971 ) $ ( 116,884 ) $ 9,648

13 weeks ended 39 weeks ended

2021 January 25,

2020 January 30,

2021 January 25,

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

Total Operating (Loss) Income $ ( 64,702 ) $ ( 2,971 ) $ ( 116,884 ) $ 9,648

Total Operating Loss $ ( 41,453 ) $ ( 58,915 )

13 weeks ended

Reconciliation of segment Operating Loss to consolidated Loss Before Income Taxes:

July 31, 2021 August 1, 2020

Total Operating Loss $ ( 41,453 ) $ ( 58,915 )

Interest Expense, net 2,494 2,653

(Loss) Income Before Income Taxes $ ( 67,013 ) $ ( 4,875 ) $ ( 122,760 ) $ 3,766

During the 13 and 39 weeks ended January 30, 2021, we recognized an impairment loss (non-cash) of $ 27,630 , $ 20,506 after-tax, in the Retail segment on the condensed consolidated statement of operations.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

Loss Before Income Taxes $ ( 43,947 ) $ ( 61,568 )

(a) For the 13 weeks ended July 13, 2021, gross margin includes a merchandise inventory loss of $ 434 in the Retail Segment.

Summary of Significant Accounting Policies - Merchandise Inventories .

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

5 unchanged sentences

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

During the 39 weeks ended January 30, 2021, we did not repurchase shares of our Common Stock under the program and as of January 30, 2021, approximately $ 26,669 remains available under the stock repurchase program.

During the 39 weeks ended January 30, 2021, we repurchased 414,174 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Sale of Treasury Shares

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 $ 15,000 , representing a share price of $ 6.50 per share.

The premium price paid above the fair market value of our common stock at closing was approximately $ 4,131 and was recorded as a contract liability ($ 175 in accrued liabilities and $ 3,956 in other long-term liabilities our condensed consolidated balance sheet) which is expected to be recognized over the term of the merchandising contracts for Fanatics and FLC, as discussed in Note 1.

Organization - Partnership with Fanatics and FLC .

We expect to use these proceeds for general corporate purposes.

During the 13 weeks ended July 31, 2021, we did not repurchase shares of our Common Stock under the program and as of July 31, 2021, approximately $ 26,669 remains available under the stock repurchase program.

During the 13 weeks ended July 31, 2021, we repurchased 130,135 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 30, 2021 and January 25, 2020, average shares of 4,005,236 and 3,682,169 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 39 weeks ended January 30, 2021 and January 25, 2020, average shares of 3,234,606 and 1,348,949 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

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

During the 13 weeks ended July 31, 2021 and August 2, 2020, average shares of 3,665,606 and 2,665,779 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 per share calculation:

13 weeks ended 39 weeks ended

(shares in thousands) January 30,

2021 January 25,

2020 January 30,

2021 January 25,

Numerator for basic earnings per share:

Net (loss) income available to common shareholders $ ( 48,289 ) $ ( 1,693 ) $ ( 87,426 ) $ 2,083

Less allocation of earnings to participating securities — — — ( 1 )

Net (loss) income available to common shareholders $ ( 48,289 ) $ ( 1,693 ) $ ( 87,426 ) $ 2,082

Numerator for diluted earnings per share:

Net (loss) income available to common shareholders $ ( 48,289 ) $ ( 1,693 ) $ ( 87,426 ) $ 2,082

Allocation of earnings to participating securities — — — 1

Less diluted allocation of earnings to participating securities — — — ( 1 )

Net (loss) income available to common shareholders $ ( 48,289 ) $ ( 1,693 ) $ ( 87,426 ) $ 2,082

Denominator for basic earnings per share:

Basic weighted average shares of Common Stock 50,082 48,298 49,099 47,911

Denominator for diluted earnings per share:

Basic weighted average shares of Common Stock 50,082 48,298 49,099 47,911

Average dilutive restricted stock units — — — 403

Average dilutive performance shares — — — 9

Average dilutive restricted shares — — — 12

Average dilutive performance share units — — — 432

Average dilutive stock options — — — —

Diluted weighted average shares of Common Stock 50,082 48,298 49,099 48,767

(Loss) Earnings per share of Common Stock:

13 weeks ended

(shares in thousands) July 31, 2021 August 1, 2020

Numerator for basic and diluted earnings per share:

Net loss available to common shareholders $ ( 44,346 ) $ ( 46,652 )

Denominator for basic and diluted earnings per share:

Basic and diluted weighted average shares of Common Stock 51,474 48,411

Loss per share of Common Stock:

Basic $ ( 0.86 ) $ ( 0.96 )

9 unchanged sentences

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable.

The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1.

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

Non-Financial Assets and Liabilities

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable.

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

Non-Financial Assets

Our non-financial assets include goodwill, property and equipment, operating lease right-of-use assets, and intangible assets.

1 unchanged sentence

During the 13 weeks ended January 30, 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 $ 27,630 , $ 20,506 after-tax, on the condensed consolidated statement of operations.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using our best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

The following table shows the fair values of our non-financial assets and liabilities that were required to be remeasured at fair value on a non-recurring basis during the 13 and 39 weeks ended January 30, 2021 and the 39 weeks ended January 25, 2020, and the total impairments recorded as a result of the remeasurement process:

13 and 39 weeks ended January 30, 2021 39 weeks ended January 25, 2020

Carrying Value

Prior to Impairment Fair Value Impairment Loss

(non-cash) Carrying Value Prior to Impairment Fair Value Impairment Loss

Receivables, net $ — $ — $ — $ 245 $ — $ 245

Property and equipment, net 5,505 420 5,085 300 — 300

Operating lease right-of-use assets 26,427 13,099 13,328 — — —

Intangible assets, net 7,723 1,445 6,278 — — —

Other noncurrent assets 3,539 600 2,939 — — —

Accrued liabilities — — — ( 112 ) — ( 112 )

Total $ 43,194 $ 15,564 $ 27,630 $ 433 $ — $ 433

Non-Financial Liabilities

1 unchanged sentence

The fair value of the liability for the cash-settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk-free rate and volatility assumptions.

As of January 30, 2021, we recorded a liability of $ 1,729 (Level 2 input) which is reflected in accrued liabilities ($ 1,093 ) and other long-term liabilities ($ 636 ) on the condensed consolidated balance sheet.

For additional information, see Note 12.

Long-Term Incentive Plan Compensation Expense .

As of July 31, 2021, we recorded a liability of $ 6,317 (Level 2 input) which is reflected in accrued liabilities ($ 4,173 ) and other long-term liabilities ($ 2,144 ) on the condensed consolidated balance sheet.

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”) effective from the date of the amendment.

We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and 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”) effective from the date of the amendment.

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 .

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

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 fiscal year ended May 1, 2021.

During the 39 weeks ended January 30, 2021, we borrowed $ 547,600 and repaid $ 571,500 under the Credit Agreement, with $ 150,800 of outstanding borrowings as of January 30, 3021, comprised entirely of borrowings under the Credit Facility.

During the 39 weeks ended January 25, 2020, we borrowed $ 383,400 and repaid $ 451,000 under the Credit Agreement, with

During the 13 weeks ended July 31, 2021, we borrowed $ 71,720 and repaid $ 45,620 under the Credit Agreement, with $ 203,700 of outstanding borrowings as of July 31, 2021, comprised of $ 153,700 and $ 50,000 under the Credit Facility and FILO Facility, respectively.

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.

As of both July 31, 2021 and August 1, 2020, we have issued $ 4,759 in letters of credit under the Credit Facility.

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;

real estate leases for office and warehouse operations;

and vehicle leases.

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

We recognize a right of use ("ROU") asset and lease liability in our 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.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on:

i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii)

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

$65,900 of outstanding borrowings as of January 25,2020, comprised entirely of borrowings under the Credit Facility.

As of both January 30, 2021 and January 25, 2020, we have issued $ 4,759 in letters of credit under the Credit Facility.

operating expenses, such as common area charges, real estate taxes and insurance.

Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

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:

13 weeks ended

July 31, 2021 August 1, 2020

Variable lease expense $ 11,702 $ 7,407

Operating lease expense 16,373 9,796

Net lease expense $ 28,075 $ 17,203

The increase in lease expense is primarily due to higher sales for contracts based on a percentage of revenue during the 13 weeks ended July 31, 2021 and the impact of the timing and reduction of minimum contractual guarantees due to temporary store closings due to the COVID pandemic during the 13 weeks ended August 1, 2020.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of July 31, 2021:

July 31, 2021

Remainder of Fiscal 2022 $ 128,412

Fiscal 2023 49,419

Fiscal 2024 42,392

Fiscal 2025 37,372

Fiscal 2026 28,146

Thereafter 72,676

Total lease payments 358,417

imputed interest ( 42,940 )

Operating lease liabilities at period end $ 315,477

Future lease payment obligations related to leases that were entered into, but did not commence as of July 31, 2021, were not material.

The following summarizes additional information related to our operating leases:

July 31, 2021 August 1, 2020

Weighted average remaining lease term (in years) 5.1 years 5.4 years

Weighted average discount rate 4.3 % 4.4 %

Supplemental cash flow information:

Cash payments for lease liabilities within operating activities $ 27,378 $ 16,676

ROU assets obtained in exchange for lease liabilities from initial recognition $ 67,106 $ 89,167

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

Supplementary Information

Impairment Loss (non-cash)

During the 13 and 39 weeks ended January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

For additional information, see Note 2.

Summary of Significant Accounting Policies and Note 8.

Fair Value Measurements .

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 were not recoverable.

Restructuring and other charges

During the 13 and 39 weeks ended January 30, 2021, we recognized restructuring and other charges totaling $ 1,669 and $ 10,727 , respectively, comprised primarily of $ 1,285 and $ 5,756 , respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 4,660 is included in accrued liabilities in the consolidated balance sheet as of January 30, 2021), $ 172 and $ 4,644 , respectively, for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with the Fanatics and FLC partnership agreements and shareholder activist activities, and $ 212 and $ 327 , respectively, related to liabilities for a facility closure.

During the 13 and 39 weeks ended January 25, 2020, we recognized restructuring and other charges 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 $ 2,249 , respectively, for professional service costs related to restructuring, process improvements, and shareholder activities.

During the 13 weeks ended July 31, 2021, we recognized restructuring and other charges totaling $ 2,623 comprised primarily of $ 1,550 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 2,369 is included in accrued liabilities in the consolidated balance sheet as of July 31, 2021), $ 983 for professional service costs related to restructuring, process improvements, costs related to development and integration associated with the FLC Partnership, and shareholder activist activities, and $ 91 related to liabilities for a facility closure.

During the 13 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), and $ 2,103 for professional service costs related to restructuring, process improvements, and shareholder activities, and $ 172 related to liability for a facility closure.

Employee Benefit Plans

2 unchanged sentences

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

Total employee benefit expense for these plans was $ 0 and $ 844 during the 13 weeks ended January 30, 2021 and January 25, 2020, respectively.

Total employee benefit expense for these plans was $ 0 and $ 2,683 during the 39 weeks ended January 30, 2021 and January 25, 2020, 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 Fiscal 2021.

Total employee benefit expense for these plans was $ 44 and $ 73 during the 13 weeks ended July 31, 2021 and August 1, 2020, respectively.

Effective April 2020, due to the significant impact as a result of COVID-19 related campus store closures, we temporarily suspended employer matching contributions into our 401(k) plans.

The matching contributions were reinstated effective July 25, 2021.

Long-Term Incentive Plan Compensation Expense

3 unchanged sentences

For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

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

For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model.

The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

During the 39 weeks ended January 30, 2021, we granted the following awards:

• 243,905 restricted stock units ("RSU") awards and 146,343 restricted stock ("RS") awards with a one year vesting period to the Board of Directors ("BOD") members for annual compensation.

• 1,250,518 stock options with an exercise price of $ 2.46 per stock option, which was the fair market value on the date of grant (Stock Option Grant #1) and 1,250,518 stock options with an exercise price of $ 5.00 per stock option (Stock Option Grant #2) granted to employees.

The stock options are exercisable in four equal annual installments commencing one year after the date of grant and have a ten year term.

Holders are not entitled to receive dividends (if any) prior to vesting and exercise of the options.

The following summarizes the stock option fair value assumptions:

Stock Option Grant #1 Stock Option Grant #2

Exercise Price $ 2.46 $ 5.00

Valuation method utilized Black-Scholes Monte Carlo

Risk-free interest rate 0.27 % 0.68 %

Expected option term 6.2 years 10.0 years

Company volatility 73 % 73 %

Dividend yield — % — %

Grant date fair value per award $ 1.58 $ 1.28

The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term.

For Stock Option Grant #1, we are permitted to use the simplified approach to estimate the expected term of the stock options, which typically assumes exercise occurs at the mid-point between the end of the vesting period and the expiration date.

The simplified approach is not allowed for premium-priced options (Stock Option Grant #2), which were estimated using a stock price multiple, as there is no option exercise history which to base an early exercise option.

The expected stock option term represents the weighted average period of time that stock options granted are expected to be outstanding, based on vesting schedules and the contractual term of the stock options.

Volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term.

• 2,345,528 phantom share units granted to employees.

Each phantom share represents the economic equivalent to one share of the Company's common stock and will be settled in cash based on the fair market value of a share of common stock at each vesting date in an amount not to exceed $ 7.38 per share.

The phantom shares vest and will be settled in three equal installments commencing one year after the date of grant.

The fair value of the phantom shares was determined using the closing stock price on the date of the award less the fair value of the call option which was estimated using the Black-Scholes model.

The average fair value on the date of grant was $ 1.88 per phantom share using risk-free rates ranging from 0.12%-0.15% for the three tranches and annual volatility ranging from 86%-114% for the three tranches.

As of January 30, 2021, we recorded a liability of $ 1,729 (Level 2 input) which is reflected in accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 30, 2021 and January 25, 2020

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

We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as follows:

13 weeks ended 39 weeks ended

2021 January 25,

2020 January 30,

2021 January 25,

13 weeks ended

July 31, 2021 August 1, 2020

Stock-based awards

1 unchanged sentence

Restricted stock units expense 730 1,359

Performance shares expense

Performance share units expense 34 132

5 unchanged sentences

Total compensation expense for long-term incentive awards $ 3,594 $ 1,521

Total unrecognized compensation cost related to unvested awards as of January 30, 2021 was $ 12,318 and is expected to be recognized over a weighted-average period of 2.4 years.

We recorded an income tax benefit of $( 18,724 ) on a pre-tax loss of $( 67,013 ) during the 13 weeks ended January 30, 2021, which represented an effective income tax rate of 27.9 % and 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 %.

We recorded an income tax benefit of $( 35,334 ) on a pre-tax loss of $( 122,760 ) during the 39 weeks ended January 30, 2021, which represented an effective income tax rate of 28.8 % and income tax expense of $ 1,683 on pre-tax income of $ 3,766 during the 39 weeks ended January 25, 2020, which represented an effective income tax rate of 44.7 %.

The effective tax rate for the 13 and 39 weeks ended January 30, 2021 is lower as compared to the prior year comparable period due to permanent differences.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 31, 2021 and August 1, 2020

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

During the 13 weeks ended July 31, 2021, no awards were granted under the Equity Incentive Plan.

Total unrecognized compensation cost related to unvested awards as of July 31, 2021 was $ 8,415 and is expected to be recognized over a weighted-average period of 2.2 years.

We recorded an income tax expense of $ 399 on a pre-tax loss of $( 43,947 ) during the 13 weeks ended July 31, 2021, which represented an effective income tax rate of ( 0.9 )% and 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 %.

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized.

As of July 31, 2021, we determined that it was more likely than not that we would not realize certain deferred tax assets and our tax rate for the current fiscal year reflects this determination.

We will continue to evaluate this position.

The effective tax rate for the 13 weeks ended July 31, 2021 is lower as compared to the prior year comparable period due to the assessment of the realization of deferred tax assets.

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.

Between January 22, 2020 and June 15, 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.

Between January 22, 2020 and June 15, 2020, thirteen purported class action complaints were filed against the Company, along with several publishers, another collegiate bookstore retailer, and an industry association, by retailers of collegiate course materials or current or former college students.

Although the specific allegations vary, the plaintiffs generally claim, on their own behalf and on behalf of the purported classes, that the Company and the other defendants violated Section 1 of the Sherman Act (15 U.S.C.

2 unchanged sentences

§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.

The United States Judicial Panel on Multidistrict Litigation 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.

On October 16, 2020, three named student plaintiffs filed a Consolidated Amended Complaint, as did the retailer plaintiffs.

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

On June 14, 2021, the Court granted defendants' motion to dismiss both cases dismissed with prejudice.

Neither Plaintiff group sought to appeal those decisions.

The orders dismissing the cases are now final and the matter has concluded.

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