What changed in this filing

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Item 1. Financial Statements

2021-11-30 compared with 2021-09-02 · 202 added, 132 removed, 478 unchanged (41% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

13 weeks ended

2021 August 1,

13 weeks ended 26 weeks ended

2021 October 31,

2020 October 30,

2021 October 31,

Product sales and other $ 577,329 $ 551,832 $ 805,099 $ 745,042

9 unchanged sentences

Restructuring and other charges 1,116 3,387 3,739 9,058

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

Operating income (loss) 24,589 6,733 ( 16,864 ) ( 52,182 )

Interest expense, net 2,264 912 4,758 3,565

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:

Income (loss) before income taxes 22,325 5,821 ( 21,622 ) ( 55,747 )

Income tax (benefit) expense ( 203 ) ( 1,694 ) 196 ( 16,610 )

Net income (loss) $ 22,528 $ 7,515 $ ( 21,818 ) $ ( 39,137 )

Earnings (Loss) per share of common stock:

Basic $ 0.43 $ 0.15 $ ( 0.42 ) $ ( 0.81 )

8 unchanged sentences

(In thousands, except per share data)

2021 August 1,

2021 October 31,

(unaudited) (unaudited) (audited)

44 unchanged sentences

26 weeks ended

2021 August 1,

2021 October 31,

Cash flows from operating activities:

10 unchanged sentences

Changes in other operating assets and liabilities, net 13,291 86,452

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

Net cash flows provided by operating activities 24,142 91,386

Cash flows from investing activities:

6 unchanged sentences

Purchase of treasury shares ( 2,359 ) ( 881 )

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

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

Proceeds from the exercise of stock options, net 37 —

Net cash flows provided by (used in) financing activities 3,378 ( 76,081 )

Net increase (decrease) in cash, cash equivalents and restricted cash 6,716 ( 889 )

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

22 unchanged sentences

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

Common Stock Paid-In Accumulated Treasury Stock Total

8 unchanged sentences

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

Stock-based compensation expense

Vested equity awards

487 5 ( 5 ) —

Shares repurchased for tax withholdings for vested stock awards

108 ( 1,144 ) ( 1,144 )

Issuance of common stock upon exercise of stock options 10 — 37 37

Net income 22,528 22,528

Balance October 30, 2021 54,162 $ 541 $ 736,886 $ ( 436,432 ) 2,186 $ ( 21,501 ) $ 279,494

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

2 unchanged sentences

References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, 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 1, 2021, which includes consolidated financial statements for the Company for each of the three fiscal years ended May 1, 2021, May 2, 2020 and April 27, 2019 (Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively).

Description of Business

22 unchanged sentences

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

We also work closely with our campus partners to ensure that each campus store

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

reflect each campus’s brand.

maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand.

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

14 unchanged sentences

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.

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

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.

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.

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

Please see our Part II - Item 2.

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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 weeks ended July 31, 2021 are not indicative of the results expected for the 52 weeks ending April 30, 2022 (Fiscal 2022).

Due to the seasonal nature of the business, the results of operations for the 26 weeks ended October 30, 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.

4 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

2 unchanged sentences

Actual results could differ from those estimates.

Restricted Cash

As of October 30, 2021 and October 31, 2020, we had restricted cash of $ 12,534 and $ 766 , respectively, comprised of $ 11,637 and $ 0 , respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement and $ 897 and $ 766 , respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Merchandise Inventories

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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.

The final inventory sale price was determined during the first quarter of Fiscal 2022, at which time, 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

8 unchanged sentences

For additional information, see Note 8.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

Revenue Recognition and Deferred Revenue

3 unchanged sentences

For additional information, see Note 3.

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)

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.

26 unchanged sentences

The majority of subscriptions sold are one month in duration.

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers.

For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract.

The revenue is recognized as each performance obligation is satisfied, typically at a point in time for 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.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers.

Cost of Sales

5 unchanged sentences

Evaluation of Goodwill and Other Long-Lived Assets

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.

As of October 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.

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.

3 unchanged sentences

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 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.

As of October 30, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 91,875 , $ 252,650 , $ 141,847 , and $ 26,010 , 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.

Some of the negative trends impacting our results, such as fewer students returning to campus and restrictions to attendance for athletic events, have been marginally reversed during the current 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.

As of October 30, 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.

At the end of the most recent tax year, inventory levels declined as compared to the prior year resulting in approximately $ 745 of the LIFO reserve becoming currently payable.

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

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

At the end of the most recent tax year, inventory levels declined as compared to the prior year resulting in approximately $ 745 of the LIFO reserve becoming currently payable.

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.

3 unchanged sentences

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

13 weeks ended

July 31, 2021 August 1, 2020

13 weeks ended 26 weeks ended

October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Product Sales (a)

2 unchanged sentences

Service and Other Revenue (b)

12,946 15,024 21,333 21,170

Retail Total Sales $ 608,952 $ 576,514 $ 819,421 $ 735,290

14 unchanged sentences

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 July 31, 2021, August 1, 2020 and May 1, 2021 on our condensed consolidated balance sheets.

Contract assets (unbilled receivables) were $ 0 as of October 30, 2021, October 31, 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).

1 unchanged sentence

• advanced payments from customers related to textbook rental and subscription-based performance obligations, which are recognized ratably over the terms of the related rental or subscription periods;

• 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 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.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 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:

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

Deferred revenue of $ 29,820 , $ 32,844 , and $ 13,469 is recorded in accrued liabilities and $ 4,470 , $ 0 , and $ 4,670 is recorded in other long-term liabilities on our condensed consolidated balance sheets for the periods ended October 30, 2021, October 31, 2020 and May 1, 2021, respectively.

As of October 30, 2021, we expect to recognize $ 29,820 of the deferred revenue balance within the next 12 months.

The following table presents changes in deferred revenue associated with our contract liabilities:

26 weeks ended

July 31, 2021 August 1, 2020

October 30, 2021 October 31, 2020

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

20 unchanged sentences

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.

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:

• 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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:

• 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.

1 unchanged sentence

Summarized financial information for our reportable segments is reported below:

13 weeks ended

July 31, 2021 August 1, 2020

13 weeks ended 26 weeks ended

October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Retail $ 608,952 $ 576,514 $ 819,421 $ 735,290

14 unchanged sentences

Total Depreciation and Amortization $ 11,952 $ 13,193 $ 24,576 $ 27,256

Operating Loss

Operating Income (Loss)

Retail $ 29,596 $ 7,072 $ ( 1,760 ) $ ( 47,744 )

3 unchanged sentences

Elimination 4,293 4,455 ( 1,244 ) ( 2,308 )

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 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 .

Total Operating Income (Loss) $ 24,589 $ 6,733 $ ( 16,864 ) $ ( 52,182 )

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

13 weeks ended 26 weeks ended

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

October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Total Operating Income (Loss) $ 24,589 $ 6,733 $ ( 16,864 ) $ ( 52,182 )

Interest Expense, net 2,264 912 4,758 3,565

Income (Loss) Before Income Taxes $ 22,325 $ 5,821 $ ( 21,622 ) $ ( 55,747 )

(a) For the 26 weeks ended October 30, 2021, gross margin includes a merchandise inventory loss of $ 434 in the Retail Segment.

Summary of Significant Accounting Policies - Merchandise Inventories .

Equity and Earnings Per Share

During the 26 weeks ended October 30, 2021, our shareholders approved an amendment to the Equity Incentive Plan to increase the number of shares available for issuance by an additional 3,000,000 shares of our Common Stock, for an aggregate total of 13,409,345 shares .

Share Repurchases

3 unchanged sentences

Any repurchased shares will be held as treasury stock and will be available 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.

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

During the 26 weeks ended October 30, 2021, we repurchased 238,170 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 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.

During the 13 weeks ended October 30, 2021 and October 31, 2020, average shares of 523,447 and 1,932,628 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 26 weeks ended October 30, 2021 and October 31, 2020, average shares of 3,771,594 and 2,849,291 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 26 weeks ended October 30, 2021 and October 31, 2020

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

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

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:

13 weeks ended 26 weeks ended

(shares in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Numerator for basic earnings per share:

Net income (loss) available to common shareholders $ 22,528 $ 7,515 $ ( 21,818 ) $ ( 39,137 )

Less allocation of earnings to participating securities ( 64 ) ( 6 ) — —

Net income (loss) available to common shareholders $ 22,464 $ 7,509 $ ( 21,818 ) $ ( 39,137 )

Numerator for diluted earnings per share:

Net income (loss) available to common shareholders $ 22,464 $ 7,509 $ ( 21,818 ) $ ( 39,137 )

Allocation of earnings to participating securities 64 6 — —

Less diluted allocation of earnings to participating securities ( 61 ) ( 6 ) — —

Net income (loss) available to common shareholders $ 22,467 $ 7,509 $ ( 21,818 ) $ ( 39,137 )

Denominator for basic earnings per share:

Basic weighted average shares of Common Stock 51,666 48,804 51,570 48,608

Denominator for diluted earnings per share:

Basic weighted average shares of Common Stock 51,666 48,804 51,570 48,608

Average dilutive restricted stock units 611 235 — —

Average dilutive performance shares — — — —

Average dilutive restricted shares 126 18 — —

Average dilutive performance share units 255 224 — —

Average dilutive stock options 1,910 147 — —

Diluted weighted average shares of Common Stock 54,568 49,428 51,570 48,608

Earnings (Loss) per share of Common Stock:

Basic $ 0.43 $ 0.15 $ ( 0.42 ) $ ( 0.81 )

9 unchanged sentences

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

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)

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

4 unchanged sentences

Such assets are reported at their carrying values and are not subject to recurring fair value measurements.

We review our

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

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 .

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 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.

As of October 30, 2021, we recorded a liability of $ 3,474 (Level 2 input) which is reflected in accrued liabilities ($ 2,345 ) and other long-term liabilities ($ 1,129 ) on the condensed consolidated balance sheet.

As of October 31, 2020, we recorded a liability of $ 224 (Level 2 input) which is reflected in accrued liabilities $ 130 and other long-term liabilities $ 94 on the condensed consolidated balance sheet.

For additional information, see Note 10.

Long-Term Incentive Plan Compensation Expense .

Credit Facility

6 unchanged sentences

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 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.

During the 26 weeks ended October 30, 2021, we borrowed $ 259,720 and repaid $ 254,020 under the Credit Agreement, with $ 183,300 of outstanding borrowings as of October 30, 2021, comprised entirely of borrowings under the Credit Facility.

During the 26 weeks ended October 31, 2020, we borrowed $ 330,800 and repaid $ 406,000 under the Credit Agreement, with $ 99,500 of outstanding borrowings as of October 31, 2020, comprised entirely of borrowings under the Credit Facility.

As of both October 30, 2021 and October 31, 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).

7 unchanged sentences

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)

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.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

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 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.

1 unchanged sentence

The following table summarizes lease expense:

13 weeks ended

July 31, 2021 August 1, 2020

13 weeks ended 26 weeks ended

October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Variable lease expense $ 30,738 $ 27,275 $ 42,440 $ 34,682

1 unchanged sentence

Net lease expense $ 79,728 $ 76,910 $ 107,803 $ 94,113

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

The increase in lease expense is primarily due to higher sales for contracts based on a percentage of revenue during the 26 weeks ended October 30, 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 26 weeks ended October 31, 2020.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of October 30, 2021:

October 30, 2021

Remainder of Fiscal 2022 $ 91,979

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Operating lease liabilities at period end $ 289,775

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

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

The following summarizes additional information related to our operating leases:

July 31, 2021 August 1, 2020

October 30, 2021 October 31, 2020

Weighted average remaining lease term (in years) 5.3 years 5.5 years

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ROU assets obtained in exchange for lease liabilities from initial recognition $ 77,811 $ 110,834

Supplementary Information

Restructuring and other charges

During the 13 and 26 weeks ended October 30, 2021, we recognized restructuring and other charges totaling $ 1,116 and $ 3,739 , respectively, comprised primarily of $ 418 and $ 1,968 , respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 754 is included in accrued liabilities in the condensed consolidated balance sheet as of October 30, 2021), $ 698 and $ 1,771 , respectively, for costs

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

Supplementary Information

Restructuring and other charges

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

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 $ 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.

associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

During the 13 and 26 weeks ended October 31, 2020, we recognized restructuring and other charges totaling $ 3,387 and $ 9,058 , respectively, comprised primarily of $ 1,075 and $ 4,471 , respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($ 7,092 is included in accrued liabilities in the condensed consolidated balance sheet as of October 31, 2020), $ 2,312 and $ 4,587 , respectively, for costs associated with professional service costs for restructuring, process improvements, the financial advisor strategic review process, shareholder activist activities, and liabilities for a facility closure.

Long-Term Incentive Plan Compensation Expense

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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 26 weeks ended October 30, 2021, we granted the following awards:

• 47,216 restricted stock units ("RSU") awards and 35,412 restricted stock ("RS") awards with a one year vesting period to the Board of Directors ("BOD") members for annual compensation.

• 809,282 restricted stock units ("RSU") awards to employees with a three year vesting period.

• 322,495 stock options with an exercise price of $ 10.80 per stock option, which was the fair market value on the date of grant (Stock Option Grant #1) and 348,723 stock options with an exercise price of $ 13.30 per stock option, which was above the fair market value on the date of grant, (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 $ 10.80 $ 13.30

Valuation method utilized Black-Scholes Monte Carlo

Risk-free interest rate 0.94 % 0.94 %

Expected option term 6.2 years 10.0 years

Company volatility 74 % 74 %

Dividend yield — % — %

Grant date fair value per award $ 7.10 $ 6.73

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 26 weeks ended October 30, 2021 and October 31, 2020

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

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.

• 183,348 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 $ 32.40 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 $ 8.50 per phantom share using risk-free rates ranging from 0.08%-0.53% for the three tranches and annual volatility ranging from 78%-92% for the three tranches.

As of October 30, 2021, we recorded a liability of $ 3,474 (Level 2 input) related to phantom share units grants which is reflected in accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.

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

13 weeks ended

July 31, 2021 August 1, 2020

13 weeks ended 26 weeks ended

October 30, 2021 October 31, 2020 October 30,

2021 October 31,

Stock-based awards

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Total compensation expense for long-term incentive awards $ 3,930 $ 1,404 $ 7,524 $ 2,925

Total unrecognized compensation cost related to unvested awards as of October 30, 2021 was $ 21,487 and is expected to be recognized over a weighted-average period of 2.8 years.

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 $ 1,004 and $ 0 during the 13 weeks ended October 30, 2021 and October 31, 2020, respectively.

Total employee benefit expense for these plans was $ 1,048 and $ 0 during the 26 weeks ended October 30, 2021 and October 31, 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.

We recorded an income tax benefit of $( 203 ) on pre-tax income of $ 22,325 during the 13 weeks ended October 30, 2021, which represented an effective income tax rate of ( 0.9 )% and an income tax benefit of $( 1,694 ) on pre-tax income of $ 5,821 during the 13 weeks ended October 31, 2020, which represented an effective income tax rate of ( 29.1 )%.

We recorded income tax expense of $ 196 on a pre-tax loss of $( 21,622 ) during the 26 weeks ended October 30, 2021, which represented an effective income tax rate of ( 0.9 )%% and an income tax benefit of $( 16,610 ) on a pre-tax loss of $( 55,747 ) during the 26 weeks ended October 31, 2020, which represented an effective income tax rate of 29.8 %.

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

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

For the 26 weeks ended October 30, 2021 and October 31, 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.

As of October 30, 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.

The effective tax rate for the 26 weeks ended October 30, 2021 is lower as compared to the prior year comparable period due to the assessment of the realization of deferred tax assets and loss carrybacks recorded in the prior year.

Legal Proceedings

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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 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.

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

§ 2), Section 13(a) of the Robinson-Patman Act (15 U.S.C.

§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 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 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