What changed in this filing

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Item 1. Financial Statements

2022-12-06 compared with 2022-08-31 · 176 added, 117 removed, 528 unchanged (36% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

13 weeks ended

2022 July 31,

13 weeks ended 26 weeks ended

2022 October 30,

2021 October 29,

2022 October 30,

Product sales and other $ 575,764 $ 577,329 $ 828,710 $ 805,099

9 unchanged sentences

Restructuring and other charges 260 1,116 635 3,021

Operating loss ( 47,906 ) ( 40,735 )

Operating income (loss) 26,730 24,589 ( 21,176 ) ( 16,146 )

Interest expense, net 4,886 2,264 8,754 4,758

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

Income tax expense 933 399

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

Loss per share of common stock:

Income (loss) before income taxes 21,844 22,325 ( 29,930 ) ( 20,904 )

Income tax (benefit) expense ( 300 ) ( 203 ) 633 196

Net income (loss) $ 22,144 $ 22,528 $ ( 30,563 ) $ ( 21,100 )

Income (Loss) per share of common stock:

Basic $ 0.42 $ 0.43 $ ( 0.58 ) $ ( 0.41 )

8 unchanged sentences

(In thousands, except per share data)

2022 July 31,

2022 October 30,

2021 April 30,

46 unchanged sentences

26 weeks ended

2022 July 31,

2022 October 30,

Cash flows from operating activities:

9 unchanged sentences

Changes in other operating assets and liabilities, net 8,721 12,573

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

Net cash flows provided by operating activities 9,376 24,276

Cash flows from investing activities:

7 unchanged sentences

Purchase of treasury shares ( 857 ) ( 2,359 )

Proceeds from the exercise of stock options, net — 37

Net cash flows provided by financing activities 23,727 3,378

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

Net increase in cash, cash equivalents and restricted cash 12,785 6,716

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

17 unchanged sentences

Vested equity awards

338 3 ( 3 ) —

Shares repurchased for tax withholdings for vested stock awards

130 ( 1,215 ) ( 1,215 )

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

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

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 $ ( 443,737 ) 2,186 $ ( 21,501 ) $ 272,189

Common Stock Paid-In Accumulated Treasury Stock Total

8 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

357 4 ( 4 ) —

Shares repurchased for tax withholdings for vested stock awards

107 ( 245 ) ( 245 )

Net income 22,144 22,144

Balance October 29, 2022 55,131 $ 551 $ 744,339 $ ( 522,057 ) 2,533 $ ( 22,369 ) $ 200,464

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 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 April 30, 2022, which includes consolidated financial statements for the Company for each of the three fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020 (Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively).

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 April 30, 2022, which includes consolidated financial statements for the Company as of April 30, 2022 and May 1, 2021 and for each of the three fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020 (Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively) and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended July 30, 2022.

Description of Business

16 unchanged sentences

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

First Day Inclusive Access Programs

First Day Inclusive and Equitable 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.

We offer our BNC First Day ® inclusive and equitable access programs, consisting of First Day Complete and First Day , 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.

• 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.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 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.

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

Offering courseware sales through our inclusive and equitable access First Day Complete and First Day 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.

We are moving quickly and decisively to accelerate our First Day Complete strategy.

We plan to move many institutions to First Day Complete for the Fall of 2023 and the majority of schools by Fall 2024.

Approximately 111 campus stores adopted our First Day Complete course materials delivery program for the 2022 Fall Term, representing approximately 545,000 (as reported by National Center for Education Statistics) in total undergraduate student enrollment, a growth rate of 85% over Fall 2021.

During the 13 weeks ended October 29, 2022, First Day Complete sales increased by $44,301 to $89,892, or 97%, as compared to $45,591 in the prior year period.

During the 26 weeks ended October 29, 2022, First Day Complete sales increased by $54,732 to $106,314, or 106%, as compared to $51,582 in the prior year period.

Partnership with Fanatics and FLC

6 unchanged sentences

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.

FLC manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and FLC owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

COVID-19 Business Impact

10 unchanged sentences

All material intercompany accounts and transactions have been eliminated in consolidation.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

Our business is highly seasonal.

4 unchanged sentences

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

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)

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).

Due to the seasonal nature of the business, the results of operations for the 13 and 26 weeks ended October 29, 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 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.

As of October 29, 2022 and October 30, 2021, we had restricted cash of $ 15,590 and $ 12,534 , respectively, comprised of $ 14,686 and $ 11,637 , 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 $ 904 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

6 unchanged sentences

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

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

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

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

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

After internal sourcing, the bookstore purchases courseware 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 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 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.

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.

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).

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset.

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.

28 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 13 weeks ended July 30, 2022 and July 31, 2021

For the 13 and 26 weeks ended October 29, 2022 and October 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 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.

As of October 29, 2022, we had $ 4,700 of goodwill on our condensed consolidated balance sheet related to our DSS reporting unit.

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

As of July 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.

As of October 29, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 96,096 , $ 291,704 , $ 121,487 , and $ 20,980 , 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.

3 unchanged sentences

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.

4 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

4 unchanged sentences

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

13 weeks ended

July 30, 2022 July 31, 2021

13 weeks ended 26 weeks ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Course Materials Product Sales $ 419,879 $ 433,734 $ 547,476 $ 555,954

2 unchanged sentences

Service and Other Revenue (b)

14,749 19,370 23,923 29,172

Retail Product and Other Sales sub-total 557,276 559,304 782,871 756,749

13 unchanged sentences

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

Contract Assets and Contract Liabilities

Contract assets represent the sale of goods or services to a customer before we have the right to obtain consideration from the customer.

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

Contract assets (unbilled receivables) were $ 0 as of July 30, 2022, July 31, 2021 and April 30, 2022 on our condensed consolidated balance sheets.

Contract Liabilities

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).

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 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:

26 weeks ended

July 30, 2022 July 31, 2021

October 29, 2022 October 30, 2021

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

2 unchanged sentences

Deferred revenue balance at the end of period:

$ 51,046 $ 34,290

Balance Sheet classification:

Accrued liabilities $ 46,610 $ 29,820

Other long-term liabilities 4,436 4,470

Deferred revenue balance at the end of period:

$ 51,046 $ 34,290

As of October 29, 2022, we expect to recognize $ 46,610 of the deferred revenue balance within the next 12 months.

Segment Reporting

9 unchanged sentences

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.

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.

The Retail Segment also offers inclusive and equitable 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.

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.

8 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

Summarized financial information for our reportable segments is reported below:

13 weeks ended

July 30, 2022 July 31, 2021

13 weeks ended 26 weeks ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Retail $ 598,610 $ 608,952 $ 835,117 $ 819,421

21 unchanged sentences

Total Depreciation and Amortization $ 10,759 $ 11,952 $ 23,292 $ 24,576

Operating (Loss) Income

Operating Income (Loss)

Retail $ 30,547 $ 29,595 $ ( 3,993 ) $ ( 1,042 )

3 unchanged sentences

Elimination 3,258 4,293 ( 1,621 ) ( 1,244 )

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

13 weeks ended

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

July 30, 2022 July 31, 2021

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

Total Operating Income (Loss) $ 26,730 $ 24,589 $ ( 21,176 ) $ ( 16,146 )

13 weeks ended 26 weeks ended

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

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Total Operating Income (Loss) $ 26,730 $ 24,589 $ ( 21,176 ) $ ( 16,146 )

Interest Expense, net 4,886 2,264 8,754 4,758

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

(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 .

Income (Loss) Before Income Taxes $ 21,844 $ 22,325 $ ( 29,930 ) $ ( 20,904 )

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

(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

Share Repurchases

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.

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

During the 26 weeks ended October 29, 2022, we repurchased 344,587 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

5 unchanged sentences

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

During the 13 weeks ended July 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.

During the 13 weeks ended October 29, 2022 and October 30, 2021, average shares of 3,153,516 and 523,447 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 26 weeks ended October 29, 2022 and October 30, 2021, average shares of 4,898,303 and 3,771,594 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 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

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

13 weeks ended

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

Numerator for basic and diluted earnings per share:

Net loss available to common shareholders $ ( 52,707 ) $ ( 43,628 )

Denominator for basic and diluted earnings per share:

Basic and diluted weighted average shares of Common Stock 52,172 51,474

Loss per share of Common Stock:

13 weeks ended 26 weeks ended

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

Numerator for basic earnings per share:

Net income (loss) available to common shareholders $ 22,144 $ 22,528 $ ( 30,563 ) $ ( 21,100 )

Less allocation of earnings to participating securities ( 11 ) ( 64 ) — —

Net income (loss) available to common shareholders $ 22,133 $ 22,464 $ ( 30,563 ) $ ( 21,100 )

Numerator for diluted earnings per share:

Net income (loss) available to common shareholders $ 22,133 $ 22,464 $ ( 30,563 ) $ ( 21,100 )

Allocation of earnings to participating securities 11 64 — —

Less diluted allocation of earnings to participating securities ( 11 ) ( 61 ) — —

Net income (loss) available to common shareholders $ 22,133 $ 22,467 $ ( 30,563 ) $ ( 21,100 )

Denominator for basic earnings per share:

Basic weighted average shares of Common Stock 52,438 51,666 52,305 51,570

Denominator for diluted earnings per share:

Basic weighted average shares of Common Stock 52,438 51,666 52,305 51,570

Average dilutive restricted stock units 141 611 — —

Average dilutive performance shares — — — —

Average dilutive restricted shares 10 126 — —

Average dilutive performance share units — 255 — —

Average dilutive stock options 606 1,910 — —

Diluted weighted average shares of Common Stock 53,195 54,568 52,305 51,570

Earnings (Loss) per share of Common Stock:

Basic $ 0.42 $ 0.43 $ ( 0.58 ) $ ( 0.41 )

15 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

6 unchanged sentences

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

As of July 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.

As of October 29, 2022, we recorded a liability of $ 1,398 (Level 2 input) which is reflected in accrued liabilities ($ 1,318 ) and other long-term liabilities ($ 80 ) on the condensed consolidated balance sheet.

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

For additional information, see Note 10.

1 unchanged sentence

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $ 400,000 (the “Credit Facility”) effective from the date of the amendment.

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

1 unchanged sentence

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

As of July 30, 2022, we were in compliance with all debt covenants under the Credit Agreement.

As of October 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 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.

2 unchanged sentences

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

During the 26 weeks ended October 29, 2022, we borrowed $ 318,200 and repaid $ 321,900 under the Credit Agreement, with $ 222,000 of outstanding borrowings as of October 29, 2022, comprised entirely of borrowings under the Credit Facility.

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

As of both October 29, 2022 and October 30, 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.

2 unchanged sentences

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.

During the 26 weeks ended October 29, 2022, we borrowed $ 30,000 and repaid $ 0 under the Term Loan Credit Agreement, with $ 30,000 of outstanding borrowings as of October 29, 2022.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 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.

We incurred debt issuance costs totaling $ 1,964 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.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly, 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.

To date, all interest on the term loan has been paid in cash.

The Term Loans do not amortize prior to maturity.

21 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

The following table summarizes lease expense:

13 weeks ended

July 30, 2022 July 31, 2021

13 weeks ended 26 weeks ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Variable lease expense $ 25,281 $ 30,738 $ 40,465 $ 42,440

1 unchanged sentence

Net lease expense $ 78,279 $ 79,728 $ 116,325 $ 107,803

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

The increase in lease expense during the 26 weeks ended October 29, 2022 is primarily due to higher sales for contracts based on a percentage of revenue during the 26 weeks ended October 29, 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 October 29, 2022:

October 29, 2022

Remainder of Fiscal 2023 $ 102,628

7 unchanged sentences

Operating lease liabilities at period end $ 321,560

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

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

The following summarizes additional information related to our operating leases:

July 30, 2022 July 31, 2021

October 29, 2022 October 30, 2021

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

2 unchanged sentences

Cash payments for lease liabilities within operating activities $ 75,876 $ 64,103

ROU assets obtained in exchange for lease liabilities from initial recognition $ 64,221 $ 67,106

Right-of-use assets obtained in exchange for lease liabilities from initial recognition $ 86,045 $ 77,811

Supplementary Information

Restructuring and other charges

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,

During the 13 and 26 weeks ended October 29, 2022, we recognized restructuring and other charges totaling $ 260 and $ 635 , respectively, comprised primarily of costs associated with professional service costs for restructuring and process improvements.

During the 13 and 26 weeks ended October 30, 2021, we recognized restructuring and other charges totaling $ 1,116 and $ 3,021 , respectively, comprised primarily of $ 418 and $ 1,250 , 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 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.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 30, 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

5 unchanged sentences

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

During the 26 weeks ended October 29, 2022, we granted the following awards:

• 82,628 restricted stock units ("RSU") awards and 11,804 restricted stock ("RS") awards with a one year vesting period to the Board of Directors ("BOD") members for annual compensation.

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

19 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 29, 2022 and October 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

2022 July 31,

13 weeks ended 26 weeks ended

2022 October 30,

2021 October 29,

2022 October 30,

Stock-based awards

8 unchanged sentences

Total compensation expense for long-term incentive awards $ 1,785 $ 3,930 $ 3,778 $ 7,524

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.

Total unrecognized compensation cost related to unvested awards as of October 29, 2022 was $ 13,077 and is expected to be recognized over a weighted-average period of 2.3 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 $ 1,325 and $ 44 during the 13 weeks ended July 30, 2022 and July 31, 2021, respectively.

Total employee benefit expense for these plans was $ 1,069 and $ 1,004 during the 13 weeks ended October 29, 2022 and October 30, 2021, respectively.

Total employee benefit expense for these plans was $ 2,394 and $ 1,048 during the 26 weeks ended October 29, 2022 and October 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 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 )%.

We recorded an income tax benefit of $( 300 ) on pre-tax income of $ 21,844 during the 13 weeks ended October 29, 2022, which represented an effective income tax rate of ( 1.4 )% and 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 )%.

We recorded an income tax expense of $ 633 on pre-tax loss of $( 29,930 ) during the 26 weeks ended October 29, 2022, which represented an effective income tax rate of ( 2.1 )% and an income tax expense of $ 196 on pre-tax loss of $( 20,904 ) during the 26 weeks ended October 30, 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 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.

As of October 29, 2022, we determined that it was more likely than not that we would not realize all deferred tax assets and our tax rate for the current fiscal year reflects this determination.

We will continue to evaluate this position.

The effective tax rate for the 13 weeks ended July 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.

The effective tax rate for the 13 and 26 weeks ended October 29, 2022 is lower 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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

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

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 .

On December 2, 2022, the Board of Directors approved a company-wide initiative to drive efficiencies, streamline operations, simplify the organizational structure and further reduce non-essential costs.

These actions are expected to be substantially implemented within thirty days.

The Company expects to incur restructuring charges, primarily related to severance, of approximately $5,000 to $6,000 in the third quarter of fiscal 2023 and expects to save $10,000 to $15,000 in fiscal year 2023.

These initiatives are expected to provide annualized savings of $30,000 to $35,000 once fully implemented.

The restructuring charges are excluded from non-GAAP adjusted EBITDA and from the annualized and fiscal year 2023 savings.

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