Barnes & Noble Education, Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FINANCIAL STATEMENT INDEX Page No. 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 29, 2023, April 30, 2022, and May 1, 2021 (PCAOB ID 42 ) 69 Consolidated Statements of Operations for the years ended April 29, 2023, April 30, 2022, and May 1, 2021 71 Consolidated Balance Sheets as of April 29, 2023 and April 30, 2022 72 Consolidated Statements of Cash Flows for the years ended April 29, 2023, April 30, 2022, and May 1, 2021 73 Consolidated Statements of Equity for the years ended April 29, 2023, April 30, 2022, and May 1, 2021 75 Notes to Consolidated Financial Statements Note 1. Organization 76 Note 2. Summary of Significant Accounting Policies 78 Note 3. Revenue 87 Note 4. Segment Reporting 88 Note 5. Equity and Earnings Per Share 91 Note 6. Fair Value Measurements 92 Note 7. Debt 93 Note 8. Leases 95 Note 9. Supplementary Information 96 Note 10. Related Party Transactions 97 Note 11. Employees Benefit Plans 97 Note 12. Long-Term Incentive Compensation Expense 98 Note 13. Income Taxes 101 Note 14. Legal Proceedings 103 Note 15. Commitments and Contingencies 104 Note 16. Selected Quarterly Financial Information (Unaudited) 104 Note 17. Subsequent Events 105 Financial Statement Schedule Schedule II Valuation and Qualifying Accounts 107 68 Index to Form 10-K Index to FS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Barnes & Noble Education, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Barnes & Noble Education, Inc. 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 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 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee of the Company’s board of directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Non-Returnable Inventory Reserve Description of the Matter As described in Note 2 to the consolidated financial statements, the Company reserves for non-returnable inventory based on its history of liquidating non-returnable inventory. Auditing management’s estimate of the reserves for non-returnable inventory involved especially subjective auditor judgment as such estimates are based on various factors that are affected by current and future market and economic conditions. In particular, the reserve calculations are sensitive to certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand. 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. 69 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. We recalculated the reserve using management’s methodology and assumptions, and we evaluated the methodology and the significant assumptions for reasonableness by comparing them to the related actual historical activity and expected future market and economic conditions. We also analyzed the impact of reasonable changes to the significant assumptions on the recorded inventory reserves. Long-Lived Asset Impairment Description of the Matter As described in Note 2 to the consolidated financial statements, the Company tests its long-lived assets for impairment if an event occurs or circumstances change that would indicate the carrying amount may not be recoverable. If the carrying amount of a long-lived asset (group) exceeds its fair value, the asset (group) is written down to its fair value and an impairment charge is recognized. During the fiscal year 2023, the Company recognized an impairment charge of $6.0 million related to long-lived assets at certain of its stores. Auditing the Company's impairment of store long-lived assets was complex and highly judgmental due to the significant estimation required to determine recoverability of each asset group and to determine the fair value of asset groups that were not recoverable, as well as the fair values of certain operating right-of-use assets included within the asset groups that were not recoverable. The significant assumptions used included annual revenue growth rates, gross margin rates and the estimated relationship of selling and administrative costs to revenue used to estimate the projected cash-flow directly related to the future operation of the stores as well as the weighted average cost of capital used to calculate the fair value. 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. 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. We also tested controls over management’s review of the significant assumptions described above. Our testing of the Company's impairment analysis included, among other procedures, evaluating the significant assumptions described above and the operating data used to calculate the estimated future cash flows of the stores and to determine fair values. We tested the completeness and accuracy of the data used by the Company in its analysis. We also compared the significant assumptions used to determine the projected cash flows to historical operating results of the stores, management’s expectations related to recovery from the pandemic and published third-party information regarding overall college and university enrollment trends; 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. /s/ Ernst & Young LLP We have served as the Company's auditor since 2015. Iselin, New Jersey July 31, 2023 70 Index to Form 10-K Index to FS BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) 52 weeks ended April 29, 2023 April 30, 2022 May 1, 2021 Sales: Product sales and other $ 1,406,655 $ 1,362,380 $ 1,272,366 Rental income 136,553 133,354 134,150 Total sales 1,543,208 1,495,734 1,406,516 Cost of sales (exclusive of depreciation and amortization expense): Product and other cost of sales 1,119,482 1,076,243 1,088,933 Rental cost of sales 74,287 76,659 87,240 Total cost of sales 1,193,769 1,152,902 1,176,173 Gross profit 349,439 342,832 230,343 Selling and administrative expenses 357,611 353,968 316,164 Depreciation and amortization expense 42,163 42,124 45,204 Impairment loss (non-cash) 6,008 6,411 27,630 Restructuring and other charges 10,103 944 10,107 Operating loss ( 66,446 ) ( 60,615 ) ( 168,762 ) Interest expense, net 22,683 10,096 8,087 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 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. 71 Index to Form 10-K Index to FS BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share data) As of April 29, 2023 April 30, 2022 ASSETS Current assets: Cash and cash equivalents $ 14,219 $ 8,795 Receivables, net 92,512 136,001 Merchandise inventories, net 322,979 293,854 Textbook rental inventories 30,349 29,612 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 Property and equipment, net 68,153 73,584 Operating lease right-of-use assets 246,972 286,584 Intangible assets, net 110,632 126,993 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 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 267,923 $ 182,617 Accrued liabilities 85,759 88,540 Current operating lease liabilities 99,980 97,143 Short-term borrowings — 40,000 Liabilities held for sale 8,423 7,102 Total current liabilities 462,085 415,402 Long-term deferred taxes, net 1,970 1,430 Long-term operating lease liabilities 184,754 219,594 Other long-term liabilities 19,068 21,053 Long-term borrowings 182,151 185,700 Total liabilities 850,028 843,179 Commitments and contingencies — — Stockholders' equity: Preferred stock, $ 0.01 par value; authorized, 5,000 shares; 0 shares issued and 0 shares outstanding — — Common stock, $ 0.01 par value; authorized, 200,000 shares; issued, 55,140 and 54,234 shares, respectively; outstanding, 52,604 and 52,046 shares, respectively 551 542 Additional paid-in capital 745,932 740,838 Accumulated deficit ( 593,356 ) ( 491,494 ) Treasury stock, at cost ( 22,376 ) ( 21,512 ) Total stockholders' equity 130,751 228,374 Total liabilities and stockholders' equity $ 980,779 $ 1,071,553 See accompanying notes to consolidated financial statements. 72 Index to Form 10-K Index to FS BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) 52 weeks ended April 29, 2023 April 30, 2022 May 1, 2021 Cash flows from operating activities: Net loss $ ( 101,862 ) $ ( 68,857 ) $ ( 139,810 ) Less: 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 Impairment loss (non-cash) 6,008 6,411 27,630 Merchandise inventory loss and write-off — 434 14,960 Content amortization expense 26 386 745 Amortization of deferred financing costs 3,129 1,472 1,112 Deferred taxes 409 ( 17,838 ) ( 7,772 ) Stock-based compensation expense 4,715 5,726 4,678 Changes in operating lease right-of-use assets and liabilities 5,912 ( 8,475 ) ( 4,367 ) Changes in other long-term assets and liabilities and other, net 2,711 ( 3,291 ) 9,454 Changes in other operating assets and liabilities, net: 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: Purchases of property and equipment $ ( 25,092 ) $ ( 33,607 ) $ ( 27,562 ) 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 $ 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 ) Sale of treasury shares — — 10,869 Purchase of treasury shares ( 864 ) ( 2,370 ) ( 894 ) Proceeds from the exercise of stock options, net — 256 — 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 73 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 Less: 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: Cash paid during the period for: Interest paid $ 19,024 $ 8,166 $ 6,778 Income taxes paid (net of refunds) $ ( 15,216 ) $ ( 8,007 ) $ 6,008 See accompanying notes to consolidated financial statements. 74 Index to Form 10-K Index to FS BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Equity (In thousands) Additional Common Stock Paid-In Accumulated Treasury Stock Total Shares Amount Capital Deficit Shares Amount Equity Balance at May 2, 2020 52,140 $ 521 $ 732,958 $ ( 282,827 ) 3,842 $ ( 32,901 ) $ 417,751 Stock-based compensation expense 5,095 5,095 Vested equity awards 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 ) Net loss ( 139,810 ) ( 139,810 ) Balance at May 1, 2021 53,327 $ 533 $ 734,257 $ ( 422,637 ) 1,948 $ ( 19,142 ) $ 293,011 Stock-based compensation expense 6,333 6,333 Vested equity awards 829 8 ( 8 ) — Shares repurchased for tax withholdings for vested stock awards 240 ( 2,370 ) ( 2,370 ) Issuance of common stock upon exercise of stock options 78 1 256 257 Net loss ( 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 5,103 5,103 Vested equity awards 906 9 ( 9 ) — Shares repurchased for tax withholdings for vested stock awards 348 ( 864 ) ( 864 ) Net loss ( 101,862 ) ( 101,862 ) Balance at April 29, 2023 55,140 $ 551 $ 745,932 $ ( 593,356 ) 2,536 $ ( 22,376 ) $ 130,751 See accompanying notes to consolidated financial statements. 75 Index to Form 10-K Index to FS BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (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., or “BNED”, a Delaware corporation. References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC. Note 1. Organization Description of Business Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions. We operate 1,366 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. 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 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. 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. 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 general merchandise business. 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. 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. Business and Part II - Item 8. Financial Statements and Supplementary Data - Note 4. Segment Reporting. BNC First Day Equitable and Inclusive Access Programs We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty requested course materials on or before the 76 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) 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. 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 general merchandise business. 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, 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. We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. 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. 77 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) Note 2. Summary of Significant Accounting Policies 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 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 78 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) 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. 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. Seasonality 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 79 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) 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 In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. 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. 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. 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. 80 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: As of 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 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. Components of accounts receivables are as follows: As of April 29, 2023 April 30, 2022 Trade accounts $ 71,990 $ 102,358 Advances for book buybacks 2,344 2,292 Credit/debit card receivables 4,733 5,129 Other receivables 13,445 26,222 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 81 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) 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 $ 1,156 , and $ 2,243 as of April 29, 2023 and April 30, 2022, respectively. Merchandise Inventories Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. 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. 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. For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends. The Retail Segment fulfillment order is directed first to our wholesale business before other sources of inventory are utilized. The products that we sell originate from a wide variety of domestic and international vendors. After internal sourcing, the bookstore purchases textbooks from outside suppliers and publishers. The Retail Segment's four largest suppliers, excluding the supply sourced from our Wholesale Segment, accounted for approximately 25 % of our merchandise purchased during the 52 weeks ended April 29, 2023. 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 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. Financial Statements and Supplementary Data - Note 1. Organization. Additionally, during the 52 weeks ended May 1, 2021, we also recognized a merchandise inventory write-off of $ 4,698 in cost of goods sold in the statement of operations for the Retail Segment related to our initiative to exit certain product offerings and streamline/rationalize our overall non-logo general merchandise product assortment resulting from the centralization of our merchandising decision-making during the year. Textbook Rental Inventories Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost. Cloud Computing Arrangements Implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract are amortized to hosting expense over the term of the arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. 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 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. 82 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) Property and Equipment Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over estimated useful lives. 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 $ 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 $ 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: As of Useful Life April 29, 2023 April 30, 2022 Property and equipment: Leasehold improvements (a) $ 120,687 $ 125,324 Machinery, equipment and display fixtures 3 - 5 253,763 252,037 Computer hardware and capitalized software costs (b) 163,098 157,908 Office furniture and other 2 - 7 66,201 64,137 Content development costs (c) 3 - 5 2,519 2,519 Construction in progress 4,644 3,710 Total property and equipment 610,912 605,635 Less accumulated depreciation and amortization 542,759 532,051 Total property and equipment, net $ 68,153 $ 73,584 (a) Leasehold improvements are capitalized and depreciated over the shorter of the lease term or the useful life of the improvements, ranging from 1 - 15 years. (b) System costs are capitalized and amortized over their estimated useful lives, from the date the systems become operational. Purchased software is generally amortized over a period of between 2 - 5 years. (c) Content development costs are fully depreciated and are generally depreciated over 3 - 5 years. Intangible Assets Amortizable intangible assets as of April 29, 2023 and April 30, 2022 are as follows: As of April 29, 2023 Amortizable intangible assets Estimated Useful Life Gross Carrying Amount Accumulated Amortization Total Customer relationships 7 - 11 $ 239,955 $ ( 130,667 ) $ 109,288 Technology 3 1,500 ( 1,500 ) — Other (a) 1 - 4 4,162 ( 2,818 ) 1,344 $ 245,617 $ ( 134,985 ) $ 110,632 As of April 30, 2022 Amortizable intangible assets Estimated Useful Life Gross Carrying Amount Accumulated Amortization Total Customer relationships 8 - 12 $ 251,728 $ ( 126,429 ) $ 125,299 Technology 3 1,500 ( 1,500 ) — Other (a) 1 - 5 4,162 ( 2,468 ) 1,694 $ 257,390 $ ( 130,397 ) $ 126,993 (a) Other consists of recognized intangibles for non-compete agreements, trade names, and favorable leasehold interests. 83 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. Aggregate Amortization Expense: For the 52 weeks ended April 29, 2023 $ 12,761 For the 52 weeks ended April 30, 2022 $ 11,992 For the 52 weeks ended May 1, 2021 $ 12,006 Estimated Amortization Expense: (Fiscal Year) 2024 $ 10,344 2025 $ 10,344 2026 $ 10,344 2027 $ 10,286 2028 $ 9,994 After 2028 $ 59,320 For additional information about intangible assets, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies . Leases 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 Accounting Standards Codification (“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). We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 8. Leases . Impairment of Long-Lived Assets 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 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 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. 84 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) During the third quarter of Fiscal 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 6,008 (both pre-tax and after-tax), comprised of $ 708 , $ 1,697 , $ 3,599 and $ 4 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations. 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. The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations. The significant assumptions used in the income approach included annual revenue growth rates, gross margin rates and the estimated relationship of selling and administrative costs to revenue used to estimate the projected cash-flow directly related to the future operation of the stores as well as the weighted average cost of capital used to calculate the fair value. Significant assumptions used to determine the fair values of certain operating right-of-use assets included the current market rent and discount rate. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 6. Fair Value Measurements . Revenue Recognition and Deferred Revenue Product sales and rentals 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. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 3. Revenue. Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. 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 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. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale. 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. 85 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. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis. Effective in April 2021, as contemplated by the 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. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year. Service and other revenue 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. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions. Cost of Sales Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses. Selling and Administrative Expenses 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. 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. Long-Term Incentive Compensation We have granted awards in accordance with the Barnes & Noble Education Inc. Equity Incentive Plan (the “Equity Incentive Plan”). Types of equity awards that can be granted under the Equity Incentive Plan include options, restricted stock, restricted stock units, performance shares, performance share units, and phantom share units. See Part II - Item 8. Financial Statements and Supplementary Data - Note 12. Long-Term Incentive Compensation Expense for additional information regarding expense recognition for each type of award. Advertising Costs The costs of advertising are expensed as incurred during the year pursuant to ASC No. 720-35, Advertising Costs . 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. 86 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) Income Taxes The provision for income taxes includes federal, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be necessary. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 13. Income Taxes. 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. Note 3. Revenue Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services. See Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Pronouncements for additional information related to our revenue recognition policies and Part II - Item 8. Financial Statements and Supplementary Data - Note 4. Segment Reporting for a description of each segments product and service offerings. Disaggregation of Revenue The following table disaggregates the revenue associated with our major product and service offerings. 52 weeks ended April 29, 2023 April 30, 2022 May 1, 2021 Retail Course Materials Product Sales $ 927,915 $ 911,182 $ 864,195 General Merchandise Product Sales (a) 385,499 346,999 274,704 Service and Other Revenue (b) 41,759 48,129 57,421 Retail Product and Other Sales sub-total 1,355,173 1,306,310 1,196,320 Course Materials Rental Income 136,553 133,354 134,150 Retail Total Sales $ 1,491,726 $ 1,439,664 $ 1,330,470 Wholesale Sales $ 106,366 $ 112,246 $ 165,825 Eliminations (c) $ ( 54,884 ) $ ( 56,176 ) $ ( 89,779 ) Total Sales $ 1,543,208 $ 1,495,734 $ 1,406,516 (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. 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. (b) Service and other revenue primarily relates to brand partnerships and other service revenues. (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 Contract assets represent the sale of goods or services to a customer before we have the right to obtain consideration from the customer. Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract assets (unbilled receivables) were $ 0 as of both April 29, 2023 and April 30, 2022 on our consolidated balance sheets. 87 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) 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; and • 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 Lids. respectively as discussed in Part II - Item 8. Financial Statements and Supplementary Data - Note 5. Equity and Earnings Per Share - Sale of Treasury Shares. 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 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. Note 4. Segment Reporting 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. 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. The following summarizes the three segments. For additional information about this segments operations, see Part I - Item 1. Business. Retail Segment The Retail Segment operates 1,366 college, university, and K-12 school bookstores, comprised of 774 physical bookstores and 592 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce 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. 88 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) 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: • The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale, and • These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period. Our international operations are not material and the majority of the revenue and total assets are within the United States. As of April 29, 2023 April 30, 2022 Total Assets Retail $ 785,900 $ 875,569 Wholesale 160,868 159,125 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 52 weeks ended 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 Corporate Services 35 62 449 Total Capital Expenditures $ 25,092 $ 33,607 $ 27,562 89 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) Summarized financial information for our reportable segments is reported below: 52 weeks ended April 29, 2023 April 30, 2022 (a) May 1, 2021 (a) Sales: Retail $ 1,491,726 $ 1,439,664 $ 1,330,470 Wholesale 106,366 112,246 165,825 Eliminations ( 54,884 ) ( 56,176 ) ( 89,779 ) Total Sales $ 1,543,208 $ 1,495,734 $ 1,406,516 Gross Profit Retail (b) $ 331,344 $ 322,983 $ 195,617 Wholesale 18,275 19,782 34,683 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 Retail $ 36,737 $ 36,635 $ 39,634 Wholesale 5,373 5,418 5,461 Corporate Services 53 71 109 Total Depreciation and Amortization $ 42,163 $ 42,124 $ 45,204 Impairment loss (non-cash) - Retail (c) $ 6,008 $ 6,411 $ 27,630 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 ) Wholesale ( 3,050 ) 495 14,732 Corporate Services ( 28,276 ) ( 24,030 ) ( 28,376 ) Eliminations ( 25 ) 225 192 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 from Continuing Operations Before Income Taxes $ ( 89,129 ) $ ( 70,711 ) $ ( 176,849 ) 90 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. (b) In Fiscal 2022 and 2021, gross margin includes a merchandise inventory loss and write-off of $ 434 and $ 14,960 , respectively, in the Retail Segment. See Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Merchandise Inventories . (c) See Part II - Item 8. Financial Statements and Supplementary Data - Note 9. Supplementary Information . Note 5. Equity and Earnings Per Share Equity Our authorized capital stock consists of 200,000,000 shares of common stock, par value $ 0.01 per share, and 5,000,000 shares of preferred stock, par value $ 0.01 per share. As of April 29, 2023, 55,140,186 shares and 52,604,274 shares of our common stock were issued and outstanding, respectively, and 0 shares of our preferred stock were both issued and outstanding. Our common stock trades on the NYSE under the symbol “BNED”. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Holders of shares of our common stock do not have cumulative voting rights in the election of directors. The holders of our common stock will be entitled to share ratably in our assets legally available for distribution to our stockholders, subject to the prior distribution rights of preferred stock, if any, then outstanding. The holders of our common stock do not have preemptive rights or preferential rights to subscribe for shares of our capital stock. Repurchase of Shares On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $ 50,000 , in the aggregate, of our outstanding common stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the Fiscal 2023, Fiscal 2022 and Fiscal 2021, we did not purchase shares under the stock repurchase program. As of April 29, 2023, approximately $ 26,669 remains available under the stock repurchase program. During the Fiscal 2023, Fiscal 2022 and Fiscal 2021, we also repurchased 347,808 , 239,751 shares, and 414,174 shares of our common stock in connection with employee tax withholding obligations for vested stock awards, respectively. Sale of Treasury Shares 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. and Lids Holdings, Inc. jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $ 15,000 , representing a share price of $ 6.50 per share. The premium price paid above the fair market value of our common stock at closing was approximately $ 4,131 and was recorded as a contract liability which is recognized over the term of the merchandising contracts for Fanatics and 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 Lids . Dividends 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. See Part II - Item 8. Financial Statements and Supplementary Data - Note 7 - Debt and Note 17. Subsequent Event for details. Earnings Per Share Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. 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 91 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) 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. During the Fiscal 2023, Fiscal 2022 and Fiscal 2021, average shares of 4,740,436 , 3,995,990 , and 3,387,185 , respectively, were excluded from the diluted earnings per share calculation using the two-class method as their inclusion would have been antidilutive. The following is a reconciliation of the basic and diluted earnings per share calculation: 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 ) Denominator for basic and diluted earnings per share: Basic and diluted weighted average shares of Common Stock 52,454 51,797 49,669 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 ) Note 6. Fair Values Measurements In accordance with ASC No. 820, Fair Value Measurements and Disclosures , the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1—Observable inputs that reflect quoted prices in active markets Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-term debt approximates its carrying value. Non-Financial Assets and Liabilities 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 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 92 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) discounted cash flows, based on historical experience, market conditions, current trends and performance expectations. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies. The following table shows the fair values of our non-financial assets and liabilities that were required to be remeasured at fair value on a non-recurring basis for each respective period and the total impairments recorded as a result of the remeasurement process: 52 weeks ended April 29, 2023 52 weeks ended April 30, 2022 52 weeks ended May 1, 2021 Carrying Value Prior to Impairment Fair Value Impairment Loss (non-cash) Carrying Value Prior to Impairment Fair Value Impairment Loss (non-cash) Carrying Value Prior to Impairment Fair Value Impairment Loss (non-cash) Property and equipment, net $ 708 $ — $ 708 $ 742 $ 3 $ 739 $ 5,505 $ 420 $ 5,085 Operating lease right-of-use assets 3,002 1,305 1,697 3,299 1,506 1,793 26,427 13,099 13,328 Intangible assets, net 3,599 — 3,599 3,745 77 3,668 7,723 1,445 6,278 Other noncurrent assets 4 — 4 211 — 211 3,539 600 2,939 Total $ 7,313 $ 1,305 $ 6,008 $ 7,997 $ 1,586 $ 6,411 $ 43,194 $ 15,564 $ 27,630 Non-Financial Liabilities We granted phantom share units as long-term incentive awards which are settled in cash based on the fair market value of a share of common stock of the Company at each vesting date. The fair value of the liability for the cash-settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk-free rate and volatility assumptions. As of 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 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. Financial Statements and Supplementary Data - Note 12. Long-Term Incentive Compensation Expense . Note 7. Debt As of April 29, 2023 April 30, 2022 Credit Facility $ 154,154 $ 185,700 FILO Facility — 40,000 Term Loan 30,000 — sub-total 184,154 225,700 Less: 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 93 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) 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. 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. Term Loan 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. 94 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 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 . Note 8. Leases 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 ASC 842, Leases (Topic 842). 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; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less). We recognize a right of use (“ROU”) asset and lease liability in our consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year. Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises (“variable commissions”), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants. We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later. 95 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 29, 2023 April 30, 2022 May 1, 2021 Variable lease expense $ 69,570 $ 77,956 $ 69,511 Operating lease expense 135,037 114,815 108,282 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 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: As of April 29, 2023 Fiscal 2024 $ 111,864 Fiscal 2025 55,801 Fiscal 2026 39,052 Fiscal 2027 30,724 Fiscal 2028 24,276 Thereafter 59,252 Total lease payments 320,969 Less: imputed interest ( 36,235 ) Operating lease liabilities at period end $ 284,734 Future lease payment obligations related to leases that were entered into, but did not commence as of April 29, 2023, were not material. The following summarizes additional information related to our operating leases: As of 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 Weighted average discount rate 4.7 % 4.7 % 4.9 % Supplemental cash flow information: Cash payments for lease liabilities within operating activities $ 127,582 $ 123,037 $ 111,167 ROU assets obtained in exchange for lease liabilities from initial recognition $ 97,926 $ 160,510 $ 123,556 Note 9. Supplementary Information Impairment Loss (non-cash) 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. For information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies . During the 52 weeks ended April 29, 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 6,008 (both pre-tax and after-tax), comprised of $ 708 , $ 1,697 , $ 3,599 and $ 4 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations. 96 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) During the 52 weeks ended April 30, 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 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. 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). Note 10. Related Party Transactions MBS Textbook Exchange, LLC Prior to the acquisition of MBS on February 27, 2017, MBS was considered a related-party as it was majority-owned by Leonard Riggio, who is a principal owner holding substantial shares of our common stock, and other members of the Riggio family. Subsequent to the acquisition, the consolidated financial statements include the accounts of MBS and all material intercompany accounts and transactions have been eliminated in consolidation. MBS leases its main warehouse and distribution facility located in Columbia, Missouri from MBS Realty Partners L.P. which is majority-owned by Leonard Riggio, with the remaining ownership by other sellers of MBS. The lease was originally entered into in 1991 and included a renewal option which extended the lease through September 1, 2023. 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 $ 1,150 , $ 1,380 and $ 1,380 during the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively. Note 11. Employee Benefit Plans We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS. 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, 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. 97 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) Note 12. Long-Term Incentive Compensation Expense We have reserved 13,409,345 shares of our common stock for future grants in accordance with the Barnes & Noble Education Inc. Equity Incentive Plan. Types of equity awards that can be granted under the Equity Incentive Plan include options, restricted stock (“RS”), restricted stock units (“RSU”), performance shares (“PS”), performance share units (“PSU”), and stock options. We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense for these awards based on the number of awards expected to vest, which includes an estimated average forfeiture rate. We calculate the fair value of these awards based on the closing stock price on the date the award was granted. For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied. Restricted Stock Awards A RS award is an award of common stock that is subject to certain restrictions during a specified period. Restricted stock awards are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares of unvested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon (although payment may be deferred until the shares have vested) and are considered to be currently issued and outstanding. Restricted stock awards will have a minimum vesting period of one year. A RSU is a grant valued in terms of our common stock, but no stock is issued at the time of grant. Each restricted stock unit may be redeemed for one share of our common stock once vested. Restricted stock units are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the units except in very limited circumstances and with the consent of the compensation committee. Shares associated with unvested restricted stock units have no voting rights but are entitled to receive dividends and other distributions thereon (although payment may be deferred until the units have vested). Restricted stock units generally vest over a period of three years, but will have a minimum vesting period of one year. Performance Share Awards PS awards and PSU awards were granted to employees. Each PS and PSU may be redeemed for one share of our common stock once vested and are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the PS or PSU awards except in very limited circumstances and with the consent of the compensation committee. Shares of unvested PSU awards have no voting rights but are entitled to receive dividends and other distributions thereon (although payment may be deferred until the shares or units, as the case may be, have vested). The PS and PSU awards will only vest based upon the achievement of pre-established performance goals related to Adjusted EBITDA, segment revenue, new business, and/or total shareholder return performance achieved over a period of time. The PS and PSU awards will vest based on company performance and/or market conditions during the subsequent two year period with one additional year of time-based vesting. 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 98 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 For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model. The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options. During Fiscal 2023, we granted 322,495 stock options with an exercise price of $ 2.36 per stock option, which was the fair market value on the date of grant (Stock Option Grant #1) and 348,723 stock options with an exercise price of $ 4.86 per stock option (Stock Option Grant #2) granted to employees. The stock options are exercisable in four equal annual installments commencing one year after the date of grant and have a ten year term. Holders are not entitled to receive dividends (if any) prior to vesting and exercise of the options. The following summarizes the stock option fair value assumptions: Stock Option Grant #1 Stock Option Grant #2 Exercise Price $ 2.36 $ 4.86 Valuation method utilized Black-Scholes Monte Carlo Risk-free interest rate 3.28 % 3.28 % Expected option term 6.3 years 10.0 years Company volatility 74 % 74 % Dividend yield — % — % Grant date fair value per award $ 1.61 $ 1.28 The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term. For Stock Option Grant #1, we are permitted to use the simplified approach to estimate the expected term of the stock options, which typically assumes exercise occurs at the mid-point between the end of the vesting period and the expiration date. The simplified approach is not allowed for premium-priced options (Stock Option Grant #2), which were estimated using a stock price multiple, as there is no option exercise history which to base an early exercise option. The expected stock option term represents the weighted average period of time that stock options granted are expected to be outstanding, based on vesting schedules and the contractual term of the stock options. Volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term. 99 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 Activity The following table presents a summary of awards activity related to our current Equity Incentive Plan: Restricted Stock Awards Restricted Stock Units Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value 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 — $ — ( 477,651 ) $ 5.54 Balance, April 29, 2023 11,804 $ 2.30 1,090,973 $ 5.33 Performance Share Units Phantom Shares Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Balance, April 30, 2022 528,567 $ 2.23 1,539,027 $ 2.72 Granted — $ — — $ — Vested ( 241,820 ) $ 2.23 ( 720,289 ) $ 2.39 Forfeited (a) ( 286,747 ) $ 2.23 ( 216,595 ) $ 3.02 Balance, April 29, 2023 — $ — 602,143 $ 3.01 Stock Options Number of Shares Weighted Average Grant Date Fair Value Weighted Average Exercise Price Balance, April 30, 2022 2,702,937 $ 2.79 $ 5.82 Granted 671,218 $ 1.44 $ 3.66 Exercised (b) — $ — $ — 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 Exercisable, April 29, 2023 1,137,691 $ 2.13 $ 4.84 (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 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. 100 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 We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as follows: 52 weeks ended April 29, 2023 April 30, 2022 May 1, 2021 Stock-based awards Restricted stock expense $ 172 $ 394 $ 226 Restricted stock units expense 2,813 3,399 3,487 Performance share units expense (a) 10 120 298 Stock option expense 1,720 1,813 667 Sub-total stock-based awards: $ 4,715 $ 5,726 $ 4,678 Cash settled awards Phantom share units expense $ ( 299 ) $ 3,929 $ 3,575 Total compensation expense for long-term incentive awards $ 4,416 $ 9,655 $ 8,253 (a) Long-term incentive compensation expense reflects cumulative adjustments to reflect changes to the expected level of achievement of the respective grants. 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. Note 13. 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. Tax Reform On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”) was enacted. We have analyzed the provisions, which provide for a technical correction to allow for full expensing of qualified leasehold improvements, modifications to charitable contribution and net operating loss limitations (“NOLs”), modifications to the deductibility of business interest expense, as well as Alternative Minimum Tax (“AMT”) credit acceleration. 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 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 29, 2023 April 30, 2022 May 1, 2021 Current: Federal $ — $ ( 1,900 ) $ ( 35,130 ) State 301 444 ( 524 ) International 252 266 147 Total Current 553 ( 1,190 ) ( 35,507 ) Deferred: Federal 458 ( 12,075 ) ( 5,803 ) State — 4,113 ( 1,970 ) International — — — Total Deferred 458 ( 7,962 ) ( 7,773 ) Total US tax provision $ 1,011 $ ( 9,152 ) $ ( 43,280 ) 101 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) Reconciliation between the effective income tax rate and the federal statutory income tax rate is as follows: 52 weeks ended April 29, 2023 April 30, 2022 May 1, 2021 Federal statutory income tax rate (a) 21.0 % 21.0 % 21.0 % State income taxes, net of federal income tax benefit 3.6 4.6 4.4 Permanent book / tax differences ( 1.2 ) ( 0.8 ) ( 1.0 ) CARES Act NOL Carryback — — 4.1 Valuation allowance ( 24.6 ) ( 12.3 ) ( 4.2 ) Other, net 0.1 0.4 0.2 Effective income tax rate ( 1.1 ) % 12.9 % 24.5 % 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 officer's compensation, and non-deductible stock compensation. We account for income taxes using the asset and liability method. Deferred taxes are recorded based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. The significant components of our deferred taxes consisted of the following: As of April 29, 2023 April 30, 2022 Deferred tax assets: Estimated accrued liabilities $ 5,840 $ 7,141 Inventory 19,426 16,113 Stock-based compensation 1,145 1,879 Insurance liability 347 374 Operating lease liabilities 65,471 75,950 Tax credits 886 440 Goodwill 8,314 9,214 Net operating losses 70,503 53,149 Interest carryforwards 7,246 2,390 Other 2,456 2,620 Gross deferred tax assets 181,634 169,270 Valuation allowance ( 56,962 ) ( 33,209 ) Net deferred tax assets 124,672 136,061 Deferred tax liabilities: Intangible asset amortization ( 23,555 ) ( 27,160 ) Operating lease right-of-use assets ( 63,201 ) ( 73,035 ) LIFO inventory valuation ( 33,999 ) ( 29,917 ) Property and equipment ( 5,755 ) ( 7,379 ) Gross deferred tax liabilities ( 126,510 ) ( 137,491 ) Net deferred tax liability $ ( 1,838 ) $ ( 1,430 ) 102 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 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 May 2, 2020 $ 52 Additions for tax positions of the current period — Additions for tax positions of prior periods — Reductions due to settlements — Other reductions for tax positions of prior periods ( 52 ) Balance at May 1, 2021 $ — Additions for tax positions of the current period — Additions for tax positions of prior periods — Reductions due to settlements — Other reductions for tax positions of prior periods — Balance at April 30, 2022 $ — Additions for tax positions of the current period — Additions for tax positions of prior periods — Reductions due to settlements — Other reductions for tax positions of prior periods — Balance at April 29, 2023 $ — Our policy is to recognize interest and penalties related to income tax matters in income tax expense. 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 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. If additional earnings in these foreign subsidiaries were repatriated in the future, additional income and withholding tax expense would be incurred. Additional income and withholding tax expense on any future repatriated earnings is estimated to be less than $ 100 . We are subject to U.S. federal income tax, as well as income tax in jurisdictions of each state having an income tax. The tax years that remain subject to examination are primarily Fiscal 2018 and forward. Some earlier years remain open for a small minority of states. Note 14. 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 consolidated financial position, results of operations, or cash flows. 103 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) Note 15. Commitments and Contingencies We generally operate our physical bookstores pursuant to multi-year school management contracts under which a school designates us to operate the official school physical bookstore on campus and we provide the school with regular payments that represent a percentage of store sales and, in some cases, include a minimum fixed guaranteed payment. We account for these service agreements for our physical bookstores under lease accounting. 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. For additional information on lease expense and minimum fixed lease obligations, excluding variable commissions, see Part II - Item 8. Financial Statements and Supplementary Data - Note 8. Leases . Purchase obligations, which includes information technology contracts, as of April 29, 2023 are as follows: Less Than 1 Year $ 12,254 1-3 Years 4,341 3-5 Years 476 Total $ 17,071 Note 16. 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. 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. 104 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: Basic 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 Diluted 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 - 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. Note 17. 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 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 105 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. 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) . 106 Index to Form 10-K Index to FS Schedule II—Valuation and Qualifying Accounts Receivables Valuation and Qualifying Accounts (In thousands) Balance at beginning of period Charge (recovery) to costs and expenses Write-offs Balance at end of period Allowance for Doubtful Accounts April 29, 2023 $ 2,243 $ 575 $ ( 1,662 ) $ 1,156 April 30, 2022 $ 3,594 $ 2,750 $ ( 4,101 ) $ 2,243 May 1, 2021 $ 1,986 $ 4,600 $ ( 2,992 ) $ 3,594 Balance at beginning of period Addition Charged to Costs Deductions Balance at end of period Sales Returns Reserves April 29, 2023 $ 2,723 $ 122,831 $ ( 123,128 ) $ 2,426 April 30, 2022 $ 3,331 $ 123,559 $ ( 124,167 ) $ 2,723 May 1, 2021 $ 5,063 $ 145,595 $ ( 147,327 ) $ 3,331 All other schedules are omitted because the conditions requiring their filing do not exist, or because the required information is provided in the consolidated financial statements, including the notes thereto. 107 Index to Form 10-K Index to FS Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no disagreements with accountants on accounting and financial disclosure.