What changed in this filing

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Item 1. Financial Statements

2023-03-09 compared with 2022-12-06 · 237 added, 178 removed, 526 unchanged (44% of the section changed)

5 unchanged sentences

13 weeks ended 39 weeks ended

2022 October 30,

2021 October 29,

2022 October 30,

2023 January 29,

2022 January 28,

2023 January 29,

Product sales and other $ 402,755 $ 377,713 $ 1,231,465 $ 1,182,812

8 unchanged sentences

Depreciation and amortization expense 10,618 12,179 33,910 36,755

Impairment loss (non-cash) 6,008 6,411 6,008 6,411

Restructuring and other charges 5,975 46 6,610 3,067

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

Operating loss ( 17,864 ) ( 33,135 ) ( 39,040 ) ( 49,281 )

Interest expense, net 6,918 3,051 15,672 7,809

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:

Loss before income taxes ( 24,782 ) ( 36,186 ) ( 54,712 ) ( 57,090 )

Income tax expense 267 615 900 811

Net loss $ ( 25,049 ) $ ( 36,801 ) $ ( 55,612 ) $ ( 57,901 )

Loss per share of common stock:

Basic $ ( 0.48 ) $ ( 0.71 ) $ ( 1.06 ) $ ( 1.12 )

8 unchanged sentences

(In thousands, except per share data)

2022 October 30,

2023 January 29,

2022 April 30,

46 unchanged sentences

39 weeks ended

2022 October 30,

2023 January 29,

Cash flows from operating activities:

4 unchanged sentences

Amortization of deferred financing costs 2,058 1,087

Impairment loss (non-cash) 6,008 6,411

Merchandise inventory loss — 434

Deferred taxes 171 330

Stock-based compensation expense 4,588 4,463

2 unchanged sentences

Changes in other operating assets and liabilities, net ( 32,145 ) 10,270

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

Net cash flows (used in) provided by operating activities ( 22,582 ) 7,901

Cash flows from investing activities:

9 unchanged sentences

Net cash flows provided by financing activities 56,422 20,686

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

Net increase (decrease) in cash, cash equivalents and restricted cash 7,513 ( 4,072 )

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

30 unchanged sentences

Balance October 30, 2021 54,162 $ 541 $ 736,886 $ ( 443,737 ) 2,186 $ ( 21,501 ) $ 272,189

Stock-based compensation expense 1,863 1,863

Vested equity awards 4 — — —

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 $ ( 480,538 ) 2,188 $ ( 21,512 ) $ 237,460

Common Stock Paid-In Accumulated Treasury Stock Total

15 unchanged sentences

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

Stock-based compensation expense

Vested equity awards

Shares repurchased for tax withholdings for vested stock awards

3 ( 7 ) ( 7 )

Net loss ( 25,049 ) ( 25,049 )

Balance January 28, 2023 55,140 $ 551 $ 745,417 $ ( 547,106 ) 2,536 $ ( 22,376 ) $ 176,486

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(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 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

7 unchanged sentences

(“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 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.

D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

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.

12 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

4 unchanged sentences

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

In December 2020, we entered into the FLC Partnership.

As of January 28, 2023, 116 campus stores adopted our First Day Complete course materials delivery program for the 2023 Spring Term, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment for the 2022 Spring Term.

During the 13 weeks ended January 28, 2023, First Day Complete sales increased by $28,912 to $66,901, or 76%, as compared to $37,989 in the prior year period.

During the 39 weeks ended January 28, 2023, First Day Complete sales increased by $83,752 to $173,380, or 94%, as compared to $89,628 in the prior year period.

Partnership with Fanatics and Lids

In December 2020, we entered into the F/L Partnership.

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

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

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

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

1 unchanged sentence

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, and FLC owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

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

COVID-19 Business Impact

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 .

Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term.

While the impact of the COVID-19 pandemic is lessening, 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, 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.

3 unchanged sentences

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported.

These condensed consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by GAAP.

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

These condensed consolidated financial statements are

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

condensed and therefore do not include all of the information and footnotes required by GAAP.

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

Our business is highly seasonal.

5 unchanged sentences

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

Due to the seasonal nature of the business, the results of operations for the 13 and 26 weeks ended October 29, 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 39 weeks ended January 28, 2023 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 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.

As of January 28, 2023 and January 29, 2022, we had restricted cash of $ 18,309 and $ 2,775 , respectively, comprised of $ 17,397 and $ 1,878 , respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Partnership's merchandising agreement, and $ 912 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

9 unchanged sentences

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 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.

As contemplated by the F/L Partnership merchandising agreement, we sold our logo general merchandise inventory to Lids 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 Fiscal 2022 condensed consolidated statement of operations for the Retail Segment.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

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.

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)

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 .

24 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 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.

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 the transition.

We do not have gift card or customer loyalty programs.

We do not treat any promotional offers as expenses.

Sales tax collected from our customers is excluded from reported revenues.

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

Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo general merchandise sales to Lids and Fanatics.

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

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

basis in our condensed consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition.

We do not have gift card or customer loyalty programs.

We do not treat any promotional offers as expenses.

Sales tax collected from our customers is excluded from reported revenues.

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

Service and other revenue

12 unchanged sentences

Evaluation of Goodwill and Other Long-Lived Assets

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

As of January 28, 2023, 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 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.

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.

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.

We completed our annual goodwill impairment test as of the first day of the third quarter of Fiscal 2023.

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, including but not limited to contractual changes, renewals or amendments are made to agreements with our college, university, or K-12 schools, 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 28, 2023, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 92,225 , $ 259,470 , $ 114,947 , and $ 19,686 , respectively, on our condensed consolidated balance sheet.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

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

Although most academic institutions have since reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes.

Enrollment trends have been negatively impacted overall by COVID-19 concerns at physical campuses.

While many athletic conferences resumed their sport activities, other events, such as parent and alumni weekends and prospective student campus tour activities, some may still be curtailed or offer a virtual option.

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

During the 13 weeks ended January 28, 2023, 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 $ 6,008 (both pre-tax and after-tax), comprised of $ 708 , $ 1,697 , $ 3,599 and $ 4 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 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.

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 .

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.

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.

4 unchanged sentences

13 weeks ended 39 weeks ended

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

January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Course Materials Product Sales $ 286,714 $ 262,895 $ 834,190 $ 818,849

12 unchanged sentences

Total Sales $ 447,064 $ 402,798 $ 1,328,020 $ 1,270,569

(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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

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

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

As the logo general merchandise sales are fulfilled by Lids 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 general merchandise sales on a gross basis in the periods prior to the transition.

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

6 unchanged sentences

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

• unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the e-commerce and merchandising contracts for Fanatics and FLC, 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 table presents changes in deferred revenue associated with our contract liabilities:

39 weeks ended

October 29, 2022 October 30, 2021

January 28, 2023 January 29, 2022

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

8 unchanged sentences

$ 57,168 $ 55,591

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

As of January 28, 2023, we expect to recognize $ 52,891 of the deferred revenue balance within the next 12 months.

Segment Reporting

8 unchanged sentences

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

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

including emblematic apparel and gifts.

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.

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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 and 26 weeks ended October 29, 2022 and October 30, 2021

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

Intercompany Eliminations

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

1 unchanged sentence

13 weeks ended 39 weeks ended

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

January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Retail $ 421,259 $ 374,740 $ 1,256,376 $ 1,194,161

21 unchanged sentences

Total Depreciation and Amortization $ 10,618 $ 12,179 $ 33,910 $ 36,755

Operating Income (Loss)

Impairment loss (non-cash) - Retail (b)

$ 6,008 $ 6,411 $ 6,008 $ 6,411

Restructuring and Other Charges (b)

Retail $ 1,452 $ 30 $ 1,452 $ 2,113

2 unchanged sentences

Corporate Services 1,744 16 2,379 954

Total Restructuring and Other Charges $ 5,975 $ 46 $ 6,610 $ 3,067

Operating Loss

Retail $ ( 10,036 ) $ ( 30,845 ) $ ( 14,029 ) $ ( 31,887 )

Wholesale 817 2,767 2,454 7,750

DSS ( 2,787 ) ( 1,669 ) ( 7,027 ) ( 5,286 )

Corporate Services ( 7,322 ) ( 5,188 ) ( 20,281 ) ( 20,414 )

Elimination 1,464 1,800 ( 157 ) 556

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

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

Total Operating Loss $ ( 17,864 ) $ ( 33,135 ) $ ( 39,040 ) $ ( 49,281 )

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(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.

13 weeks ended 39 weeks ended

Reconciliation of segment Operating Loss to Loss Before Income Taxes:

January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Total Operating Loss $ ( 17,864 ) $ ( 33,135 ) $ ( 39,040 ) $ ( 49,281 )

Interest Expense, net 6,918 3,051 15,672 7,809

Loss Before Income Taxes $ ( 24,782 ) $ ( 36,186 ) $ ( 54,712 ) $ ( 57,090 )

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

Summary of Significant Accounting Policies - Merchandise Inventories .

(b) For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022, operating loss includes an impairment loss (non-cash) and restructuring and other charges.

For additional information, see Note 9.

Supplementary Information.

Equity and Earnings Per Share

Share Repurchases

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.

During the 39 weeks ended January 28, 2023, we did not repurchase shares of our Common Stock under the stock repurchase program and as of January 28, 2023, approximately $ 26,669 remains available under the stock repurchase program.

During the 39 weeks ended January 28, 2023, we repurchased 347,808 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 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)

During the 13 weeks ended January 28, 2023 and January 29, 2022, average shares of 4,677,926 and 4,233,063 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 39 weeks ended January 28, 2023 and January 29, 2022, average shares of 4,824,844 and 3,295,417 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) 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:

(shares in thousands) January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Numerator for basic and diluted earnings per share:

Net loss available to common shareholders $ ( 25,049 ) $ ( 36,801 ) $ ( 55,612 ) $ ( 57,901 )

Denominator for basic and diluted earnings per share:

Basic and diluted weighted average shares of Common Stock 52,602 52,003 52,404 51,714

Loss per share of Common Stock:

Basic $ ( 0.48 ) $ ( 0.71 ) $ ( 1.06 ) $ ( 1.12 )

Diluted $ ( 0.48 ) $ ( 0.71 ) $ ( 1.06 ) $ ( 1.12 )

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

Fair Value Measurements

10 unchanged sentences

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

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)

Non-Financial Assets and Liabilities

2 unchanged sentences

During the 13 weeks ended January 28, 2023 and January 29, 2022, 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 $ 6,008 and $ 6,411 (both pre-tax and 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 .

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 28, 2023 13 and 39 weeks ended January 29, 2022

Carrying Value

Prior to Impairment Fair Value Impairment Loss

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

Property and equipment, net $ 708 $ — $ 708 $ 742 $ 3 $ 739

Operating lease right-of-use assets 3,002 1,305 1,697 3,299 1,506 1,793

Intangible assets, net 3,599 — 3,599 3,745 77 3,668

Other noncurrent assets 4 — 4 211 — 211

Total $ 7,313 $ 1,305 $ 6,008 $ 7,997 $ 1,586 $ 6,411

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 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.

As of January 28, 2023, we recorded a liability of $ 1,261 (Level 2 input) which is reflected in accrued liabilities ($ 1,205 ) and other long-term liabilities ($ 56 ) on the condensed consolidated balance sheet.

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

For additional information, see Note 10.

Long-Term Incentive Plan Compensation Expense .

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

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 March 1, 2019 amendment.

We have a credit agreement (the “Credit Agreement”), amended from time to time including on 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 March 1, 2019 amendment.

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

Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs.

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 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.

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

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

From and after July 31, 2022, commitments under the FILO Facility were reduced to $ 0 .

As of January 28, 2023, we were in compliance with all debt covenants under the Credit Agreement.

On March 8, 2023, subsequent to quarter end, we amended our existing Credit Agreement to, among other things, extend the maturity date thereunder by six months to August 29, 2024.

The amendment also reduces the commitments under the Credit Agreement by $20,000 to $380,000.

For additional information, see Note 14.

Subsequent Event.

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 April 30, 2022.

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.

During the 39 weeks ended January 28, 2023, we borrowed $ 512,000 and repaid $ 452,100 under the Credit Agreement, with $ 255,600 of outstanding borrowings as of January 28, 2023, comprised entirely of borrowings under the Credit Facility.

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

As of both January 28, 2023 and January 29, 2022, 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 into an amendment to our existing Credit Agreement, which permitted us to incur the Term Loan Facility (as defined below).

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.

1 unchanged sentence

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 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.

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)

During the 39 weeks ended January 28, 2023, we borrowed $ 30,000 and repaid $ 0 under the Term Loan Credit Agreement, with $ 30,000 of outstanding borrowings as of January 28, 2023.

On March 8, 2023, subsequent to quarter end, we amended the Term Loan Credit Agreement to, among other things, extend the maturity date thereunder by six months to December 7, 2024.

For additional information, see Note 14.

Subsequent Event.

We incurred debt issuance costs totaling $ 2,614 related to the Term Loan Credit Agreement.

5 unchanged sentences

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 Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

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.

13 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 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 39 weeks ended

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

January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Variable lease expense $ 17,242 $ 18,306 $ 57,707 $ 60,746

1 unchanged sentence

Net lease expense $ 55,835 $ 52,144 $ 172,160 $ 159,947

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

The increase in lease expense during the 39 weeks ended January 28, 2023 is primarily due to higher sales for contracts based on a percentage of revenue during the 39 weeks ended January 28, 2023, 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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of January 28, 2023:

January 28, 2023

Remainder of Fiscal 2023 $ 78,142

7 unchanged sentences

Operating lease liabilities at period end $ 304,517

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

Future lease payment obligations related to leases that were entered into, but did not commence as of January 28, 2023, were not material.

The following summarizes additional information related to our operating leases:

October 29, 2022 October 30, 2021

January 28, 2023 January 29, 2022

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

4 unchanged sentences

Supplementary Information

Impairment Loss (non-cash)

During the 13 and 39 weeks ended January 28, 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

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.

For additional information, see Note 2.

Summary of Significant Accounting Policies and Note 6.

Fair Value Measurements .

Restructuring and other charges

During the 13 and 26 weeks ended October 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.

During the 13 and 39 weeks ended January 28, 2023, we recognized restructuring and other charges totaling $ 5,975 and $ 6,610 , respectively, comprised primarily of $ 4,696 in each period for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($ 781 is included in accrued liabilities in the condensed consolidated balance sheet as of January 28, 2023), and $ 1,279 and $ 1,914 , respectively, for costs primarily associated with professional service costs for restructuring and process improvements.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

During the 13 and 39 weeks ended January 29, 2022, we recognized restructuring and other charges totaling $ 46 and $ 3,067 , respectively, comprised primarily of $ 0 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, ($ 202 is included in accrued liabilities in the condensed consolidated balance sheet as of January 29, 2022), $ 46 and $ 1,817 , respectively, for costs primarily associated with professional service costs for restructuring, process improvements, development and integration associated with the F/L Partnership.

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

During the 39 weeks ended January 28, 2023, 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.

20 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

1 unchanged sentence

13 weeks ended 39 weeks ended

2022 October 30,

2021 October 29,

2022 October 30,

2023 January 29,

2022 January 28,

2023 January 29,

Stock-based awards

8 unchanged sentences

Total compensation expense for long-term incentive awards $ 940 $ 2,055 $ 4,718 $ 9,579

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.

Total unrecognized compensation cost related to unvested awards as of January 28, 2023 was $ 9,838 and is expected to be recognized over a weighted-average period of 2.1 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 $ 1,069 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.

Total employee benefit expense for these plans was $ 1,151 and $ 1,155 during the 13 weeks ended January 28, 2023 and January 29, 2022, respectively.

Total employee benefit expense for these plans was $ 3,545 and $ 2,203 during the 39 weeks ended January 28, 2023 and January 29, 2022, respectively.

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

The matching contributions were reinstated effective July 25, 2021.

We recorded an income tax benefit of $( 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 )%.

We recorded an income tax expense of $ 267 on pre-tax loss of $( 24,782 ) during the 13 weeks ended January 28, 2023, which represented an effective income tax rate of ( 1.1 )% and an income tax expense of $ 615 on pre-tax loss of $( 36,186 ) during the 13 weeks ended January 29, 20221, which represented an effective income tax rate of ( 1.7 )%.

We recorded an income tax expense of $ 900 on pre-tax loss of $( 54,712 ) during the 39 weeks ended January 28, 2023, which represented an effective income tax rate of ( 1.6 )% and an income tax expense of $ 811 on pre-tax loss of $( 57,090 ) during the 39 weeks ended January 29, 2022, which represented an effective income tax rate of ( 1.4 )%.

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

As of October 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.

As of January 28, 2023, 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 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

We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, personal injuries and other matters.

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.

The effective tax rate for the 13 weeks ended January 28, 2023 is higher as compared to the prior year comparable period due to state tax adjustments recorded in the prior year.

The effective tax rate for the 39 weeks ended January 28, 2023 is lower as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the current year.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

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

Legal Proceedings

Subsequent Event

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.

Credit Agreement Amendment

On March 8, 2023, subsequent to quarter end, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement by six months to August 29, 2024, (ii) reduce the commitments under the Credit Agreement by $20,000 to $380,000, (iii) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.375% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.375%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (iv) reduce advance rates with respect to the borrowing base (x) by 500 basis points upon the achievement of certain liquidity events, which may include a sale of equity interests or of assets (a “Specified Event”), or, if such a Specified Event shall not have occurred, on May 31, 2023 and (y) by an additional 500 basis points on September 29, 2023, (v) amend certain negative covenants and add certain additional covenants, (vi) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) to be at all times greater than the greater of 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and $32,500 and (vii) require repayment of the loans under the Credit Agreement upon a Specified Event.

In addition, the amendment requires the achievement of a Special Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms of the Credit Agreement).

We paid a fee of 0.25% of the outstanding principal amount of the commitments under the Credit Agreement on the amendment closing date and we will pay an additional fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement on September 29, 2023.

Term Loan Agreement Amendment

On March 8, 2023, subsequent to quarter end, we amended the Term Loan Credit Agreement to (i) extend the maturity date of the Term Loan Credit Agreement by six months to December 7, 2024, (ii) permit the application of certain proceeds to the repayment of the loans under Credit Agreement and (iii) amend certain negative covenants and add certain additional covenants to conform to the Credit Agreement.

In addition, the amendment requires the achievement of a Specified Event (as described above) by no later than May 31, 2023 (as such date may be extended under the Credit Agreement, but no later than August 31, 2023 without consent from lenders under the Term Loan Credit Agreement).

We paid a fee of $50 on the amendment closing date to the lenders under the Term Loan Credit Agreement.

For additional information related to the Credit Agreement amendment and the Term Loan Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.

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