What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-07-31 compared with 2022-06-29 · 556 added, 489 removed, 884 unchanged (54% of the section changed)

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Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on the consolidated financial statements of Barnes & Noble Education, Inc.

for the years ended April 30, 2022, May 1, 2021 (Restated), and May 2, 2020 (PCAOB ID 42 )

Consolidated Statements of Operations for the years ended April 30, 2022, May 1, 2021 (Restated), and May 2, 2020

Consolidated Balance Sheets as of April 30, 2022 and May 1, 2021 (Restated)

Consolidated Statements of Cash Flows for the years ended April 30, 2022, May 1, 2021 (Restated), and May 2, 2020

Consolidated Statements of Equity for the years ended April 30, 2022, May 1, 2021 (Restated), and May 2, 2020

for the years ended April 29, 2023, April 30, 2022, and May 1, 2021 (PCAOB ID 42 )

Consolidated Statements of Operations for the years ended April 29, 2023, April 30, 2022, and May 1, 2021

Consolidated Balance Sheets as of April 29, 2023 and April 30, 2022

Consolidated Statements of Cash Flows for the years ended April 29, 2023, April 30, 2022, and May 1, 2021

Consolidated Statements of Equity for the years ended April 29, 2023, April 30, 2022, and May 1, 2021

Notes to Consolidated Financial Statements

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Fair Value Measurements

Credit Facility

Supplementary Information

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Commitments and Contingencies

Subsequent Event

Selected Quarterly Financial Information (Unaudited)

Subsequent Events

Financial Statement Schedule

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We have audited the accompanying consolidated balance sheets of Barnes & Noble Education, Inc.

and subsidiaries (the Company) as of April 30, 2022 and May 1, 2021, the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended April 30, 2022 and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at April 30, 2022 and May 1, 2021, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2022, in conformity with U.S.

and subsidiaries (the Company) as of April 29, 2023 and April 30, 2022, the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended April 29, 2023 and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at April 29, 2023 and April 30, 2022, and the results of its operations and its cash flows for each of the three years in the period ended April 29, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated June 29, 2022 expressed an adverse opinion thereon.

Restatement of fiscal 2021 Financial Statements

As discussed in Note 2, Restatement - Fiscal 2021 Consolidated Financial Statements, the fiscal 2021 consolidated financial statements have been restated to correct a misstatement.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of April 29, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated July 31, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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In particular, the reserve calculations are sensitive to certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand.

Index to Form 10-K Index to FS

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's inventory reserve process, including management’s review controls over the determination of significant assumptions and the data underlying the calculations of the inventory reserves.

Index to Form 10-K Index to FS

Our procedures included, among others, evaluating the significant assumptions, identified above, and testing the accuracy and completeness of the underlying data used in management’s inventory reserve calculation.

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Significant assumptions used to determine the fair values of certain operating right-of-use assets included the current market rent and discount rate.

These assumptions are subjective in nature and are affected by expectations about future market or economic conditions (including the effects of the global pandemic).

These assumptions are subjective in nature and are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the store long-lived assets impairment process, including controls over the determination of the undiscounted projected cash flows of the stores with indicators of impairment, the fair values of the stores with carrying values that were not recoverable and the fair values of operating right-of-use assets within those stores.

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and, we obtained an understanding of the business initiatives supporting the assumptions used to estimate the future cash flows through inquiries of management and inspection of internal and external communications.

We involved our internal valuation specialists to assist in evaluating the calculation of the fair values of certain operating lease right-of-use assets, which included assessing the reasonableness of the methodology utilized to determine market rental rates and evaluating the applied discount rate.

/s/ Ernst & Young LLP

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Iselin, New Jersey

June 29, 2022

July 31, 2023

Index to Form 10-K Index to FS

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52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Product sales and other $ 1,406,655 $ 1,362,380 $ 1,272,366

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Interest expense, net 22,683 10,096 8,087

Loss before income taxes ( 77,512 ) ( 184,981 ) ( 50,228 )

Income tax benefit ( 8,655 ) ( 45,171 ) ( 11,978 )

Loss from continuing operations before income taxes ( 89,129 ) ( 70,711 ) ( 176,849 )

Income tax expense (benefit) 1,011 ( 9,152 ) ( 43,280 )

Loss from continuing operations, net of tax ( 90,140 ) ( 61,559 ) ( 133,569 )

Loss from discontinued operations, net of tax of $ 398 , 497 , and $( 1,891 ), respectively

( 11,722 ) ( 7,298 ) ( 6,241 )

Net loss $ ( 101,862 ) $ ( 68,857 ) $ ( 139,810 )

Loss per share of Common Stock

Basic $ ( 1.33 ) $ ( 2.81 ) $ ( 0.80 )

Diluted $ ( 1.33 ) $ ( 2.81 ) $ ( 0.80 )

Weighted average shares of Common Stock outstanding:

Basic 51,797 49,669 48,013

Diluted 51,797 49,669 48,013

Basic and Diluted

Continuing operations $ ( 1.72 ) $ ( 1.19 ) $ ( 2.69 )

Discontinued operations $ ( 0.22 ) $ ( 0.14 ) $ ( 0.12 )

Total Basic and Diluted Earnings per share $ ( 1.94 ) $ ( 1.33 ) $ ( 2.81 )

Weighted average shares of common stock outstanding - Basic and Diluted 52,454 51,797 49,669

See accompanying notes to consolidated financial statements.

(a) We identified certain out of period adjustments related primarily to Income tax benefit, as well as Restructuring and other charges, for the 52 weeks ended May 1, 2021.

Refer to Note 2.

Summary of Significant Accounting Policies for further information.

Index to Form 10-K Index to FS

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(In thousands, except per share data)

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Current assets:

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Prepaid expenses and other current assets 49,512 59,899

Assets held for sale, current 27,430 3,544

Total current assets 537,001 531,705

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Intangible assets, net 110,632 126,993

Goodwill 4,700 4,700

Deferred tax assets, net 132 —

Other noncurrent assets 17,889 24,547

Assets held for sale, noncurrent — 28,140

Total assets $ 980,779 $ 1,071,553

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Short-term borrowings — 40,000

Liabilities held for sale 8,423 7,102

Total current liabilities 462,085 415,402

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See accompanying notes to consolidated financial statements.

(a) We identified certain out of period adjustments related to Deferred tax assets, net and Accrued liabilities as of May 1, 2021.

Refer to Note 2.

Summary of Significant Accounting Policies for further information.

Index to Form 10-K Index to FS

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52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Cash flows from operating activities:

Net loss $ ( 101,862 ) $ ( 68,857 ) $ ( 139,810 )

Adjustments to reconcile net loss to net cash flows from operating activities:

Loss from discontinued operations, net of tax ( 11,722 ) ( 7,298 ) ( 6,241 )

Loss from continuing operations, net of tax ( 90,140 ) ( 61,559 ) ( 133,569 )

Adjustments to reconcile net loss from continuing operations to net cash flows from operating activities from continuing operations:

Depreciation and amortization expense 42,163 42,124 45,204

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Changes in other operating assets and liabilities, net:

Net cash flows provided by (used in) operating activities 2,060 32,895 ( 8,676 )

Receivables, net 43,489 ( 15,532 ) ( 30,244 )

Merchandise inventories ( 29,125 ) ( 13,176 ) 132,867

Textbook rental inventories ( 737 ) ( 920 ) 12,018

Prepaid expenses and other current assets 19,610 2,100 ( 35,256 )

Accounts payable and accrued liabilities 82,343 45,943 ( 10,411 )

Changes in other operating assets and liabilities, net 115,580 18,415 68,974

Net cash flows provided by (used in) operating activities from continuing operations 90,513 ( 16,195 ) 27,049

Net cash flows provided by operating activities from discontinued operations 1,157 17,356 5,847

Net cash flows provided by operating activities $ 91,670 $ 1,161 $ 32,896

Cash flows from investing activities:

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Changes in other noncurrent assets and other 591 872 335

Net cash flows used in investing activities from continuing operations ( 24,501 ) ( 32,735 ) ( 27,227 )

Net cash flows used in investing activities from discontinued operations ( 6,542 ) ( 9,926 ) ( 9,661 )

Net cash flows used in investing activities $ ( 31,043 ) $ ( 42,661 ) $ ( 36,888 )

Cash flows from financing activities:

Proceeds from borrowings under Credit Agreement 632,220 722,600 600,900

Repayments of borrowings under Credit Agreement ( 584,120 ) ( 719,700 ) ( 559,700 )

Proceeds from borrowings $ 590,303 $ 632,220 $ 722,600

Repayments of borrowings ( 631,849 ) ( 584,120 ) ( 719,700 )

Payment of deferred financing costs ( 7,265 ) ( 265 ) ( 1,076 )

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Proceeds from the exercise of stock options, net — 256 —

Net cash flows provided by (used in) financing activities 45,721 11,799 39,935

Net increase (decrease) in cash, cash equivalents, and restricted cash 5,120 7,806 ( 5,760 )

Net cash flows (used in) provided by financing activities from continuing operations ( 49,675 ) 45,721 11,799

Net cash flows provided by financing activities from discontinued operations — — —

Net cash flows (used in) provided by financing activities $ ( 49,675 ) $ 45,721 $ 11,799

Net increase in cash, cash equivalents, and restricted cash $ 10,952 $ 4,221 $ 7,807

Index to Form 10-K Index to FS

Cash, cash equivalents, and restricted cash at beginning of period 21,036 16,815 9,008

Cash, cash equivalents, and restricted cash at end of period 31,988 21,036 16,815

Changes in other operating assets and liabilities, net:

Receivables, net $ ( 15,967 ) $ ( 30,221 ) $ 7,320

Merchandise inventories ( 13,176 ) 132,867 ( 8,617 )

Textbook rental inventories ( 920 ) 12,018 6,291

Prepaid expenses and other current assets 3,112 ( 37,492 ) ( 4,399 )

Accounts payable and accrued liabilities 46,974 ( 8,011 ) ( 59,095 )

Changes in other operating assets and liabilities, net $ 20,023 $ 69,161 $ ( 58,500 )

Cash and cash equivalents of discontinued operations at end of period ( 1,057 ) ( 696 ) ( 645 )

Cash, cash equivalents, and restricted cash of continuing operations at end of period $ 30,931 $ 20,340 $ 16,170

Supplemental cash flow information:

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See accompanying notes to consolidated financial statements.

(a) We identified certain out of period adjustments related to Deferred tax assets and Accrued liabilities as of May 1, 2021.

Refer to Note 2.

Summary of Significant Accounting Policies for further information.

Index to Form 10-K Index to FS

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Shares Amount Capital Deficit Shares Amount Equity

Balance at April 27, 2019 51,030 $ 510 $ 726,331 $ ( 244,577 ) 3,467 $ ( 31,636 ) $ 450,628

Balance at May 2, 2020 52,140 $ 521 $ 732,958 $ ( 282,827 ) 3,842 $ ( 32,901 ) $ 417,751

Stock-based compensation expense

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1,187 12 ( 12 ) —

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

Shares repurchased for tax withholdings for vested stock awards

414 ( 894 ) ( 894 )

( 38,250 ) ( 38,250 )

Net loss ( 139,810 ) ( 139,810 )

Balance at May 1, 2021 53,327 $ 533 $ 734,257 $ ( 422,637 ) 1,948 $ ( 19,142 ) $ 293,011

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Vested equity awards 829 8 ( 8 ) —

1,187 12 ( 12 ) —

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

Shares repurchased for tax withholdings for vested stock awards

240 ( 2,370 ) ( 2,370 )

Net loss - Restated (a)

( 139,810 ) ( 139,810 )

Balance at May 1, 2021 - Restated (a)

Issuance of common stock upon exercise of stock options 78 1 256 257

( 68,857 ) ( 68,857 )

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

Stock-based compensation expense

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348 ( 864 ) ( 864 )

Issuance of common stock upon exercise of stock options 78 1 256 257

( 101,862 ) ( 101,862 )

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See accompanying notes to consolidated financial statements.

(a) We identified certain out of period adjustments related to related primarily to Income tax benefit, as well as Restructuring and other charges, for the 52 weeks ended May 1, 2021.

Refer to Note 2.

Summary of Significant Accounting Policies for further information.

Index to Form 10-K Index to FS

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

Unless the context otherwise indicates, references in these Notes to the accompanying consolidated financial statements to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc., a Delaware corporation.

References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC.

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We operate 1,366 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

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

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

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

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 ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty requested course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately.

The BNC First Day discounted price is offered as a course fee or included in tuition.

During Fiscal 2023, BNC First Day total revenue increased 48% from the prior year period.

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

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

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

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

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

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

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

We have three reportable segments:

Retail, Wholesale and DSS.

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

We expect gross general merchandise sales to continue 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 F/L Partnership.

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.

During the fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment.

On May 31, 2023, subsequent to the end of Fiscal 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20,000, net of certain transaction fees, severance costs, escrow, and other considerations.

During the first quarter of Fiscal 2024, we expect to record a Gain on Sale of Business in the range of $2,500 to $4,500.

Net cash proceeds from the sale was used for debt repayment and provided additional funds for working capital needs under our Credit Facility.

We have two reportable segments:

Retail and Wholesale.

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

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Segment Reporting.

First Day Inclusive Access Programs

BNC First Day Equitable and Inclusive Access Programs

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.

• 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 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

We offer our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty requested course materials on or before the

Index to Form 10-K Index to FS

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

that rely on individual student marketing and sales.

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

Partnership with Fanatics and FLC

In December 2020, we entered into the FLC Partnership.

first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately.

The BNC First Day discounted price is offered as a course fee or included in tuition.

• First Day Complete is adopted by an institution and includes all undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials.

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

• First Day is adopted by a faculty member for a single course, and students receive primarily digital course materials through their school's learning management system ("LMS").

Offering course materials through our equitable and inclusive 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 course material 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.

These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which have been observed 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 in Fiscal 2024 and the majority of our schools by Fiscal 2025, with continued relative adoption of this model thereafter.

For the 2023 Spring Term, 116 campus stores adopted our First Day Complete course materials delivery program, 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 52 weeks ended April 29, 2023, First Day Complete sales increased by 88% as compared to 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.

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

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

In December 2020, Fanatics, Inc.

and Lids Holdings, Inc.

jointly made a strategic equity investment in BNED.

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

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

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

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies and Note 5.

Equity and Earnings Per Share .

COVID-19 Business Impact

Our business has experienced an unprecedented and significant negative impact as a result of COVID-19 related campus store closures.

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

We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including 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, as well as hosted traditional on campus sporting activities, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

Please see our Part II - Item 7.

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 Pandemic Business Impact

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

The impact of COVID-19 store closings during Fiscal 2021 to Fiscal 2022 resulted in the loss of cash flow and increased borrowings that we would not otherwise have expected to incur.

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 lingering impact of the COVID-19 pandemic on enrollments, primarily at community colleges and international student enrollment, campus activities, university budgets, athletics, the continuation of remote and hybrid class offerings, and other areas that directly affect our business operations .

Refer to Part II - Item 7.

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

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation and Consolidation

The results of operations reflected in our consolidated financial statements are presented on a consolidated basis.

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

Our consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).

Net income (loss) is equal to comprehensive income (loss) on our consolidated statement of operations.

In the opinion of the Company’s management, the accompanying 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.

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

The fiscal year periods for each of the last three fiscal years consisted of the 52 weeks ended April 30, 2022 (“Fiscal 2022”), 52 weeks ended May 1, 2021 (“Fiscal 2021”), and 53 weeks ended May 2, 2020 (“Fiscal 2020”).

Our business is highly seasonal.

Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates.

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

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

Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as

The fiscal year periods for each of the last three fiscal years consisted of the 52 weeks ended April 29, 2023 (“Fiscal 2023”), 52 weeks ended April 30, 2022 (“Fiscal 2022”), and 52 weeks ended May 1, 2021 (“Fiscal 2021”).

Liquidity and Going Concern

The accompanying consolidated financial statements are prepared in accordance with U.S.

GAAP applicable to a going concern.

This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.

Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”) , management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these Consolidated Financial Statements are issued.

In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date of these consolidated financial statements if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

Evaluation in conjunction with the issuance of the April 29, 2023 Consolidated Financial Statements

Our primary sources of cash are net cash flows from operating activities, funds available under our Credit Agreement, Term Loan Agreement, and short-term vendor financing.

Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming Fall and Spring semesters, respectively.

As of April 29, 2023, we had $ 30,931 of cash on hand, including $ 16,712 of restricted cash related to segregated funds for commission due to Fanatics for logo merchandise sales as per the merchandising partnership agreement.

We incurred a Net Loss from Continuing Operations of $( 90,140 ), $( 61,559 ), and $( 133,569 ), for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively, and Cash Flow Provided By (Used In) Operating Activities from Continuing Operations of $ 90,513 , $( 16,195 ), and $ 27,049 , respectively.

The tightening of our available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility) of $ 40,000 , has had a significant impact on our liquidity during the year ended April 29, 2023, including our ability to make timely vendor payments and school commission payments resulting in a positive cash flow from operations offset by a use of cash for financing activities.

Our business was significantly negatively impacted by the COVID-19 pandemic during the years ended April 30, 2022 and May 1, 2021, as many schools adjusted their learning models and on-campus activities.

Although most academic institutions have since reopened after the COVID-19 pandemic, the lingering impacts of the pandemic have resulted in changes in customer behaviors, lower enrollments, and an evolving educational landscape which continued to impact our financial results during the year ended April 29, 2023.

Some institutions are still providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes.

The impact of COVID-19 store closings, as well as lower earnings during the year ended April 29, 2023, resulted in the loss of cash flows and increased borrowings that we would not otherwise have expected to incur.

Our losses and projected cash needs, combined with our current liquidity level, initially raised substantial doubt about our ability to continue as a going concern.

As discussed below, Management’s plan to improve the Company’s liquidity and

Index to Form 10-K Index to FS

3 unchanged sentences

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

MBS sells textbooks and other course materials for retail distribution.

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

As discussed in Part II - Item 8.

successfully alleviate substantial doubt includes (1) raising additional liquidity an d (2) taking additional operational restructuring actions.

Debt amendments

On July 28, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement to December 28, 2024, (ii) reduce advance rates with respect to the borrowing base by 1000 basis points on September 2, 2024 (in lieu of the reductions previously contemplated for September 2023), (iii) subject to the conditions set forth in such amendment, add a CARES Act tax refund claim to the borrowing base, from April 1, 2024 through July 31, 2024, (iv) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and (y) (A) $32,500 minus, subject to the conditions set forth in such amendment, (B) (a) $7,500 for the period of April 1, 2024 through and including April 30, 2024, (b) $2,500 for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment.

The amendment also requires that we appoint a Chief Restructuring Officer and that, by August 11, 2023, we (i) appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and (ii) appoint a committee of the board of directors of the Company to consist of three board members (two of whom will be the new independent directors).

The committee’s responsibilities will include, among other things, to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement).

There can be no guarantee or assurances that any such transaction or transactions be consummated.

We must pay (i) a fee of 0.50% of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

On July 28, 2023, we amended our Term Loan to (i) extend the maturity date of the Term Loan Agreement to April 7, 2025, (ii) allow for interest to be paid in kind until September 2, 2024, (iii) amend the 1.50% anniversary fee to recur on June 7 of each year that the Term Loan Agreement remains outstanding, with 2024 fee deferred to the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative covenants and affirmative and add certain additional covenants.

We must pay a fee of $50,000 to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 7.

Organization , our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of the COVID-19 pandemic on our operations affects the comparability of our results of operations and cash flows.

Restatement - Fiscal 2021 Consolidated Financial Statements

We identified certain out of period adjustments related primarily to the recognition of Income tax benefit related to the recording of an additional deferred tax valuation allowance, and Restructuring and other charges related to severance costs, for the 52 weeks ended May 1, 2021, the 13 weeks ended July 31, 2021, the 26 weeks ended October 30, 2021 and the 39 weeks ended January 29, 2022.

The adjustments did not impact Net cash flows provided by operating activities, Net cash flows used in investing activities, or Net cash flows used in financing activities for the periods noted.

The impact of the adjustments identified are disclosed as follows:

Fiscal 2021 52 weeks ended May 1, 2021

As Reported Adjustment Restated

Statement of Operations

Restructuring and other charges $ 9,960 $ 718 $ 10,678

Operating loss $ ( 176,176 ) $ ( 718 ) $ ( 176,894 )

Loss before income taxes $ ( 184,263 ) $ ( 718 ) $ ( 184,981 )

Income tax benefit $ ( 52,476 ) $ 7,305 $ ( 45,171 )

Net loss $ ( 131,787 ) $ ( 8,023 ) $ ( 139,810 )

Basic EPS $ ( 2.65 ) $ ( 0.16 ) $ ( 2.81 )

Diluted EPS $ ( 2.65 ) $ ( 0.16 ) $ ( 2.81 )

As of May 1, 2021

Balance Sheet As Reported Adjustment Restated

Deferred tax assets, net $ 23,248 $ ( 7,305 ) $ 15,943

Total assets $ 1,038,418 $ ( 7,305 ) $ 1,031,113

Accrued liabilities $ 92,871 $ 718 $ 93,589

Total current liabilities $ 372,962 $ 718 $ 373,680

Total liabilities $ 737,384 $ 718 $ 738,102

Accumulated deficit $ ( 414,614 ) $ ( 8,023 ) $ ( 422,637 )

Total stockholders' equity $ 301,034 $ ( 8,023 ) $ 293,011

Total liabilities and stockholders' equity $ 1,038,418 $ ( 7,305 ) $ 1,031,113

Restatement - Fiscal 2022 Interim Financial Statements (Unaudited)

Fiscal 2022 13 weeks ended July 31, 2021 26 weeks ended October 30, 2021 39 weeks ended January 29, 2022

Reported Adjustment Restated As

Reported Adjustment Restated

Statement of Operations

Restructuring and other charges $ 2,623 $ ( 718 ) $ 1,905 $ 3,739 $ ( 718 ) $ 3,021 $ 3,785 $ ( 718 ) $ 3,067

Operating loss $ ( 41,453 ) $ 718 $ ( 40,735 ) $ ( 16,864 ) $ 718 $ ( 16,146 ) $ ( 49,999 ) $ 718 $ ( 49,281 )

Loss before income taxes $ ( 43,947 ) $ 718 $ ( 43,229 ) $ ( 21,622 ) $ 718 $ ( 20,904 ) $ ( 57,808 ) $ 718 $ ( 57,090 )

Net loss $ ( 44,346 ) $ 718 $ ( 43,628 ) $ ( 21,818 ) $ 718 $ ( 21,100 ) $ ( 58,619 ) $ 718 $ ( 57,901 )

Basic EPS $ ( 0.86 ) $ 0.01 $ ( 0.85 ) $ ( 0.42 ) $ 0.01 $ ( 0.41 ) $ ( 1.13 ) $ 0.01 $ ( 1.12 )

Diluted EPS $ ( 0.86 ) $ 0.01 $ ( 0.85 ) $ ( 0.42 ) $ 0.01 $ ( 0.41 ) $ ( 1.13 ) $ 0.01 $ ( 1.12 )

Debt and Note 17.

Subsequent Events.

Operational restructuring plans

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

We have taken steps to significantly reduce our workforce during non-rush seasonal sales periods, eliminated duplicate administrative headcounts at all levels, implemented improved system development processes to reduce maintenance costs.

reduced capital expenditures, and evaluated operating contractual obligations for cost savings.

We have achieved meaningful cost savings from this program of approximately $17,000 d uring the year ended April 29, 2023.

These initiatives are expected to provide annualized savings of $30,000 to $35,000 in Fiscal 2024.

Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25,000.

Management believes that these plans are within its control and probable of being implemented on a timely basis.

Management believes that the expected impact on our liquidity and cash flows resulting from the Debt amendments and the operational initiatives outlined above are sufficient to enable the Company to meet its obligations for at least twelve months from the issuance date of these consolidated financial statements and alleviate the conditions that initially raised substantial doubt about the Company's ability to continue as a going concern.

See Part I - Risk Factors - We are dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for liquidity needs.

Our business is highly seasonal.

Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates.

These shifts in timing may affect the comparability of our

Index to Form 10-K Index to FS

3 unchanged sentences

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

As of July 31, 2021 As of October 30, 2021 As of January 29, 2022

Balance Sheet As

Reported Adjustment Restated As

Reported Adjustment Restated

Deferred tax assets, net $ 23,248 $ ( 7,305 ) $ 15,943 $ 23,248 $ ( 7,305 ) $ 15,943 $ 22,918 $ ( 7,305 ) $ 15,613

Total assets $ 1,251,315 $ ( 7,305 ) $ 1,244,010 $ 1,259,515 $ ( 7,305 ) $ 1,252,210 $ 1,274,035 $ ( 7,305 ) $ 1,266,730

Accumulated deficit $ ( 458,960 ) $ ( 7,305 ) $ ( 466,265 ) $ ( 436,432 ) $ ( 7,305 ) $ ( 443,737 ) $ ( 473,233 ) $ ( 7,305 ) $ ( 480,538 )

Total stockholders' equity $ 256,595 $ ( 7,305 ) $ 249,290 $ 279,494 $ ( 7,305 ) $ 272,189 $ 244,765 $ ( 7,305 ) $ 237,460

Total liabilities and stockholders' equity $ 1,251,315 $ ( 7,305 ) $ 1,244,010 $ 1,259,515 $ ( 7,305 ) $ 1,252,210 $ 1,274,035 $ ( 7,305 ) $ 1,266,730

Consolidation

The results of operations reflected in our consolidated financial statements are presented on a consolidated basis.

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

results across periods.

Our retail business is highly seasonal, with the major portion of sales and operating profit realized during the second and third fiscal quarters, when college students generally purchase and rent textbooks for the upcoming semesters.

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

See Revenue Recognition and Deferred Revenue discussion below.

Use of Estimates

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Actual results could differ from those estimates.

Discontinued Operations

During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment.

Certain assets and liabilities associated with the DSS Segment are presented in our consolidated balance sheets as "Assets Held for Sale" and "Liabilities Held for Sale".

The results of operations related to the DSS Segment are included in the consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our consolidated statements of cash flows.

All corresponding prior year periods presented in our financial statements and related information in the accompanying notes have been reclassified to reflect the Asset Held for Sale and Discontinued Operations presentation.

During the first quarter of Fiscal 2024, we expect to record a Gain on Sale of Business in the range of $2,500 to $4,500.

Net cash proceeds from the sale was used for debt repayment and provided additional funds for working capital needs under our Credit Facility.

The following table summarizes the operating results of the discontinued operations for the periods indicated:

52 weeks ended

Dollars in thousands April 29, 2023 April 30, 2022 May 1, 2021

Total sales $ 35,353 $ 35,666 $ 27,374

Cost of sales (a)

7,156 5,738 5,056

Gross profit (a)

28,197 29,928 22,318

Selling and administrative expenses 34,137 29,472 22,116

Depreciation and amortization 3,155 7,257 7,763

Restructuring costs 1,848 — 571

Transaction costs 381 — —

Operating loss ( 11,324 ) ( 6,801 ) ( 8,132 )

Income tax expense 398 497 ( 1,891 )

Loss from discontinued operations, net of tax $ ( 11,722 ) $ ( 7,298 ) $ ( 6,241 )

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $ 6,594 , $ 5,068 , and $ 4,289 for the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

The following table summarizes the assets and liabilities of the Assets Held for Sale included in the consolidated balance sheets for the periods indicated:

April 29, 2023 April 30, 2022

Cash and cash equivalents $ 1,057 $ 696

Receivables, net 480 1,038

Prepaid expenses and other current assets 901 1,810

Property and equipment, net 19,523 20,488

Intangible assets, net 402 2,631

Goodwill 4,700 4,700

Deferred tax assets, net 130 —

Other noncurrent assets 237 321

Assets held for sale $ 27,430 $ 31,684

Accounts payable $ 211 $ 173

Accrued liabilities 8,212 6,847

Other long-term liabilities — 82

Liabilities held for sale $ 8,423 $ 7,102

Cash and Cash Equivalents

We consider all short-term, highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash

As of April 30, 2022, we had restricted cash of $ 11,545 , comprised of $ 10,649 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement and $ 897 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 May 1, 2021, we had restricted cash of $ 8,790 , comprised of $ 7,893 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the merchandising partnership agreement and $ 897 in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

As of April 29, 2023, we had restricted cash of $ 16,712 , comprised of $ 15,790 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids Partnership's merchandising agreement and $ 922 in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

As of April 30, 2022, we had restricted cash of $ 11,545 , comprised of $ 10,649 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids Partnership's merchandising agreement and $ 897 in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Accounts Receivable

Receivables represent customer, private and public institutional and government billings (colleges, universities and other financial aid providers), credit/debit card receivables, advances for book buybacks, advertising and other receivables due within one year.

The increase in trade accounts receivable is primarily due to the growth of our of First Day inclusive access offerings, where cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

The increase in other receivables is primarily due to vendor reimbursements.

Components of accounts receivables are as follows:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Trade accounts $ 71,990 $ 102,358

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Total receivables, net $ 92,512 $ 136,001

Accounts receivable are presented on our consolidated balance sheets net of allowances.

An allowance for doubtful accounts is determined through an analysis of the aging of accounts receivable and assessments of collectability based on

Index to Form 10-K Index to FS

3 unchanged sentences

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

Accounts receivable are presented on our consolidated balance sheets net of allowances.

An allowance for doubtful accounts is determined through an analysis of the aging of accounts receivable and assessments of collectability based on historical trends, the financial condition of our customers and an evaluation of economic conditions.

historical trends, the financial condition of our customers and an evaluation of economic conditions.

We write-off uncollectible trade receivables once collection efforts have been exhausted and record bad debt expenses related to textbook rentals that are not returned and we are unable to successfully charge the customer.

Allowance for doubtful accounts were $ 2,243 , and $ 3,594 as of April 30, 2022 and May 1, 2021, respectively.

Allowance for doubtful accounts were $ 1,156 , and $ 2,243 as of April 29, 2023 and April 30, 2022, respectively.

Merchandise Inventories

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Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand.

Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment.

Our textbook inventories, for Retail and Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

Cost is determined primarily by the retail inventory method for our Retail segment.

Our textbook and trade book inventories, for Retail and Wholesale, are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

There were no LIFO adjustments in Fiscal 2023, Fiscal 2022 and Fiscal 2021.

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For our Wholesale Segment, the four largest suppliers, excluding textbooks purchased from students at our Retail Segment's bookstores, accounted for approximately 25 % of merchandise purchases during the 52 weeks ended April 29, 2023.

As contemplated by the merchandising partnership 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 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 partnership agreement, we sold our logo and emblematic 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 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 consolidated statement of operations for the Retail Segment.

For additional information, see Part II - Item 8.

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Implementation costs are included in prepaid expenses and other assets in the consolidated balance sheets and amortized to selling and administrative expense in the consolidated statement of operations.

Implementation costs incurred in cloud computing arrangements reflected in prepaid and other assets in the consolidated

Implementation costs incurred in cloud computing arrangements reflected in prepaid and other assets in the consolidated balance sheets were $ 9,359 and $ 13,294 as of April 29, 2023 and April 30, 2022, respectively.

We had $ 6,460 , $ 3,179 , and $ 283 of amortization of implementation costs in selling and administrative expense in the consolidated statement of operations, for the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Index to Form 10-K Index to FS

3 unchanged sentences

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

balance sheets were $ 13,294 and $ 10,516 as of April 30, 2022 and May 1, 2021, respectively.

We had $ 3,179 , $ 283 , and $ 96 of amortization of implementation costs in selling and administrative expense in the consolidated statement of operations, for the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020, respectively.

Property and Equipment

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Maintenance and repairs are expensed as incurred, however major maintenance and remodeling costs are capitalized if they extend the useful life of the asset.

We had $ 31,785 , $ 35,024 , and $ 42,550 , of depreciation expense in the consolidated statement of operations for the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020, respectively.

Content development costs are primarily related to bartleby.com textbook solutions which was launched in Fiscal 2019.

We had $ 29,401 , $ 30,132 , and $ 33,198 , of depreciation expense in the consolidated statement of operations for the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Content development costs are primarily related to development of courseware.

Content amortization is computed using the straight-line method over estimated useful lives.

Amortization of content development costs is recorded to cost of goods sold.

We had $ 5,454 , $ 5,034 , and $ 4,082 , of content amortization expense in the consolidated statement of operations for the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020, respectively.

We had $ 26 , $ 386 , and $ 745 , of content amortization expense in the consolidated statement of operations for the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Components of property and equipment are as follows:

Useful Life April 30, 2022 May 1, 2021

Useful Life April 29, 2023 April 30, 2022

Property and equipment:

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66,201 64,137

Content development costs 3 - 5

34,867 25,526

Content development costs (c)

Construction in progress 4,644 3,710

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Purchased software is generally amortized over a period of between 2 - 5 years.

Intangible Assets

Amortizable intangible assets as of April 30, 2022 and May 1, 2021 are as follows:

Amortizable intangible assets as of April 29, 2023 and April 30, 2022 are as follows:

As of April 29, 2023

Amortizable intangible assets Remaining

Amortizable intangible assets Estimated Useful Life Gross

Amount Accumulated

5 unchanged sentences

$ 245,617 $ ( 134,985 ) $ 110,632

$ 291,165 $ ( 161,541 ) $ 129,624

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

As of May 1, 2021

Amortizable intangible assets Remaining

As of April 30, 2022

Amortizable intangible assets Estimated Useful Life Gross

Amount Accumulated

2 unchanged sentences

$ 251,728 $ ( 126,429 ) $ 125,299

Content 1 - 2

1,500 ( 1,500 ) —

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$ 257,390 $ ( 130,397 ) $ 126,993

$ 300,998 $ ( 150,094 ) $ 150,904

(a) Other consists of recognized intangibles for non-compete agreements, trade names, and favorable leasehold interests.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

All amortizable intangible assets are being amortized over their useful life on a straight-line basis.

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For the 52 weeks ended April 29, 2023 $ 12,761

For the 52 weeks ended May 1, 2021 $ 17,943

For the 52 weeks ended April 30, 2022 $ 11,992

For the 52 weeks ended May 1, 2021 $ 12,006

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2027 $ 10,286

2027 $ 10,790

After 2028 $ 59,320

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Summary of Significant Accounting Policies .

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

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

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As of April 29, 2023, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 68,153 , $ 246,972 , $ 110,632 , and $ 17,889 , respectively, on our consolidated balance sheet.

As of May 1, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 89,172 , $ 240,456 , $ 150,904 , and $ 29,105 , respectively, on our consolidated balance sheet.

As of April 30, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 73,584 , $ 286,584 , $ 126,993 , and $ 24,547 , respectively, on our consolidated balance sheet.

These amortizable intangible assets relate primarily to our customer and bookstore relationships with our colleges and university clients, and technology acquired.

For additional information related to amortizable intangibles, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies - Intangible Assets .

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 and consider market participants in accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets .

We evaluate the long-lived

For additional information related to amortizable intangibles, see Intangible Assets above.

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 .

We evaluate the long-lived assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified.

When evaluating long-lived assets for potential impairment, we first compared the carrying amount of the asset group to the estimated future undiscounted cash flows.

The impairment loss calculation compares the carrying amount of the assets to the fair value based on estimated discounted future cash flows.

If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value.

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.

Index to Form 10-K Index to FS

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

assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified.

When evaluating long-lived assets for potential impairment, we first compared the carrying amount of the asset group to the estimated future undiscounted cash flows.

The impairment loss calculation compares the carrying amount of the assets to the fair value based on estimated discounted future cash flows.

If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value.

Our business has been significantly negatively impacted by the ongoing COVID-19 pandemic during Fiscal 2022 and Fiscal 2021, as many schools continued to adjust their learning models and on-campus activities.

Many of the trends observed during Fiscal 2021 continued into Fiscal 2022, as fewer students returned to campus and enrollments declined, including enrollments at community colleges and by international students.

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

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

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

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

During the third quarter of Fiscal 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

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During the third quarter of Fiscal 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 consolidated statement of operations.

During the third quarter of Fiscal 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 27,630 , $ 20,506 after-tax, comprised of $ 5,085 , $ 13,328 , $ 6,278 and $ 2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations.

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Fair Value Measurements .

In the first quarter of Fiscal 2020, we recorded an impairment loss (non-cash) of $ 433 in the Retail segment related to net capitalized development costs for a project which are not recoverable.

During the fourth quarter of Fiscal 2020, in conjunction with COVID-19 related campus store closures, we evaluated certain of our long-lived assets associated with our Retail and Wholesale segments for impairment.

Based on the results of the tests, for the Retail segment, we recognized an impairment loss of $ 587 related to store-level assets in restructuring and other charges.

These long-lived assets were not recoverable and had a de minimis fair value, as determined using an income approach (Level 3 input), resulting in a non-cash impairment charge for the full carrying value of those long-lived assets.

The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance sheets.

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.

As of both April 30, 2022 and May 1, 2021, we had $ 0 , $ 0 and $ 4,700 of goodwill on our consolidated balance sheets related to our Retail, Wholesale, and DSS reporting units, respectively.

During the third quarter of Fiscal 2022, Fiscal 2021 and Fiscal 2020, we completed our annual goodwill impairment test and concluded that 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.

As of April 30, 2022, goodwill of approximately $ 60,910 was deductible for federal income tax purposes.

This is higher than the goodwill balance reflected on the consolidated balance sheet as of April 30, 2022 due to impairment losses recorded in Fiscal 2018 and Fiscal 2019.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

Application of the goodwill impairment test requires judgment, including:

the identification of reporting units;

assignment of assets and liabilities to reporting units;

assignment of goodwill to reporting units;

and the determination of the fair value of each reporting unit.

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.

We estimated the fair value of our reporting units using a weighting of fair values derived from the income approach.

Under the income approach, we calculate the fair value of the reporting unit based on the present value of estimated future cash flows.

Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital and tax rates.

We also make certain forecasts about future economic conditions, interest rates, market data, and other observable trends, such as comparable store sales trends, recent changes in publisher relationships, and development of innovative digital products and services in the rapidly changing education landscape.

The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows.

Refer to Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates for a discussion of key assumptions used in our testing.

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of our revenue is derived from the sales of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation.

The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation.

Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products.

4 unchanged sentences

Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer.

Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized at the point of sale as product revenue in our consolidated financial statements.

A software feature is embedded within the content of our digital textbooks, such that upon expiration of the term the customer is no longer able to access the content.

While the sale of the digital textbook allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

Revenue from the rental of physical textbooks is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer and is recognized as rental income in our consolidated financial statements.

Rental periods are typically for a single semester and are always less than one year in duration.

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In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale.

A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content.

While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

Revenue for our BNC First Day offerings are recognized consistent with our policies outlined above for product, digital and rental sales, net of an anticipated opt-out or return provision.

Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized.

When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

We estimate returns based on an analysis of historical experience.

4 unchanged sentences

For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis.

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

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

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

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 our 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 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.

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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.

Service and other revenue is primarily derived from partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers, shipping and handling, and revenue from other programs.

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

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Our selling and administrative expenses consist primarily of store payroll and store operating expenses.

Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our direct-to-student subscription-based services business.

Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting.

Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

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720-35, Advertising Costs .

Advertising costs charged to selling and administrative expenses were $ 13,206 , $ 12,916 , and $ 10,349 in the consolidated statement of operations for the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020, respectively.

Advertising costs charged to selling and administrative expenses were $ 9,139 , $ 9,932 , and $ 10,895 in the consolidated statement of operations for the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

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

Income Taxes.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

For the fiscal year ended April 30, 2022, the Company intends to file an application to change its tax year from January to April under the automatic consent provisions.

For the fiscal year ended April 30, 2022, the Company filed an application to change its tax year from January to April under the automatic consent provisions.

As a result of the tax year-end change, there is no longer a long-term tax payable associated with the LIFO reserve in other long-term liabilities.

8 unchanged sentences

52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Course Materials Product Sales $ 927,915 $ 911,182 $ 864,195

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Wholesale Sales $ 106,366 $ 112,246 $ 165,825

DSS Sales (c)

$ 35,666 $ 27,374 $ 23,661

Eliminations (d)

Eliminations (c)

$ ( 54,884 ) $ ( 56,176 ) $ ( 89,779 )

Total Sales $ 1,543,208 $ 1,495,734 $ 1,406,516

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

(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 our 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.

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

(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.

(c) 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

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

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

Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue).

Deferred revenue consists of the following:

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

Contract assets (unbilled receivables) were $ 0 as of both April 29, 2023 and April 30, 2022 on our consolidated balance sheets.

Index to Form 10-K Index to FS

3 unchanged sentences

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

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).

Deferred revenue consists of the following:

• advanced payments from customers related to textbook rental performance obligations, which are recognized ratably over the terms of the related rental period;

• 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 merchandising contracts for Fanatics and FLC as discussed in Part II - Item 8.

respectively as discussed in Part II - Item 8.

Financial Statements and Supplementary Data - Note 5.

Organization - Partnership with Fanatics and FLC and Note 5.

Equity and Earnings Per Share - Sale of Treasury Shares.

Deferred revenue of $ 14,946 and $ 4,776 is recorded within accrued liabilities and other long-term liabilities on our consolidated balance sheet, respectively, as of April 30, 2022 and $ 13,469 and $ 4,670 is recorded within accrued liabilities and other long-term liabilities on our consolidated balance sheet, respectively, as of May 1, 2021.

As of April 30, 2022 we expect to recognize $ 14,946 of the deferred revenue balance within in the next 12 months.

The following table presents changes in contract liabilities during the fiscal year ended April 30, 2022:

Deferred revenue balance as of May 2, 2020 $ 13,373

Additions to deferred revenue during the period 171,834

Reductions to deferred revenue for revenue recognized during the period ( 167,068 )

Deferred revenue balance as of May 1, 2021 $ 18,139

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

52 weeks ended

April 29, 2023 April 30, 2022

Deferred revenue at the beginning of period $ 16,475 $ 15,709

Additions to deferred revenue during the period 184,163 130,137

Reductions to deferred revenue for revenue recognized during the period ( 185,282 ) ( 129,371 )

Deferred revenue balance as of April 30, 2022 $ 19,722

Deferred revenue balance at the end of period:

$ 15,356 $ 16,475

Balance Sheet classification:

Accrued liabilities $ 11,218 $ 11,781

Other long-term liabilities 4,138 4,694

Deferred revenue balance at the end of period:

$ 15,356 $ 16,475

As of April 29, 2023, we expect to recognize $ 11,218 of the deferred revenue balance within the next 12 months.

Segment Reporting

We have three reportable segments:

Retail, Wholesale and DSS.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies.

We have two reportable segments:

Retail and Wholesale.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are not allocated to any specific reporting segment and continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance.

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

The majority of the physical campus bookstores have school-branded e-commerce sites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

The Retail Segment also offers inclusive access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class.

The majority of the physical campus bookstores have school-branded e-commerce websites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

The Retail Segment offers our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty requested course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately.

The BNC First Day discounted price is offered as a course fee or included in tuition.

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.

Wholesale Segment

The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country.

The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,100 physical bookstores (including our Retail Segment's 805 physical bookstores) and sources and distributes new and used textbooks to our 622 virtual bookstores.

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

Index to Form 10-K Index to FS

3 unchanged sentences

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

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

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

Wholesale Segment

The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country.

The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,000 physical bookstores (including our Retail Segment's 774 physical bookstores) and sources and distributes new and used textbooks to our 592 virtual bookstores.

Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 340 college bookstores.

Corporate Services

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

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:

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

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Retail $ 785,900 $ 875,569

Wholesale 160,868 159,125

DSS 32,418 33,937

Corporate Services 6,581 5,175

Sub-Total 953,349 1,039,869

Assets Held for Sale 27,430 31,684

Total Assets $ 980,779 $ 1,071,553

As of both April 30, 2022 and May 1, 2021, we had $ 0 , $ 0 and $ 4,700 of goodwill on our consolidated balance sheets related to our Retail, Wholesale, and DSS reporting units, respectively.

52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

Capital Expenditures

April 29, 2023 April 30, 2022 May 1, 2021

Capital Expenditures from Continuing Operations

Retail $ 23,098 $ 31,073 $ 21,208

Wholesale 1,959 2,472 5,905

9,926 9,662 5,425

Corporate Services 35 62 449

Total Capital Expenditures $ 25,092 $ 33,607 $ 27,562

(a) Primarily comprised of content development costs for bartleby.com .

Index to Form 10-K Index to FS

5 unchanged sentences

52 weeks ended

April 30, 2022 (a)

52 weeks ended

May 1, 2021 (a)

53 weeks ended

April 29, 2023 April 30, 2022 (a)

May 1, 2021 (a)

1 unchanged sentence

Wholesale 106,366 112,246 165,825

DSS 35,666 27,374 23,661

Eliminations ( 54,884 ) ( 56,176 ) ( 89,779 )

2 unchanged sentences

Wholesale 18,275 19,782 34,683

DSS 29,928 22,318 19,313

Eliminations ( 180 ) 67 43

Total Gross Profit $ 349,439 $ 342,832 $ 230,343

Selling and Administrative Expenses

Retail $ 320,730 $ 315,124 $ 278,149

Wholesale 15,036 16,000 16,085

Corporate Services 22,000 23,002 22,079

Eliminations ( 155 ) ( 158 ) ( 149 )

Total Selling and Administrative Expenses $ 357,611 $ 353,968 $ 316,164

Depreciation and Amortization

1 unchanged sentence

Wholesale 5,373 5,418 5,461

DSS 7,257 7,763 8,670

Corporate Services 53 71 109

Total Depreciation and Amortization $ 42,163 $ 42,124 $ 45,204

Operating Loss

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

$ 6,008 $ 6,411 $ 27,630

Wholesale (c)

Restructuring and Other Charges (c)

Retail $ 2,964 $ 2,118 $ 5,514

Wholesale 916 ( 2,131 ) ( 1,595 )

Corporate Services 6,223 957 6,188

Total Restructuring and Other Charges $ 10,103 $ 944 $ 10,107

Operating Loss

Retail $ ( 35,095 ) $ ( 37,305 ) $ ( 155,310 )

( 3,050 ) 495 14,732

DSS ( 6,801 ) ( 8,132 ) ( 8,529 )

Corporate Services ( 28,276 ) ( 24,030 ) ( 28,376 )

Eliminations ( 25 ) 225 192

Total Operating Loss (c)

$ ( 67,416 ) $ ( 176,894 ) $ ( 42,783 )

The following is a reconciliation of segment Operating Loss to consolidated Income Before Income Taxes

Total Operating Loss $ ( 66,446 ) $ ( 60,615 ) $ ( 168,762 )

The following is a reconciliation of segment Operating Loss from Continuing Operations to consolidated Loss from Continuing Operations Before Income Taxes

Total Operating Loss $ ( 66,446 ) $ ( 60,615 ) $ ( 168,762 )

Interest Expense, net ( 22,683 ) ( 10,096 ) ( 8,087 )

Total Loss Before Income Taxes $ ( 77,512 ) $ ( 184,981 ) $ ( 50,228 )

(a) In Fiscal 2022, Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

Total Loss from Continuing Operations Before Income Taxes $ ( 89,129 ) $ ( 70,711 ) $ ( 176,849 )

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

(a) In Fiscal 2022 and Fiscal 2021, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

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Summary of Significant Accounting Policies - Merchandise Inventories .

(c) In Fiscal 2022, we recognized an impairment loss (non-cash) of $ 6,411 , both before-tax and after-tax, in the Retail segment related to certain of our store-level long-lived assets.

In Fiscal 2021, we recognized an impairment loss (non-cash) of $ 27,630 , $ 20,506 after-tax, in the Retail segment related to certain of our store-level long-lived assets.

In Fiscal 2020, we recorded an impairment loss (non-cash) of $ 433 in the Retail segment related to net capitalized development costs for a project which were not recoverable.

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 9.

Summary of Significant Accounting Policies .

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

Supplementary Information .

Equity and Earnings Per Share

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The holders of our common stock do not have preemptive rights or preferential rights to subscribe for shares of our capital stock.

Following our shareholders approval of an amendment to the Equity Incentive Plan to increase the number of shares available for issuance by an additional 3,000,000 shares of our Common Stock, we have reserved an aggregate of 13,409,345 shares of common stock for future grants in accordance with the Barnes & Noble Education Inc.

Equity Incentive Plan.

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 12.

Long-Term Incentive Compensation Expense .

Repurchase of Shares

7 unchanged sentences

Sale of Treasury Shares

In December 2020, we entered into a new merchandising partnership with Fanatics and FLC which included a strategic equity investment in the Company.

In December 2020 (Fiscal 2021), we entered into a new merchandising partnership with Fanatics and Lids which included a strategic equity investment in the Company.

Fanatics, Inc.

1 unchanged sentence

jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $ 15,000 , representing a share price of $ 6.50 per share.

The premium price paid above the fair market value of our common stock at closing was approximately $ 4,131 and was recorded as a contract liability which is recognized over the term of the merchandising contracts for Fanatics and FLC ($ 211 and $ 202 , respectively, in accrued liabilities, and $ 3,709 and $ 3,920 , respectively, as of April 30, 2022 and May 1, 2021, in other long-term liabilities our consolidated balance sheet) which is expected to be recognized over the term of the merchandising contracts for Fanatics and FLC, as discussed in Part II - Item 8.

The premium price paid above the fair market value of our common stock at closing was approximately $ 4,131 and was recorded as a contract liability which is recognized over the term of the merchandising contracts for Fanatics and Lids ($ 211 and $ 211 , respectively, in accrued liabilities, and $ 3,498 and $ 3,709 , respectively, as of April 29, 2023 and April 30, 2022, in other long-term liabilities our consolidated balance sheet) which is expected to be recognized over the term of the merchandising contracts for Fanatics and Lids, as discussed in Part II - Item 8.

Financial Statements and Supplementary Data - Note 1.

Organization - Partnership with Fanatics and FLC .

Organization - Partnership with Fanatics and Lids .

We paid no other dividends to common stockholders during Fiscal 2023, Fiscal 2022 and Fiscal 2021.

We do not intend to pay dividends on our common stock in the foreseeable future and dividend payments are not permitted under current or future financing arrangements.

On June 7, 2022, subsequent to the end of Fiscal 2022, we entered into a Term Loan Credit Agreement with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to the Credit Agreement.

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 7 - Credit Facility and Note 16.

Financial Statements and Supplementary Data - Note 7 - Debt and Note 17.

Subsequent Event for details.

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We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method.

Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock.

The two-class method of computing earnings per share is an allocation method that calculates earnings per share

Our participating securities consist solely of

Index to Form 10-K Index to FS

3 unchanged sentences

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

for common stock and participating securities.

unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock.

The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities.

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

1 unchanged sentence

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

(shares in thousands) 52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

52 weeks ended

(shares in thousands) April 29, 2023 April 30, 2022 May 1, 2021

Numerator for basic and diluted earnings per share:

Loss from continuing operations, net of tax $ ( 90,140 ) $ ( 61,559 ) $ ( 133,569 )

Loss from discontinued operations, net of tax ( 11,722 ) ( 7,298 ) ( 6,241 )

Net loss available to common shareholders $ ( 101,862 ) $ ( 68,857 ) $ ( 139,810 )

2 unchanged sentences

Loss per share of Common Stock:

Basic and Diluted

Continuing operations $ ( 1.72 ) $ ( 1.19 ) $ ( 2.69 )

Discontinued operations ( 0.22 ) ( 0.14 ) ( 0.12 )

Basic and diluted loss per share of Common Stock $ ( 1.94 ) $ ( 1.33 ) $ ( 2.81 )

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Non-Financial Assets and Liabilities

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

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

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

We review our 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 .

During the 52 weeks ended April 30, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment, and we recognized an impairment loss (non-cash) of $ 6,411 , both pre-tax and after-tax, on the consolidated statement of operations.

During the 52 weeks ended May 1, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment, and we recognized an impairment loss (non-cash) of $ 27,630 , $ 20,506 after-tax, on the 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.

During the 53 weeks ended May 2, 2020, we recognized an impairment loss (non-cash) of $ 433 in the Retail segment related to net capitalized development costs for a project which are not recoverable.

During the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment, and we recognized an impairment loss (non-cash) of $ 6,008 , $ 6,411 , and $ 27,630 ($ 20,506 after-tax), respectively, on the 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

Index to Form 10-K Index to FS

3 unchanged sentences

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

discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

For additional information, see Part II - Item 8.

1 unchanged sentence

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 and the total impairments recorded as a result of the remeasurement process:

52 weeks ended April 30, 2022 52 weeks ended May 1, 2021 53 weeks ended May 2, 2020

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:

52 weeks ended April 29, 2023 52 weeks ended April 30, 2022 52 weeks ended May 1, 2021

Carrying Value

4 unchanged sentences

Prior to Impairment Fair Value Impairment Loss

Receivables, net $ — $ — $ — $ — $ — $ — $ 245 $ — $ 245

Property and equipment, net $ 708 $ — $ 708 $ 742 $ 3 $ 739 $ 5,505 $ 420 $ 5,085

2 unchanged sentences

Other noncurrent assets 4 — 4 211 — 211 3,539 600 2,939

Accrued liabilities — — — — — — ( 112 ) — ( 112 )

Total $ 7,313 $ 1,305 $ 6,008 $ 7,997 $ 1,586 $ 6,411 $ 43,194 $ 15,564 $ 27,630

3 unchanged sentences

As of April 29, 2023, we recorded a liability of $ 777 (Level 2 input) which is reflected in accrued liabilities ($ 734 ) and other long-term liabilities ($ 42 ) on the consolidated balance sheet.

As of May 1, 2021, we recorded a liability of $ 3,845 (Level 2 input) which is reflected in accrued liabilities ($ 2,509 ) and other long-term liabilities ($ 1,336 ) on the consolidated balance sheet.

As of April 30, 2022, we recorded a liability of $ 2,774 (Level 2 input) which is reflected in accrued liabilities ($ 1,726 ) and other long-term liabilities ($ 1,048 ) on the consolidated balance sheet.

For additional information, see Part II - Item 8.

1 unchanged sentence

Long-Term Incentive Compensation Expense .

April 29, 2023 April 30, 2022

Credit Facility $ 154,154 $ 185,700

We have a credit agreement (the “Credit Agreement”), 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.

FILO Facility — 40,000

Term Loan 30,000 —

sub-total 184,154 225,700

Deferred financing costs ( 2,003 ) —

Total debt $ 182,151 $ 225,700

Balance Sheet classification:

Short-term borrowings $ — $ 40,000

Long-term borrowings 182,151 185,700

Total debt $ 182,151 $ 225,700

Credit Facility

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 .

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

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

On June 7, 2022, subsequent to the end of Fiscal 2022, we entered into a Term Loan Credit Agreement with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to the Credit Agreement.

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 16.

Subsequent Event for details.

On June 28, 2022, we obtained limited waivers with respect to the Credit Agreement and the Term Loan Credit Agreement, pursuant to which the requisite lenders thereunder waived any potential default or event of default under such agreements solely to the extent arising from the restatement of Fiscal 2021 consolidated financial statements as described in Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies and Note 16.

Subsequent Events .

Index to Form 10-K Index to FS

3 unchanged sentences

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

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 .

As of July 31, 2022, the FILO Facility was repaid according to its terms and future commitments under the FILO Facility were reduced to $ 0 .

On March 8, 2023, 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 (see discussion below) 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.

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

As noted above, 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).

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies for information related to the sale of our DSS segment on May 31, 2023 .

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.

On May 24, 2023 and July 28, 2023, subsequent to quarter end, we amended the Credit Agreement to extend the maturity date, as well as other changes as described in Part II - Item 8.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

As of April 29, 2023, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement.

The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the Credit Facility.

This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company and a pledge of equity from subsidiaries, exclusive of real estate).

During the 52 weeks ended April 29, 2023, we borrowed $ 590,303 and repaid $ 631,849 under the Credit Agreement, and had outstanding borrowings of $ 154,154 as of April 29, 2023, comprised entirely of borrowing under the Credit Facility and $ 0 under the FILO Facility, which was repaid on August 1, 2022.

During the 52 weeks ended April 30, 2022, we borrowed $ 632,220 and repaid $ 584,120 under the Credit Agreement, and had outstanding borrowings of $ 185,700 and $ 40,000 under the Credit Facility and FILO Facility, respectively, as of April 30, 2022.

During the 53 weeks ended May 1, 2021, we borrowed $ 722,600 and repaid $ 719,700 under the Credit Agreement, and had outstanding borrowings of $ 127,600 and $ 50,000 under the Credit Facility and FILO Facility, respectively, as of May 1, 2021.

During the 53 weeks ended May 2, 2020, we borrowed $ 600,900 and repaid $ 559,700 under the Credit Agreement, and had outstanding borrowings of $ 99,700 and $ 75,000 under the Credit Facility and FILO Facility, respectively, as of May 2, 2020.

As of both April 30, 2022 and May 1, 2021, we issued $ 4,759 in letters of credit under the Credit Facility, respectively.

During the 52 weeks ended April 30, 2022 and May 1, 2021, we incurred debt issuance costs totaling $ 265 and $ 1,076 related to the March 4, 2022 waiver and March 31, 2021 Credit Facility amendment.

As of April 29, 2023 and April 30, 2022, we issued $ 2,059 and $ 4,759 , respectively, in letters of credit under the Credit Facility.

During the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021 we incurred debt issuance costs totaling $ 4,081 , $ 265 , and $ 1,076 , respectively.

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 credit agreement.

The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the Credit Facility.

This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company and a pledge of equity from subsidiaries, exclusive of real estate).

Interest under the Credit Facility accrues, at our election, at a Secured Overnight Financing Rate ("SOFR") or alternate base rate, plus, in each case, an applicable interest rate margin, which is determined by reference to the level of excess availability under the Credit Facility.

Loans will initially bear interest at SOFR plus 2.00% per annum, in the case of SOFR borrowings, or at the alternate base rate plus 1.00% per annum, in the alternative, and thereafter the interest rate will fluctuate between SOFR plus 2.00% per annum and SOFR plus 1.50% per annum (or between the alternate base rate plus 1.00% per annum and the alternate base rate plus 0.50% per annum), based upon the excess availability under the Credit Facility at such time.

Loans under the FILO Facility will bear interest at a rate equal to the SOFR rate, plus 3.750%.

In connection with the waiver, the applicable margin for credit extensions made under the FILO Facility after March 31, 2021 through the end of 2021 was increased by 0.50% (to 3.75% per annum for LIBO rate loans and 2.75% for base rate loans).

The FILO Facility will be available solely during the draw period each year, from April 1 through July 31.

We are required to borrow 100% of the aggregate commitments under the FILO Facility on April 1 of each year, and the loans must be repaid in full (including interest and fees) on July 31 of each year.

We will pay a commitment fee of 0.375% on the daily unused portion of the FILO Facility.

The Credit Facility contains customary negative covenants, which limit the Company’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets, among other things.

In addition, if excess availability under the Credit Facility were to fall below certain specified levels, certain additional covenants (including fixed charge coverage ratio requirements and a minimum excess availability of the greater of 10% of the Loan Cap and $25,000 when the FILO is funded) would be triggered, and the lenders would have the right to assume dominion and control over the Company's cash.

The Credit Facility includes an anti-cash hoarding provision, which limits maximum excess cash allowed to $50,000 when the FILO is funded.

The Credit Facility contains customary events of default, including payment defaults, material breaches of representations and warranties, covenant defaults, default on other material indebtedness, customary ERISA events of default, bankruptcy and insolvency, material judgments, invalidity of liens on collateral, change of control or cessation of business.

The Credit Facility also contains customary affirmative covenants and representations and warranties.

We are in compliance with all covenants, representations and warranties under the Credit Facility as of April 30, 2022.

We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-term financings will provide adequate resources to fund our operating and financing needs for the foreseeable future.

Our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store openings, and any potential acquisitions of other brands or companies including digital properties.

To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity.

Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy.

There can be no assurances that we will have access to capital markets on acceptable terms.

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.

Index to Form 10-K Index to FS

3 unchanged sentences

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

We recognize lease assets and lease liabilities on the consolidated balance sheets for substantially all lease arrangements based on the present value of future lease payments as required by FASB ASC 842, Leases (Topic 842).

The Term Loan Credit Agreement provides for term loans in an amount equal to $ 30,000 (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”) and matures on June 7, 2024.

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 52 weeks ended April 29, 2023, we borrowed $ 30,000 and repaid $ 0 under the Term Loan Credit Agreement, with $ 30,000 of outstanding borrowings as of April 29, 2023.

On May 24, 2023 and July 28, 2023, subsequent to quarter end, we amended the Term Loan Agreement to extend the maturity date, as well as other changes as described in Part II - Item 8.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $3,184 related to the Term Loan Credit Agreement.

The debt issuance costs have been deferred and are presented as a reduction to the long-term borrowings 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%, payable quarterly.

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.

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

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

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

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

Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities;

11 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.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

The following table summarizes lease expense:

52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Variable lease expense $ 69,570 $ 77,956 $ 69,511

1 unchanged sentence

Net lease expense $ 204,607 $ 192,771 $ 177,793

The increase in lease expense is primarily due to higher sales for contracts based on a percentage of revenue and the impact of the timing and reduction of minimum contractual guarantees due to temporary store closings due to the COVID pandemic during the prior year.

The increase in lease expense is primarily due to higher sales for contracts based on a percentage of revenue and the impact of the timing due to contract renewals, and the increase in minimum contractual guarantees which were temporarily eliminated in the prior years due to limited on campus store traffic resulting from the COVID-19 pandemic.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of April 29, 2023:

10 unchanged sentences

Future lease payment obligations related to leases that were entered into, but did not commence as of April 29, 2023, were not material.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

The following summarizes additional information related to our operating leases:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Weighted average remaining lease term (in years) 5.3 years 6.2 years 5.5 years

11 unchanged sentences

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 consolidated statement of operations.

During the 52 weeks ended May 1, 2021, we recognized an impairment loss (non-cash) of $ 27,630 , $ 20,506 after-tax, in the Retail segment comprised of $ 5,085 , $ 13,328 , $ 6,278 and $ 2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations.

During the 53 weeks ended May 2, 2020, we recognized an impairment loss (non-cash) of $ 433 in the Retail segment related to net capitalized development costs for a project which are not recoverable.

Restructuring and Other Charges

During the 52 weeks ended April 30, 2022, we recognized restructuring and other charges totaling $ 944 , comprised primarily of $ 1,250 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 71 is included in accrued liabilities in the consolidated balance sheet as of April 30, 2022) and $ 1,825 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, partially offset by a $ 2,131 in an actuarial gain related to a frozen retirement benefit plan (non-cash).

During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling $ 10,678 (Restated), comprised primarily of $ 6,606 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 3,246 is included in accrued liabilities in the consolidated balance sheet as of May 1, 2021), $ 5,213 for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with the FLC Partnership and shareholder activist activities, and $ 454 related to liabilities for a facility closure, partially offset by a $ 1,595 in an actuarial gain related to a frozen retirement benefit plan (non-cash).

During the 53 weeks ended May 2, 2020, we recognized restructuring and other charges totaling $ 18,567 comprised of $ 12,667 for severance and other employee termination and benefit costs associated with several management changes ($ 10,370 is included in accrued liabilities in the consolidated balance sheet as of May 2, 2020), the elimination of various positions as part of cost reduction objectives, and professional service costs for process improvements, and $ 2,695 related to an actuarial loss for a frozen retirement benefit plan (non-cash), $ 2,841 for professional service costs for shareholder activist activities, and $ 587 related to a store-level asset impairment charge, offset by $ 223 related to reduction of liabilities for a facility closure.

Index to Form 10-K Index to FS

3 unchanged sentences

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

During the 52 weeks ended April 30, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Restructuring and Other Charges

During the 52 weeks ended April 29, 2023, we recognized restructuring and other charges totaling $ 10,103 , comprised primarily of $ 4,359 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($ 1,712 is included in accrued liabilities in the consolidated balance sheet as of April 29, 2023), and $ 5,744 for costs primarily associated with professional service costs for restructuring and process improvements.

During the 52 weeks ended April 30, 2022, we recognized restructuring and other charges totaling $ 944 , comprised primarily of $ 1,250 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 71 is included in accrued liabilities in the consolidated balance sheet as of April 30, 2022) and $ 1,825 for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the F/L Partnership, shareholder activist activities, and liabilities for a facility closure, partially offset by a $ 2,131 in an actuarial gain related to a frozen retirement benefit plan (non-cash).

During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling $ 10,107 , comprised primarily of $ 6,035 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, $ 5,213 for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with the F/L Partnership and shareholder activist activities, and $ 454 related to liabilities for a facility closure, partially offset by a $ 1,595 in an actuarial gain related to a frozen retirement benefit plan (non-cash).

Related Party Transactions

5 unchanged sentences

The lease was originally entered into in 1991 and included a renewal option which extended the lease through September 1, 2023.

Based upon a valuation performed as of the acquisition date, the lease was determined to be favorable from a lessee perspective with below market rent.

Effective January 1, 2023, MBS amended the lease agreement to lower the rent and extend the term to December 31, 2024.

Rent payments to MBS Realty Partners L.P.

were approximately $ 1,380 during each of the 52 weeks ended April 30, 2022, May 1, 2021, and May 2, 2020.

were approximately $ 1,150 , $ 1,380 and $ 1,380 during the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Employee Benefit Plans

1 unchanged sentence

MBS maintains a profit sharing plan covering substantially all full-time employees of MBS.

For all plans, we are responsible to fund the employer contributions directly.

Total employee benefit expense for these plans was $ 3,287 , $ 0 , and $ 5,015 , during the 52 weeks ended April 30, 2022, May 1, 2021, and May 2, 2020, respectively.

For all plans, we are responsible to fund the employer contributions directly, if any.

Total employee benefit expense for these plans was $ 4,391 , $ 3,200 , and $ 0 , during the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 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.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

Long-Term Incentive Compensation Expense

18 unchanged sentences

Restricted stock units generally vest over a period of three years, but will have a minimum vesting period of one year.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

Performance Share Awards

6 unchanged sentences

The number of PS and PSU awards that will vest range from 0%-150% of the target award based on actual performance.

Phantom Shares

During Fiscal 2022, we granted 183,348 phantom share units granted to employees.

Each phantom share represents the economic equivalent to one share of the Company's common stock and will be settled in cash based on the fair market value of a share of common stock at each vesting date in an amount not to exceed $ 32.40 per share.

The phantom shares vest and will be settled in three equal installments commencing one year after the date of grant.

The fair value of the phantom shares was determined using the closing stock price on the date of the award less the fair value of the call option which was estimated using the Black-Scholes model.

The average fair value on the date of grant was $ 8.50 per phantom share using risk-free rates ranging from 0.08%-0.53% for the three tranches and annual volatility ranging from 78%-92% for the three tranches.

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 April 29, 2023, we recorded a liability of $ 777 (Level 2 input) related to phantom share units grants of which $ 734 and $ 42 is reflected in accrued liabilities and other long-term liabilities, respectively, on the consolidated balance sheet.

As of April 30, 2022, we recorded a liability of $ 2,774 (Level 2 input) related to phantom share units grants of which $ 1,726 and

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

$ 1,048 is reflected in accrued liabilities and other long-term liabilities, respectively, on the consolidated balance sheet, respectively.

Stock Options

18 unchanged sentences

Volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term.

Phantom Shares

During Fiscal 2022, we granted 183,348 phantom share units granted to employees.

The phantom shares vest and will be settled in three equal installments commencing one year after the date of grant.

The fair value of the phantom shares was determined using the closing stock price on the date of the award less the fair value of the call option which was estimated using

Index to Form 10-K Index to FS

3 unchanged sentences

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

the Black-Scholes model.

As of April 30, 2022, we recorded a liability of $ 2,774 (Level 2 input) related to phantom share units grants of which $ 1,726 and $ 1,048 is reflected in accrued liabilities and other long-term liabilities, respectively, on the consolidated balance sheet.

As of May 1, 2021, we recorded a liability of $ 3,845 (Level 2 input) related to phantom share units grants of which $ 2,509 and $ 1,336 is reflected in accrued liabilities and other long-term liabilities, respectively, on the consolidated balance sheet, respectively.

Long-Term Incentive Compensation Activity

5 unchanged sentences

Grant Date Fair Value

Balance, May 1, 2021 146,343 $ 2.40 1,199,851 $ 3.56

Balance, April 30, 2022 35,412 $ 10.59 1,205,079 $ 8.71

Granted 11,804 $ 2.30 990,875 $ 2.37

Vested ( 35,412 ) $ 10.59 ( 627,330 ) $ 7.00

Forfeited (a)

— $ — ( 40,402 ) $ 3.67

Forfeited — $ — ( 477,651 ) $ 5.54

Balance, April 29, 2023 11,804 $ 2.30 1,090,973 $ 5.33

3 unchanged sentences

Shares Weighted

Balance, May 1, 2021 595,233 $ 2.23 2,204,863 $ 1.97

Balance, April 30, 2022 528,567 $ 2.23 1,539,027 $ 2.72

Granted — $ — — $ —

7 unchanged sentences

Exercise Price

Balance, May 1, 2021 2,190,990 $ 1.43 $ 3.73

Balance, April 30, 2022 2,702,937 $ 2.79 $ 5.82

Granted 671,218 $ 1.44 $ 3.66

Exercised (b)

( 77,883 ) $ 1.48 $ 3.29

Forfeited ( 591,222 ) $ 2.95 $ 6.02

Expired ( 20,589 ) $ 6.91 $ 12.10

Balance, April 29, 2023 2,762,344 $ 2.40 $ 5.21

1 unchanged sentence

(a) The PSUs forfeitures reflect a cumulative adjustment to reflect changes to the expected level of achievement of the respective grants.

(b) During the period ended April 30, 2022, 77,883 options were exercised with a total intrinsic value of $ 369 .

The aggregate grant date fair value of stock options that vested during the period ending April 30, 2022 was $ 783 .

There were no stock options that vested during the periods ended May 1, 2021 and May 2, 2020.

(b) During the period ended April 29, 2023, no options were exercised with a total intrinsic value of $ 0 .

The aggregate grant date fair value of stock options that vested during the 52 weeks ended April 29, 2023 and April 30, 2022 was $ 1,903 and $ 783 , respectively.

There were no stock options that vested during the 52 weeks ended May 1, 2021.

Total fair value of vested share awards during the periods ended April 29, 2023, April 30, 2022, and May 1, 2021 was $ 8,851 , $ 9,651 , and $ 6,631 , respectively.

Index to Form 10-K Index to FS

3 unchanged sentences

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

Total fair value of vested share awards during the periods ended April 30, 2022, May 1, 2021, and May 2, 2020 was $9,651, $6,631, and $8,130, respectively.

Long-Term Incentive Compensation Expense

1 unchanged sentence

52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Stock-based awards

1 unchanged sentence

Restricted stock units expense 2,813 3,399 3,487

Performance shares expense (a)

Performance share units expense (a)

7 unchanged sentences

Total unrecognized compensation cost related to unvested awards as of April 29, 2023 was $ 6,290 and is expected to be recognized over a weighted-average period of 1.85 years.

For Fiscal 2022, Fiscal 2021 and Fiscal 2020, we had no material revenue or expense in jurisdictions outside the United States.

Income Taxes - Continuing Operations

For Fiscal 2023, Fiscal 2022 and Fiscal 2021, we had no material revenue or expense in jurisdictions outside the United States other than India.

Impact of U.S.

2 unchanged sentences

The most significant impact of the legislation for the Company was an income tax benefit of $ 7,164 for the carryback of NOLs to higher tax rate years, recorded in Fiscal 2021.

As of May 1, 2021, we recognized a current income tax receivable for NOL carrybacks of $ 30,492 in prepaid and other current assets on the consolidated balance sheet.

We received a $ 7,841 refund in the second quarter of Fiscal 2022 and expect to receive additional refunds of approximately $ 22,651 .

As of April 29, 2023, we recognized a current income tax receivable for NOL carrybacks in prepaid and other current assets on the consolidated balance sheet.

We received a $ 7,841 refund in Fiscal 2022, a $ 15,774 refund in Fiscal 2023 and expect to receive additional refunds of approximately $ 10,019 .

Income tax benefits for Fiscal 2023, Fiscal 2022 and Fiscal 2021 are as follows:

52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Federal $ — $ ( 1,900 ) $ ( 35,130 )

State 301 444 ( 524 )

International 252 266 147

Total Current 553 ( 1,190 ) ( 35,507 )

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State — 4,113 ( 1,970 )

International — — —

Total Deferred 458 ( 7,962 ) ( 7,773 )

Total $ ( 8,655 ) $ ( 45,171 ) $ ( 11,978 )

Total US tax provision $ 1,011 $ ( 9,152 ) $ ( 43,280 )

Index to Form 10-K Index to FS

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52 weeks ended

April 30, 2022 52 weeks ended

May 1, 2021 53 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Federal statutory income tax rate (a)

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Valuation allowance ( 24.6 ) ( 12.3 ) ( 4.2 )

Credits — — 0.5

Other, net 0.1 0.4 0.2

Effective income tax rate ( 1.1 ) % 12.9 % 24.5 %

(a) We identified certain out of period adjustments related primarily to the recognition of Income tax benefit related to the recording of an additional deferred tax valuation allowance for the 52 weeks ended May 1, 2021.

Refer to Note 2.

Summary of Significant Accounting Policies for further information.

The effective tax rate for Fiscal 2022 is significantly lower as compared to the prior year comparable period due to the change in pre-tax loss and the change in the assessment of the realization of deferred tax assets as compared to the prior year loss carrybacks.

The effective tax rate for Fiscal 2023 is significantly lower as compared to the prior year comparable period due to the valuation allowance benefit of changing the tax fiscal year in the prior year.

One percentage point on our Fiscal 2023 effective tax rate is approximately $ 891 .

The permanent book / tax differences are principally comprised of non-deductible compensation, and non-deductible meals and entertainment costs.

The permanent book / tax differences are principally comprised of non-deductible officer's compensation, and non-deductible stock compensation.

We account for income taxes using the asset and liability method.

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The significant components of our deferred taxes consisted of the following:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Deferred tax assets:

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Net operating losses 70,503 53,149

Interest carryforwards 7,246 2,390

Other 2,456 2,620

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Gross deferred tax liabilities ( 126,510 ) ( 137,491 )

Net deferred tax (liability) asset $ ( 1,430 ) $ 15,943

Net deferred tax liability $ ( 1,838 ) $ ( 1,430 )

Index to Form 10-K Index to FS

3 unchanged sentences

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

Refer to Note 2.

Summary of Significant Accounting Policies for further information.

As of April 29, 2023, we had $ 0 of unrecognized tax benefits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at April 27, 2019 $ 91

Balance at May 2, 2020 $ 52

Additions for tax positions of the current period —

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Other reductions for tax positions of prior periods —

Balance at May 1, 2021 $ —

Balance at April 30, 2022 $ —

Additions for tax positions of the current period —

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Our policy is to recognize interest and penalties related to income tax matters in income tax expense.

As of both April 30, 2022 and May 1, 2021, we had accrued $ 0 for net interest and penalties.

As of both April 29, 2023 and April 30, 2022, we had accrued $ 0 for net interest and penalties.

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.

In evaluating our ability to utilize our deferred tax assets, we considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis.

As of April 30, 2022, we recorded a valuation allowance of $ 43,550 compared to $ 8,692 as of May 1, 2021.

As of April 30, 2022, we had state net operating loss carryforwards (“NOLs”) of approximately $ 348,201 which will begin to expire in 2030, state tax credit carryforwards totaling $ 440 which will begin to expire in 2023, and federal NOLs of approximately $ 166,118 which have an indefinite carryforward period.

As of April 29, 2023, we recorded a valuation allowance of $ 56,962 compared to $ 33,209 as of April 30, 2022.

As of April 29, 2023, we had state net operating loss carryforwards (“NOLs”) of approximately $ 407,294 which will begin to expire in 2026, state tax credit carryforwards totaling $ 230 which will begin to expire in 2024, federal tax credit carryforward of $ 886 which will begin to expire in 2040 and federal NOLs of approximately $ 234,951 which have an indefinite carryforward period.

As of April 29, 2023, we recorded $ 201 of foreign withholding tax related to repatriations of earnings from certain foreign subsidiaries.

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Some earlier years remain open for a small minority of states.

We retain an income tax liability for periods prior to the Spin-Off from Barnes & Noble, Inc.

only for returns filed on a stand-alone basis.

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

Index to Form 10-K Index to FS

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We account for these service agreements for our physical bookstores under lease accounting.

Prior to the adoption of FASB ASC 842, Leases (Topic 842) ("ASC 842"), the excess of such minimum contract expense over actual contract payments (net of school allowances) was reflected in other long-term liabilities and accrued liabilities in the consolidated balance sheets.

We recognize lease assets and lease liabilities on the consolidated balance sheets for substantially all fixed lease arrangements (excluding variable obligations) with a term greater than twelve months.

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Total $ 17,071

Subsequent Event

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

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

See Part II - Item 8.

Selected Quarterly Financial Information (Unaudited)

A summary of quarterly financial information for the 52 weeks ended April 29, 2023 and April 30, 2022 is as follows:

13 weeks ended (a)

52 weeks ended

July 30, 2022 October 29, 2022 January 28, 2023 April 29, 2023 April 29, 2023

Sales $ 254,674 $ 608,633 $ 438,054 $ 241,847 $ 1,543,208

Gross profit $ 56,005 $ 138,141 $ 97,011 $ 58,282 $ 349,439

(Loss) income from continuing operations, net of tax (b)(c)(d)

$ ( 50,322 ) $ 24,168 $ ( 22,134 ) $ ( 41,852 ) $ ( 90,140 )

Loss from discontinued operations, net of tax $ ( 2,385 ) $ ( 2,024 ) $ ( 2,915 ) $ ( 4,398 ) $ ( 11,722 )

Net (loss) income $ ( 52,707 ) $ 22,144 $ ( 25,049 ) $ ( 46,250 ) $ ( 101,862 )

(Loss) earnings per common share:

Basic and Diluted

Continuing operations $ ( 0.96 ) $ 0.46 $ ( 0.42 ) $ ( 0.80 ) $ ( 1.72 )

Discontinued operations ( 0.05 ) ( 0.04 ) ( 0.06 ) ( 0.08 ) ( 0.22 )

Total Basic and Diluted Earnings per share $ ( 1.01 ) $ 0.42 $ ( 0.48 ) $ ( 0.88 ) $ ( 1.94 )

Weighted average common shares outstanding - Basic:

52,172 52,438 52,602 52,604 52,454

Weighted average common shares outstanding - Diluted:

52,172 53,195 52,602 52,604 52,454

(a) For information related to quarterly seasonality and other variance components, see Part II - Item 7.

Management Discussion and Analysis - Results of Operations and Item 8.

Financial Statements and Supplementary Data - Note 2.

Credit Facility for Credit Agreement details.

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

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

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

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

The Term Loans do not amortize prior to maturity.

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

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

The Credit Agreement amendment permits 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.

Summary of Significant Accounting Policies - Seasonality .

(b) (Loss) income from continuing operations includes $ 375 , $ 260 , $ 4,127 , and $ 5,341 of restructuring and other charges for the 13 weeks ended July 30, 2022, October 29, 2022, January 28, 2023 and April 29, 2023, respectively, and $ 10,103 for the 52 weeks ended April 29, 2023.

(c) (Loss) income from continuing operations includes an impairment loss (non-cash) of $ 6,008 for the 13 weeks ended January 28, 2023 and 52 weeks ended April 29, 2023.

(d) (Loss) income from continuing operations includes $ 7,011 and $ 22,683 of interest expense for the 13 and 52 weeks ended April 29, 2023, respectively.

Interest expense increased by $ 4,724 and $ 12,587 primarily due to higher borrowings and higher interest rates compared to the prior year.

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

13 weeks ended (a)

52 weeks ended

July 31, 2021 October 30, 2021 January 29, 2022 April 30, 2022 April 30, 2022

Sales $ 232,491 $ 618,698 $ 393,368 $ 251,177 $ 1,495,734

Gross profit $ 52,999 $ 138,653 $ 79,029 $ 72,151 $ 342,832

(Loss) income from continuing operations, net of tax (b)(c)(d)

$ ( 42,248 ) $ 24,982 $ ( 34,994 ) $ ( 9,299 ) $ ( 61,559 )

Loss from discontinued operations, net of tax $ ( 1,380 ) $ ( 2,454 ) $ ( 1,807 ) $ ( 1,657 ) $ ( 7,298 )

Net (loss) income (

$ ( 43,628 ) $ 22,528 $ ( 36,801 ) $ ( 10,956 ) $ ( 68,857 )

(Loss) earnings per common share:

Continuing operations $ ( 0.82 ) $ 0.48 $ ( 0.67 ) $ ( 0.18 ) $ ( 1.19 )

Discontinued operations ( 0.03 ) ( 0.05 ) ( 0.04 ) ( 0.03 ) ( 0.14 )

Total Basic Earnings per share $ ( 0.85 ) $ 0.43 $ ( 0.71 ) $ ( 0.21 ) $ ( 1.33 )

Weighted average common shares outstanding - Basic:

51,474 51,666 52,003 52,046 51,797

Continuing operations $ ( 0.82 ) $ 0.46 $ ( 0.67 ) $ ( 0.18 ) $ ( 1.19 )

Discontinued operations ( 0.03 ) ( 0.05 ) ( 0.04 ) ( 0.03 ) ( 0.14 )

Total Diluted Earnings per share $ ( 0.85 ) $ 0.41 $ ( 0.71 ) $ ( 0.21 ) $ ( 1.33 )

Weighted average common shares outstanding - Diluted:

51,474 54,568 52,003 52,046 51,797

(a) For information related to quarterly seasonality and other variance components, see Part II - Item 7.

Management Discussion and Analysis - Results of Operations and Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies.

Summary of Significant Accounting Policies - Seasonality .

(b) (Loss) income from continuing operations includes $ 1,905 , $ 1,116 , $ 46 , and $( 2,123 ) of restructuring and other charges for the 13 weeks ended July 31, 2021, October 30, 2021, January 29, 2022 and April 30, 2022, respectively, and $ 944 for the 52 weeks ended April 30, 2022.

(c) (Loss) income from continuing operations also includes an impairment loss (non-cash) of $ 6,411 for the 13 weeks ended January 29, 2022 and 52 weeks ended April 30, 2022.

(d) (Loss) income from continuing operations includes $( 9,608 ) and $( 9,152 ) of an income tax benefit for the 13 and 52 weeks ended April 30, 2022, respectively.

The income tax benefit was primarily due to the change in pre-tax loss and the change in the assessment of the realization of deferred tax assets, driven by a change in our tax year.

Subsequent Events

May 2023 Debt Amendments

On May 24, 2023, subsequent to quarter end, we amended our existing Credit Agreement to (i) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.75% per annum, in the case of interest accruing based on SOFR, and 2.75%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (ii) defer the reduction of advance rates used to calculate our borrowing capacity by an amount equal to 500 basis points previously required on May 31, 2023 to September 1, 2023, (iii) require cash flow reporting and variance testing commencing June 3, 2023 and (iv) defer partial prepayment of the term loan from the DSS segment sale proceeds to September 1, 2023.

For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated May 24, 2023 and filed with the SEC on May 31, 2023.

July 2023 Debt Amendments

Index to Form 10-K Index to FS

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Continued

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

forth in such amendment, (B) (a) $7,500 for the period of April 1, 2024 through and including April 30, 2024, (b) $2,500 for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment.

There can be no guarantee or assurances that any such transaction or transactions be consummated.

We must pay a fee of $50,000 to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) .

Index to Form 10-K Index to FS

Schedule II—Valuation and Qualifying Accounts

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(In thousands)

For the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020:

of period Charge

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April 29, 2023 $ 2,243 $ 575 $ ( 1,662 ) $ 1,156

May 1, 2021 $ 1,986 $ 4,600 $ ( 2,992 ) $ 3,594

April 30, 2022 $ 3,594 $ 2,750 $ ( 4,101 ) $ 2,243

May 1, 2021 $ 1,986 $ 4,600 $ ( 2,992 ) $ 3,594

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April 29, 2023 $ 2,723 $ 122,831 $ ( 123,128 ) $ 2,426

May 1, 2021 $ 5,063 $ 145,595 $ ( 147,327 ) $ 3,331

April 30, 2022 $ 3,331 $ 123,559 $ ( 124,167 ) $ 2,723

May 1, 2021 $ 5,063 $ 145,595 $ ( 147,327 ) $ 3,331

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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-K

Item 8. Financial Statements and Supplementary Data