What changed in this filing

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Item 1. Financial Statements

2022-03-08 compared with 2021-11-30 · 210 added, 163 removed, 517 unchanged (42% of the section changed)

5 unchanged sentences

13 weeks ended 39 weeks ended

2021 October 31,

2020 October 30,

2021 October 31,

2022 January 30,

2021 January 29,

2022 January 30,

Product sales and other $ 377,713 $ 373,502 $ 1,182,812 $ 1,118,544

1 unchanged sentence

Total sales 402,798 411,613 1,270,569 1,211,112

Cost of sales:

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

Product and other cost of sales 297,693 315,607 924,924 933,847

4 unchanged sentences

Depreciation and amortization expense 12,179 13,307 36,755 40,563

Impairment loss (non-cash) 6,411 27,630 6,411 27,630

Restructuring and other charges 46 1,669 3,785 10,727

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

Operating loss ( 33,135 ) ( 64,702 ) ( 49,999 ) ( 116,884 )

Interest expense, net 3,051 2,311 7,809 5,876

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:

Loss before income taxes ( 36,186 ) ( 67,013 ) ( 57,808 ) ( 122,760 )

Income tax expense (benefit) 615 ( 18,724 ) 811 ( 35,334 )

Net loss $ ( 36,801 ) $ ( 48,289 ) $ ( 58,619 ) $ ( 87,426 )

Loss per share of common stock:

Basic $ ( 0.71 ) $ ( 0.96 ) $ ( 1.13 ) $ ( 1.78 )

8 unchanged sentences

(In thousands, except per share data)

2021 October 31,

2022 January 30,

(unaudited) (unaudited) (audited)

44 unchanged sentences

39 weeks ended

2021 October 31,

2022 January 30,

Cash flows from operating activities:

4 unchanged sentences

Amortization of deferred financing costs 1,087 811

Impairment loss (non-cash) 6,411 27,630

Merchandise inventory loss 434 —

12 unchanged sentences

Repayments of borrowings under Credit Agreement ( 440,420 ) ( 571,500 )

Sale of treasury shares — 10,869

Purchase of treasury shares ( 2,370 ) ( 894 )

1 unchanged sentence

Net cash flows provided by (used in) financing activities 20,686 ( 13,925 )

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

Net (decrease) increase in cash, cash equivalents and restricted cash ( 4,072 ) 1,673

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

11 unchanged sentences

Condensed Consolidated Statements of Equity

(In thousands)

(In thousands) (unaudited)

Common Stock Paid-In Accumulated Treasury Stock Total

15 unchanged sentences

Balance at 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

Common Stock Paid-In Accumulated Treasury Stock Total

16 unchanged sentences

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

Stock-based compensation expense

Vested equity awards

Shares repurchased for tax withholdings for vested stock awards

2 ( 11 ) ( 11 )

Issuance of common stock upon exercise of stock options 68 1 219 220

Net loss ( 36,801 ) ( 36,801 )

Balance January 29, 2022 54,234 $ 542 $ 738,968 $ ( 473,233 ) 2,188 $ ( 21,512 ) $ 244,765

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

(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) and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 13 weeks ended July 31, 2021.

Description of Business

20 unchanged sentences

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

Coupled with FLC, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.

Coupled with Lids (FLC's parent company), the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.

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

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

15 unchanged sentences

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 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.

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

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

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

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

The COVID-19 impact on higher education remains a fluid situation.

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.

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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 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.

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.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

Due to the seasonal nature of the business, the results of operations for the 39 weeks ended January 29, 2022 are not indicative of the results expected for the 52 weeks ending April 30, 2022 (Fiscal 2022).

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

2 unchanged sentences

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.

As of January 29, 2022 and January 30, 2021, we had restricted cash of $ 2,775 and $ 766 , respectively, comprised of $ 1,878 and $ 0 , respectively, in prepaid and other current assets in the condensed 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

9 unchanged sentences

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, 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.

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 in the condensed consolidated statement of operations during the 52 weeks ended May 1, 2021 for the Retail Segment.

Textbook Rental Inventories

4 unchanged sentences

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

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

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

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

For additional information, see Note 8.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

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

For additional information, see Note 8.

Revenue Recognition and Deferred Revenue

20 unchanged sentences

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.

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

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

We do not have gift card or customer loyalty programs.

2 unchanged sentences

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

Service and other revenue

Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers.

Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer.

The majority of subscriptions sold are one month in duration.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

Service and other revenue

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.

8 unchanged sentences

Evaluation of Goodwill and Other Long-Lived Assets

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.

As of January 29, 2022, 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 2022.

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;

1 unchanged sentence

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 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.

As of January 29, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 93,752 , $ 229,259 , $ 133,975 , and $ 24,040 , 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.

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.

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 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.

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

thus reducing and/or delaying sales later into the quarter or shifting some sales to our fourth quarter.

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

During the 13 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 6,411 (both pre-tax and after-tax), comprised of $ 739 , $ 1,793 , $ 3,668 and $ 211 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

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 6.

Fair Value Measurements .

As of January 29, 2022, other long-term liabilities includes $ 25,335 related to the long-term tax payable associated with the LIFO reserve.

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.

7 unchanged sentences

13 weeks ended 36 weeks ended

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

January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Product Sales (a)

10 unchanged sentences

Total Sales $ 402,798 $ 411,613 $ 1,270,569 $ 1,211,112

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

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

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021.

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

4 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 October 30, 2021, October 31, 2020 and May 1, 2021 on our condensed consolidated balance sheets.

Contract assets (unbilled receivables) were $ 0 as of January 29, 2022, January 30, 2021 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;

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)

• 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 $ 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.

Deferred revenue of $ 51,125 , $ 47,166 , and $ 13,469 is recorded in accrued liabilities and $ 4,466 , $ 3,956 , and $ 4,670 is recorded in other long-term liabilities on our condensed consolidated balance sheets for the periods ended January 29, 2022, January 30, 2021 and May 1, 2021, respectively.

As of January 29, 2022, we expect to recognize $ 51,125 of the deferred revenue balance within the next 12 months.

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

39 weeks ended

October 30, 2021 October 31, 2020

January 29, 2022 January 30, 2021

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

13 unchanged sentences

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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

day of class.

Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

4 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.

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)

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

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

Summarized financial information for our reportable segments is reported below:

13 weeks ended 39 weeks ended

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

January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Retail $ 374,740 $ 387,669 $ 1,194,161 $ 1,122,959

14 unchanged sentences

Total Depreciation and Amortization $ 12,179 $ 13,307 $ 36,755 $ 40,563

Operating Income (Loss)

Operating (Loss) Income

Retail $ ( 30,845 ) $ ( 59,996 ) $ ( 32,605 ) $ ( 107,740 )

3 unchanged sentences

Elimination 1,800 604 556 ( 1,704 )

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

Total Operating Loss $ ( 33,135 ) $ ( 64,702 ) $ ( 49,999 ) $ ( 116,884 )

13 weeks ended 39 weeks ended

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

January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Total Operating Loss $ ( 33,135 ) $ ( 64,702 ) $ ( 49,999 ) $ ( 116,884 )

Interest Expense, net 3,051 2,311 7,809 5,876

Loss Before Income Taxes $ ( 36,186 ) $ ( 67,013 ) $ ( 57,808 ) $ ( 122,760 )

(a) For the 39 weeks ended January 29, 2022, 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 26 weeks ended October 30, 2021 and October 31, 2020

For the 39 weeks ended January 29, 2022 and January 30, 2021

(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 .

During the 39 weeks ended January 29, 2022, 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 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.

During the 39 weeks ended January 29, 2022, we did not repurchase shares of our Common Stock under the program and as of January 29, 2022, approximately $ 26,669 remains available under the stock repurchase program.

During the 39 weeks ended January 29, 2022, we repurchased 239,751 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

During the 39 weeks ended January 30, 2021, we entered into a 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 which is recognized over the term of the merchandising contracts for Fanatics and FLC ($ 211 and $ 175 , respectively, in accrued liabilities, and $ 3,762 and $ 3,956 , respectively, as of January 29, 2022 and January 30, 2021, in other long-term liabilities our condensed consolidated balance sheet), as discussed in Note 1.

Organization - Partnership with Fanatics and FLC .

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 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.

During the 13 weeks ended January 29, 2022 and January 30, 2021, average shares of 4,233,063 and 4,005,236 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 39 weeks ended January 29, 2022 and January 30, 2021, average shares of 3,295,417 and 3,234,606 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

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13 weeks ended 39 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:

(shares in thousands) January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Numerator for basic and diluted earnings per share:

Net loss available to common shareholders $ ( 36,801 ) $ ( 48,289 ) $ ( 58,619 ) $ ( 87,426 )

Denominator for basic and diluted earnings per share:

Basic and diluted weighted average shares of Common Stock 52,003 50,082 51,714 49,099

Loss per share of Common Stock:

Basic $ ( 0.71 ) $ ( 0.96 ) $ ( 1.13 ) $ ( 1.78 )

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

Non-Financial Assets

Non-Financial Assets and Liabilities

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

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

We review our

During the 13 weeks ended January 29, 2022 and January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment and based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 6,411 (both pre-tax and after-tax), and $ 27,630 ($ 20,506 after-tax), 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 our best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

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

For the 39 weeks ended January 29, 2022 and January 30, 2021

(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

The following table shows the fair values of our non-financial assets and liabilities that were required to be remeasured at fair value on a non-recurring basis for each respective period and the total impairments recorded as a result of the remeasurement process:

13 and 39 weeks ended January 29, 2022 13 and 39 weeks ended January 30, 2021

Carrying Value

Prior to Impairment Fair Value Impairment Loss

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

Property and equipment, net $ 742 $ 3 $ 739 $ 5,505 $ 420 $ 5,085

Operating lease right-of-use assets 3,299 1,506 1,793 26,427 13,099 13,328

Intangible assets, net 3,745 77 3,668 7,723 1,445 6,278

Other noncurrent assets 211 — 211 3,539 600 2,939

Total $ 7,997 $ 1,586 $ 6,411 $ 43,194 $ 15,564 $ 27,630

Other Non-Financial Liabilities

We granted phantom share units as long-term incentive awards which are settled in cash based on the fair market value of a share of common stock of the Company at each vesting date.

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

As of 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.

As of January 29, 2022, we recorded a liability of $ 3,666 (Level 2 input) which is reflected in accrued liabilities ($ 2,397 ) and other long-term liabilities ($ 1,269 ) on the condensed consolidated balance sheet.

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 10.

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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.

As of January 29, 2022, we were in compliance with all debt covenants under the Credit Agreement.

On March 4, 2022, we were granted a waiver to the condition to the upcoming draw under the FILO Facility, scheduled for April 2022, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110,000.

Under the waiver amendment, the commitment under the FILO Facility of $25,000 was increased to $40,000, with all remaining terms unchanged.

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 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.

During the 39 weeks ended January 29, 2022, we borrowed $ 463,220 and repaid $ 440,420 under the Credit Agreement, with $ 200,400 of outstanding borrowings as of January 29, 2022, comprised entirely of borrowings under the Credit Facility.

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, 2021, comprised entirely of borrowings under the Credit Facility.

As of both January 29, 2022 and January 30, 2021, we have issued $ 4,759 in letters of credit under the Credit Facility.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

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).

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

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13 weeks ended 39 weeks ended

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

January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Variable lease expense $ 18,306 $ 27,399 $ 60,746 $ 62,081

1 unchanged sentence

Net lease expense $ 52,144 $ 55,526 $ 159,947 $ 149,639

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

The increase in lease expense during the 39 weeks ended January 29, 2022 is primarily due to higher sales for contracts based on a percentage of revenue and the impact of the timing and reduction of minimum contractual guarantees due to temporary store closings due to the COVID pandemic during the 39 weeks ended January 30, 2021.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of January 29, 2022:

January 29, 2022

Remainder of Fiscal 2022 $ 65,338

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Operating lease liabilities at period end $ 269,697

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

Future lease payment obligations related to leases that were entered into, but did not commence as of January 29, 2022, were not material.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 29, 2022 and January 30, 2021

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

The following summarizes additional information related to our operating leases:

October 30, 2021 October 31, 2020

January 29, 2022 January 30, 2021

Weighted average remaining lease term (in years) 5.2 years 5.5 years

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Supplementary Information

Impairment Loss (non-cash)

During the 13 and 39 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

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.

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.

For additional information, see Note 2.

Summary of Significant Accounting Policies and Note 6.

Fair Value Measurements .

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.

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)

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.

During the 13 and 39 weeks ended January 29, 2022, we recognized restructuring and other charges totaling $ 46 and $ 3,785 , comprised primarily of $ 0 and $ 1,968 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 202 is included in accrued liabilities in the condensed consolidated balance sheet as of January 29, 2022), and $ 46 and $ 1,817 for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

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 condensed consolidated balance sheet as of January 30, 2021), $ 384 and $ 4,971 , respectively, for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

Long-Term Incentive Plan Compensation Expense

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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 29, 2022 and January 30, 2021

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

During the 39 weeks ended January 29, 2022, 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.

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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.

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.

5 unchanged sentences

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.

As of January 29, 2022, we recorded a liability of $ 3,666 (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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 29, 2022 and January 30, 2021

(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

October 30, 2021 October 31, 2020 October 30,

2021 October 31,

2022 January 30,

2021 January 29,

2022 January 30,

Stock-based awards

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Total compensation expense for long-term incentive awards $ 2,055 $ 2,661 $ 9,579 $ 5,586

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.

Total unrecognized compensation cost related to unvested awards as of January 29, 2022 was $ 18,042 and is expected to be recognized over a weighted-average period of 2.6 years.

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 $ 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.

Total employee benefit expense for these plans was $ 1,155 and $ 0 during the 13 weeks ended January 29, 2022 and January 30, 2021, respectively.

Total employee benefit expense for these plans was $ 2,203 and $ 0 during the 39 weeks ended January 29, 2022 and January 30, 2021, 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.

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)

We recorded an income tax expense of $ 615 on pre-tax loss of $( 36,186 ) during the 13 weeks ended January 29, 2022, which represented an effective income tax rate of ( 1.7 )% and an income tax benefit of $( 18,724 ) on pre-tax loss of $( 67,013 ) during the 13 weeks ended January 30, 2021, which represented an effective income tax rate of 27.9 %.

We recorded income tax expense of $ 811 on a pre-tax loss of $( 57,808 ) during the 39 weeks ended January 29, 2022, which represented an effective income tax rate of ( 1.4 )%% and 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 %.

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 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.

As of January 29, 2022, 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 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.

The effective tax rate for the 13 and 39 weeks ended January 29, 2022 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

2 unchanged sentences

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