What changed in this filing

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Item 1. Financial Statements

2022-08-31 compared with 2022-03-08 · 181 added, 263 removed, 464 unchanged (49% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

13 weeks ended 39 weeks ended

2022 January 30,

2021 January 29,

2022 January 30,

13 weeks ended

2022 July 31,

Product sales and other $ 252,946 $ 227,770

8 unchanged sentences

Depreciation and amortization expense 12,533 12,624

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

Restructuring and other charges 375 1,905

2 unchanged sentences

Loss before income taxes ( 51,774 ) ( 43,229 )

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

Income tax expense 933 399

Net loss $ ( 52,707 ) $ ( 43,628 )

10 unchanged sentences

(In thousands, except per share data)

2022 January 30,

2022 July 31,

2021 April 30,

(unaudited) (unaudited) (audited)

20 unchanged sentences

Total current liabilities 608,417 609,053 415,320

Long-term deferred taxes, net 1,430 — 1,430

Long-term operating lease liabilities 197,407 179,540 219,594

22 unchanged sentences

13 weeks ended

2022 January 30,

2022 July 31,

Cash flows from operating activities:

4 unchanged sentences

Amortization of deferred financing costs 555 362

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

Merchandise inventory loss — 434

Deferred taxes 330 ( 7,179 )

Stock-based compensation expense 1,791 1,122

2 unchanged sentences

Changes in other operating assets and liabilities, net 7,491 18,999

Net cash flows provided by operating activities 7,901 41,173

Net cash flows used in operating activities ( 28,998 ) ( 17,304 )

Cash flows from investing activities:

3 unchanged sentences

Cash flows from financing activities:

Proceeds from borrowings under Credit Agreement 463,220 547,600

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

Sale of treasury shares — 10,869

Proceeds from borrowings 147,200 71,720

Repayments of borrowings ( 112,600 ) ( 45,620 )

Payment of deferred financing costs ( 559 ) —

Purchase of treasury shares ( 612 ) ( 1,215 )

Proceeds from the exercise of stock options, net 256 —

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

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

Net cash flows provided by financing activities 33,429 24,885

Net decrease in cash, cash equivalents and restricted cash ( 5,295 ) ( 3,597 )

Cash, cash equivalents and restricted cash at beginning of period 21,934 16,814

17 unchanged sentences

Vested equity awards 338 3 ( 3 ) —

514 5 ( 5 ) —

Shares repurchased for tax withholdings for vested stock awards 130 ( 1,215 ) ( 1,215 )

179 ( 342 ) ( 342 )

Net loss ( 43,628 ) ( 43,628 )

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

Stock-based compensation expense

Vested equity awards

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

Shares repurchased for tax withholdings for vested stock awards

4 ( 13 ) ( 13 )

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

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

Balance July 31, 2021 53,665 $ 536 $ 735,376 $ ( 466,265 ) 2,078 $ ( 20,357 ) $ 249,290

Common Stock Paid-In Accumulated Treasury Stock Total

Shares Amount Capital Deficit Shares Amount Equity

Balance at May 1, 2021 53,327 $ 533 $ 734,257 $ ( 414,614 ) 1,948 $ ( 19,142 ) $ 301,034

Balance at April 30, 2022 54,234 $ 542 $ 740,838 $ ( 491,494 ) 2,188 $ ( 21,512 ) $ 228,374

Stock-based compensation expense

5 unchanged sentences

Balance July 30, 2022 54,774 $ 547 $ 742,624 $ ( 544,201 ) 2,426 $ ( 22,124 ) $ 176,846

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

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

For the 13 weeks ended July 30, 2022 and July 31, 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, and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 26 weeks ended October 30, 2021.

Description of Business

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

We operate 1,441 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content and tools within a dynamic omnichannel retail environment.

We operate 1,406 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

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

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands.

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

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

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

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

We expect general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the “FLC Partnership”.

We expect gross general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the FLC Partnership.

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

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

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

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

2 unchanged sentences

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

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

Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 .

First Day Inclusive Access Programs

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

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

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

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

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

Offering courseware sales through our inclusive access First Day and First Day Complete models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has occurred at those schools where such programs have been adopted.

Partnership with Fanatics and FLC

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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

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)

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

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 reflect each campus’s brand.

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

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

In December 2020, Fanatics, Inc.

and Lids Holdings, Inc.

jointly made a strategic equity investment in BNED.

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

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

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

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

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

COVID-19 Business Impact

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

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

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

However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years.

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.

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.

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

Although most four year schools returned to a traditional on-campus environment, 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.

Summary of Significant Accounting Policies

7 unchanged sentences

These shifts in timing may affect the comparability of our results across periods.

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

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

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

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

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 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.

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 30, 2022 are not indicative of the results expected for the 52 weeks ending April 29, 2023 (Fiscal 2023).

Use of Estimates

2 unchanged sentences

Restricted Cash

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.

As of July 30, 2022 and July 31, 2021, we had restricted cash of $ 7,492 and $ 5,568 , respectively, comprised of $ 6,593 and $ 4,671 , 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 $ 899 and $ 897 , 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

10 unchanged sentences

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.

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 in the condensed consolidated statement of operations for the Retail Segment.

The final inventory sale price was determined during the 13 weeks ended July 31, 2021, 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 in the condensed consolidated statement of operations for the Retail Segment.

Textbook Rental Inventories

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

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).

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 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).

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.

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.

21 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 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.

Effective in April 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.

The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

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.

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)

Service and other revenue

2 unchanged sentences

The majority of subscriptions sold are one month in duration.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

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

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Evaluation of Goodwill and Other Long-Lived Assets

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.

As of July 30, 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;

therefore, no goodwill impairment was recognized.

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

As of January 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.

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

As of July 30, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 94,638 , $ 318,070 , $ 124,569 , and $ 22,405 , respectively, on our condensed consolidated balance sheet.

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

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

However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years.

In Fiscal 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.

While the majority of schools brought students back to campus, some schools chose to conduct classes virtually.

During Fiscal 2022 and Fiscal 2021, we recognized an impairment loss (non-cash) of $ 6,411 (both pre-tax and after-tax) and $ 27,630 ($ 20,506 after-tax), respectively, comprised of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, on the condensed consolidated statement of operations.

The provision for income taxes includes federal, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax basis of assets and liabilities.

The deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse.

We regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be necessary.

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 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.

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.

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

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

13 weeks ended 36 weeks ended

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

Product Sales (a)

13 weeks ended

July 30, 2022 July 31, 2021

Course Materials Product Sales $ 127,493 $ 122,217

General Merchandise Product Sales (a)

88,824 65,423

Rental Income 25,085 38,111 87,757 92,568

Service and Other Revenue (b)

8,949 11,063 30,282 32,233

Retail Product and Other Sales sub-total 225,595 197,445

Course Materials Rental Income 10,912 13,024

Retail Total Sales $ 236,507 $ 210,469

5 unchanged sentences

Total Sales $ 263,858 $ 240,794

(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.

(a) Effective in April 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.

The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

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

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

Contract assets (unbilled receivables) were $ 0 as of January 29, 2022, January 30, 2021 and May 1, 2021 on our condensed consolidated balance sheets.

Contract assets (unbilled receivables) were $ 0 as of July 30, 2022, July 31, 2021 and April 30, 2022 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).

3 unchanged sentences

• 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 $ 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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

Deferred revenue of $ 20,964 and $ 4,586 is recorded in accrued liabilities and other long-term liabilities on our condensed consolidated balance sheets, respectively, as of July 30, 2022 and $ 16,028 , and $ 4,561 is recorded in accrued liabilities and other long-term liabilities on our condensed consolidated balance sheets, respectively, as of July 31, 2021.

As of July 30, 2022, we expect to recognize $ 20,964 of the deferred revenue balance within the next 12 months.

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

13 weeks ended

January 29, 2022 January 30, 2021

July 30, 2022 July 31, 2021

Deferred revenue at the beginning of period $ 19,722 $ 18,139

9 unchanged sentences

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

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

Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 .

The Retail Segment operates 1,406 college, university, and K-12 school bookstores, comprised of 793 physical bookstores and 613 virtual bookstores.

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

The majority of the physical campus bookstores have school-branded e-commerce sites which we operate 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

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.

The majority of the physical campus bookstores have school-branded e-commerce websites 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.

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.

2 unchanged sentences

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

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

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

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

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

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

Intercompany Eliminations

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 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

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

13 weeks ended

July 30, 2022 July 31, 2021

Retail $ 236,507 $ 210,469

8 unchanged sentences

Total Gross Profit $ 63,488 $ 60,029

Selling and Administrative Expenses

Retail $ 79,004 $ 68,365

Wholesale 4,131 3,991

DSS 8,145 6,447

Corporate Services 7,214 7,444

Elimination ( 8 ) ( 12 )

Total Selling and Administrative Expenses $ 98,486 $ 86,235

Depreciation and Amortization

11 unchanged sentences

Total Operating Loss $ ( 47,906 ) $ ( 40,735 )

13 weeks ended 39 weeks ended

13 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

July 30, 2022 July 31, 2021

Total Operating Loss $ ( 47,906 ) $ ( 40,735 )

1 unchanged sentence

Loss Before Income Taxes $ ( 51,774 ) $ ( 43,229 )

(a) For the 39 weeks ended January 29, 2022, gross margin includes a merchandise inventory loss of $ 434 in the Retail Segment.

(a) For the 13 weeks ended July 31, 2021, gross margin includes a merchandise inventory loss of $ 434 in the Retail Segment.

Summary of Significant Accounting Policies - Merchandise Inventories .

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

Equity and Earnings Per Share

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

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $ 50,000 , in the aggregate, of our outstanding Common Stock.

The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934).

The stock repurchase program may be suspended, terminated, or modified at any time.

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

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 .

During the 13 weeks ended July 30, 2022, we did not repurchase shares of our Common Stock under the stock repurchase program and as of July 30, 2022, approximately $ 26,669 remains available under the stock repurchase program.

During the 13 weeks ended July 30, 2022, we repurchased 238,210 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

5 unchanged sentences

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

During the 13 weeks ended January 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.

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)

During the 13 weeks ended July 30, 2022 and July 31, 2021, average shares of 4,722,668 and 3,665,606 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

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

13 weeks ended 39 weeks ended

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

13 weeks ended

(shares in thousands) July 30, 2022 July 31, 2021

Numerator for basic and diluted earnings per share:

17 unchanged sentences

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

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.

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.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

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

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.

Other Non-Financial Liabilities

1 unchanged sentence

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

As of January 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.

As of July 30, 2022, we recorded a liability of $ 2,976 (Level 2 input) which is reflected in accrued liabilities ($ 1,810 ) and other long-term liabilities ($ 1,166 ) on the condensed consolidated balance sheet.

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.

For additional information, see Note 10.

5 unchanged sentences

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

As of January 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.

As of July 30, 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 draw scheduled for April 2022 under the FILO Facility, 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 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.

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 April 30, 2022.

During the 13 weeks ended July 30, 2022, we borrowed $ 117,200 and repaid $ 112,600 under the Credit Agreement, with $ 230,300 of outstanding borrowings as of July 30, 2022, comprised of $ 190,300 and $ 40,000 of borrowings under the Credit Facility and FILO Facility, respectively.

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 of borrowings under the Credit Facility and FILO Facility, respectively.

As of both July 30, 2022 and July 31, 2021, we have issued $ 4,759 in letters of credit under the Credit Facility.

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to our existing Credit Agreement.

For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $ 30,000 (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”).

The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility.

During the 13 weeks ended July 30, 2022, we borrowed $ 30,000 and repaid $ 0 under the Term Loan Credit Agreement, with $ 30,000 of outstanding borrowings as of July 30, 2022.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

During the 13 weeks ended July 30, 2022, we incurred debt issuance costs totaling $ 1,909 related to the Term Loan Credit Agreement.

The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

The Term Loans accrue interest at a rate equal to 11.25% and mature on June 7, 2024.

We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind.

The Term Loans do not amortize prior to maturity.

Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

The Term Loans are required to be repaid (i) after repayment of the FILO Facility under the Credit Agreement, with up to 100% of the proceeds of the sale of a non-core business line of the Company generating net proceeds in excess of $1,000, other than ordinary course dispositions and (ii) in full in connection with a debt or equity financing transaction generating net proceeds in excess of an amount sufficient to repay the FILO Facility under the Credit Agreement.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions.

The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75,000.

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).

12 unchanged sentences

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

The following table summarizes lease expense:

13 weeks ended 39 weeks ended

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

13 weeks ended

July 30, 2022 July 31, 2021

Variable lease expense $ 15,183 $ 11,702

1 unchanged sentence

Net lease expense $ 38,045 $ 28,075

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

The increase in lease expense during the 13 weeks ended July 30, 2022 is primarily due to higher sales for contracts based on a percentage of revenue during the 13 weeks ended July 30, 2022, the impact of the timing due to contract renewals, and the increase in minimum contractual guarantees which were temporarily eliminated in the prior year due to limited on campus store traffic resulting from the COVID pandemic.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of July 30, 2022:

July 30, 2022

Remainder of Fiscal 2022 $ 142,036

7 unchanged sentences

Operating lease liabilities at period end $ 346,994

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)

Future lease payment obligations related to leases that were entered into, but did not commence as of July 30, 2022, were not material.

The following summarizes additional information related to our operating leases:

January 29, 2022 January 30, 2021

July 30, 2022 July 31, 2021

Weighted average remaining lease term (in years) 5.3 years 5.1 years

4 unchanged sentences

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 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.

During the 13 weeks ended July 30, 2022, we recognized restructuring and other charges totaling $ 375 , comprised primarily of costs associated with professional service costs for restructuring and process improvements.

During the 13 weeks ended July 31, 2021, we recognized restructuring and other charges totaling $ 1,905 , comprised primarily of $ 832 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($ 1,651 is included in accrued liabilities in the condensed consolidated balance sheet as of July 31, 2021), $ 1,073 for costs associated with professional service costs for restructuring, process improvements,

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 30, 2022 and July 31, 2021

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

development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

Long-Term Incentive Plan Compensation Expense

3 unchanged sentences

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 39 weeks ended January 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 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.

During the 13 weeks ended July 30, 2022, we granted the following awards:

• 878,247 restricted stock units ("RSU") awards to employees with a three year vesting period.

16 unchanged sentences

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 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.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 30, 2022 and July 31, 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

2022 January 30,

2021 January 29,

2022 January 30,

13 weeks ended

2022 July 31,

Stock-based awards

8 unchanged sentences

Total compensation expense for long-term incentive awards $ 1,993 $ 3,594

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.

Total unrecognized compensation cost related to unvested awards as of July 30, 2022 was $ 15,133 and is expected to be recognized over a weighted-average period of 2.5 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 $ 1,155 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.

Total employee benefit expense for these plans was $ 1,325 and $ 44 during the 13 weeks ended July 30, 2022 and July 31, 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 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 %.

We recorded an income tax expense of $ 933 on pre-tax loss of $( 51,774 ) during the 13 weeks ended July 30, 2022, which represented an effective income tax rate of ( 1.8 )% and an income tax expense of $ 399 on pre-tax loss of $( 43,229 ) during the 13 weeks ended July 31, 2021, which represented an effective income tax rate of ( 0.9 )%.

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 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.

As of July 30, 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 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.

The effective tax rate for the 13 weeks ended July 30, 2022 is higher as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the current year.

Legal Proceedings

1 unchanged sentence

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

Subsequent Event

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

We received refunds of $ 7,842 in Fiscal 2022 and $ 15,770 on August 29, 2022 (Fiscal 2023).

We expect to receive additional refunds of approximately $ 6,881 .

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