What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-09-06 compared with 2023-03-09 · 357 added, 350 removed, 413 unchanged (63% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

13 weeks ended 39 weeks ended

2023 January 29,

2022 January 28,

2023 January 29,

13 weeks ended

2023 July 30,

Product sales and other $ 252,650 $ 243,762

8 unchanged sentences

Depreciation and amortization expense 10,253 10,896

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

Restructuring and other charges 4,633 375

1 unchanged sentence

Interest expense, net 8,254 3,868

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

Income tax expense 267 615 900 811

Loss from continuing operations before income taxes ( 49,982 ) ( 49,475 )

Income tax (benefit) expense

Loss from continuing operations $ ( 49,971 ) $ ( 50,322 )

Loss from discontinued operations, net of tax $ 20 and $ 86 , respectively

$ ( 417 ) $ ( 2,385 )

Net loss $ ( 50,388 ) $ ( 52,707 )

Loss per share of common stock:

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

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

Weighted average shares of common stock outstanding:

Basic 52,602 52,003 52,404 51,714

Diluted 52,602 52,003 52,404 51,714

Basic and Diluted:

Continuing operations $ ( 0.95 ) $ ( 0.96 )

Discontinued operations $ ( 0.01 ) $ ( 0.05 )

Total Basic and Diluted Earnings per share $ ( 0.96 ) $ ( 1.01 )

Weighted average common shares outstanding - Basic and Diluted 52,642 52,172

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In thousands, except per share data)

2023 January 29,

2023 July 30,

2022 April 29,

6 unchanged sentences

Prepaid expenses and other current assets 59,012 57,184 49,512

Assets held for sale, current — 30,425 27,430

Total current assets 598,572 686,234 537,001

2 unchanged sentences

Intangible assets, net 107,413 123,339 110,632

Goodwill 4,700 4,700 4,700

Deferred tax assets, net — — 132

7 unchanged sentences

Short-term borrowings — 40,000 —

Liabilities held for sale — 5,482 8,423

Total current liabilities 516,089 608,448 462,085

22 unchanged sentences

Condensed Consolidated Statements of Cash Flows

(In thousands)

(In thousands) (unaudited)

13 weeks ended

2023 January 29,

2023 July 30,

Cash flows from operating activities:

Net loss $ ( 50,388 ) $ ( 52,707 )

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

Loss from discontinued operations, net of tax ( 417 ) ( 2,385 )

Loss from continuing operations ( 49,971 ) ( 50,322 )

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

Depreciation and amortization expense 10,253 10,896

1 unchanged sentence

Amortization of deferred financing costs 1,244 555

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

Merchandise inventory loss — 434

Deferred taxes ( 3 ) —

Stock-based compensation expense 957 1,576

Changes in other long-term assets and liabilities, net 362 260

Changes in operating lease right-of-use assets and liabilities 721 ( 1,230 )

Changes in other long-term assets and liabilities, net 4,056 1,782

Changes in other operating assets and liabilities, net

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

Receivables, net ( 48,346 ) 17,048

Merchandise inventories ( 61,206 ) ( 169,701 )

Textbook rental inventories 23,489 21,110

Prepaid expenses and other current assets ( 12,168 ) ( 782 )

Accounts payable and accrued liabilities 11,116 140,435

Changes in other operating assets and liabilities, net ( 87,115 ) 8,110

Net cash flows used in operating activities from continuing operations ( 119,858 ) ( 28,607 )

Net cash flows used in operating activities from discontinued operations ( 3,266 ) ( 392 )

Net cash flow used in operating activities $ ( 123,124 ) $ ( 28,999 )

Cash flows from investing activities:

1 unchanged sentence

Net change in other noncurrent assets 78 —

Net cash flows used in investing activities ( 26,327 ) ( 32,659 )

Net cash flows used in investing activities from continuing operations ( 4,141 ) ( 7,530 )

Net cash flows provided by (used in) investing activities from discontinued operations 21,395 ( 2,196 )

Net cash flow used in investing activities $ 17,254 $ ( 9,726 )

Cash flows from financing activities:

3 unchanged sentences

Purchase of treasury shares ( 98 ) ( 612 )

Proceeds from the exercise of stock options, net — 256

Net cash flows provided by financing activities from continuing operations 93,176 33,429

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

Net cash flows provided by financing activities $ 93,176 $ 33,429

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

Net decrease in cash, cash equivalents and restricted cash ( 12,694 ) ( 5,296 )

Cash, cash equivalents and restricted cash at beginning of period 31,988 21,036

Cash, cash equivalents and restricted cash at end of period 19,294 15,740

Changes in other operating assets and liabilities, net:

Receivables, net $ ( 140,474 ) $ ( 129,115 )

Merchandise inventories ( 115,070 ) ( 122,968 )

Textbook rental inventories ( 5,856 ) ( 12,284 )

Prepaid expenses and other current assets 14,034 ( 4,697 )

Accounts payable and accrued liabilities 215,221 279,334

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

Cash, cash equivalents and restricted cash of discontinued operations at end of period — ( 633 )

Cash, cash equivalents, and restricted cash of continuing operations at end of period $ 19,294 $ 15,107

See accompanying notes to condensed consolidated financial statements.

5 unchanged sentences

Shares Amount Capital Deficit Shares Amount Equity

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

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

Stock-based compensation expense

5 unchanged sentences

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

Stock-based compensation expense

Vested equity awards

487 5 ( 5 ) —

Shares repurchased for tax withholdings for vested stock awards

108 ( 1,144 ) ( 1,144 )

Issuance of common stock upon exercise of stock options 10 — 37 37

Net income 22,528 22,528

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

Stock-based compensation expense 1,863 1,863

Vested equity awards 4 — — —

Shares repurchased for tax withholdings for vested stock awards 2 ( 11 ) ( 11 )

Issuance of common stock upon exercise of stock options 68 1 219 220

Net loss ( 36,801 ) ( 36,801 )

Balance January 29, 2022 54,234 $ 542 $ 738,968 $ ( 480,538 ) 2,188 $ ( 21,512 ) $ 237,460

Common Stock Paid-In Accumulated Treasury Stock Total

8 unchanged sentences

Balance July 29, 2023 55,319 $ 553 $ 746,724 $ ( 643,744 ) 2,614 $ ( 22,474 ) $ 81,059

Stock-based compensation expense

Vested equity awards

357 4 ( 4 ) —

Shares repurchased for tax withholdings for vested stock awards

107 ( 245 ) ( 245 )

Net income 22,144 22,144

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

Stock-based compensation expense

Vested equity awards

Shares repurchased for tax withholdings for vested stock awards

3 ( 7 ) ( 7 )

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

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

2 unchanged sentences

References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC.

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, which includes consolidated financial statements for the Company as of April 30, 2022 and May 1, 2021 and for each of the three fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020 (Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively) and the unaudited condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the quarter ended July 30, 2022, and for the quarter ended October 29, 2022.

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023, which includes consolidated financial statements for the Company as of April 29, 2023, and April 30, 2022 and for each of the three fiscal years ended April 29, 2023, April 30, 2022 and May 1, 2021 (Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively).

Description of Business

1 unchanged sentence

(“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 are also one of the largest textbook wholesalers, inventory management hardware and software providers.

We operate 1,289 physical, virtual, and custom bookstores and serve more than 5.8 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

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

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

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

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

We offer our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required 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 the first quarter ended July 29, 2023, BNC First Day total revenue increased by $ 16,715 , or 37 %, to $ 61,773 compared to $ 45,057 during 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”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

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

D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Partnership”), win new accounts, and expand our strategic opportunities through 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, and for being a trusted source for students in our direct-to-student digital solutions business.

We have three reportable segments:

Retail, Wholesale and DSS.

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.

We have two reportable segments:

Retail and Wholesale.

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

Business in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023 .

First Day Inclusive and Equitable Access Programs

BNC First Day Equitable and Inclusive Access Programs

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

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

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

We offer our BNC First Day ® equitable and inclusive access

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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

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

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

programs, consisting of First Day Complete and First Day , which provide faculty required 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.

• 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 for the Fall of 2023 and the majority of schools by Fall 2024.

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

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

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

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.

In the Fall of 2023, 157 campus stores are utilizing First Day ® Complete representing enrollment of nearly 800,000 undergraduate and post graduate students (as reported by National Center for Education Statistics), an increase of approximately 46% compared to Fall of 2022.

During the 13 weeks ended July 29, 2023, First Day Complete sales increased by $ 9,058 , or 55 %, to $ 25,522 as compared to $ 16,464 in the prior year period.

During the 13 weeks ended July 29, 2023, First Day sales increased by $ 7,657 , or 27 %, to $ 36,251 as compared to $ 28,593 in the prior year period.

Partnership with Fanatics and Lids

7 unchanged sentences

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

COVID-19 Business Impact

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

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

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

While the impact of the COVID-19 pandemic is lessening, we cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations .

Although most four year schools returned to a traditional on-campus environment, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

Summary of Significant Accounting Policies

1 unchanged sentence

Our condensed consolidated financial statements reflect our condensed 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 condensed consolidated statement of operations.

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

These condensed consolidated financial statements are

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

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

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

Due to the seasonal nature of the business, the results of operations for the 13 weeks ended July 29, 2023 are not indicative of the results expected for the 52 weeks ending April 27, 2024 (Fiscal 2024).

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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

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

Liquidity and Going Concern

The accompanying condensed 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 condensed 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 condensed 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.

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 July 29, 2023, we had $ 19,294 of cash on hand, including $ 10,704 of restricted cash related to segregated funds for commission due to Fanatics for logo merchandise sales as per the merchandising partnership agreement.

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.

We incurred a Net Loss from Continuing Operations of $( 49,971 ) and $( 50,322 ) for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and 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.

Our Cash Flow Used In Operating Activities from Continuing Operations were $( 119,858 ) and $( 28,607 ) for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and were $ 90,513 , $( 16,195 ), and $ 27,049 , for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, 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 losses and projected cash needs, combined with our current liquidity level, raised substantial doubt about our ability to continue as a going concern as of the year ended April 29, 2023, which Management subsequently remediated by implementing a plan to improve the Company’s liquidity and successfully alleviate substantial doubt including (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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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), and as of the date of this filing, we have satisfied such requirements.

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).

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, 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 second half of 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.

During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations decreased by $351 compared to the prior year period.

During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations, excluding interest expense and restructuring and other charges, improved by $8,995 primarily due to operational improvements and cost savings initiatives.

As discussed below, our first quarter is generally a low sales period, as the majority of sales and operating profit will be realized during the second and third quarters.

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 condensed consolidated financial statements and to continue to alleviate the conditions that initially raised substantial doubt about the Company's ability to continue as a going concern.

Our business is highly seasonal.

1 unchanged sentence

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

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

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

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

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

Due to the seasonal nature of the business, the results of operations for the 13 and 39 weeks ended January 28, 2023 are not indicative of the results expected for the 52 weeks ending April 29, 2023 (Fiscal 2023).

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 quarters, as it sells textbooks and other course materials for retail distribution.

See Revenue Recognition and Deferred Revenue discussion below.

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates.

Restricted Cash

As of January 28, 2023 and January 29, 2022, we had restricted cash of $ 18,309 and $ 2,775 , respectively, comprised of $ 17,397 and $ 1,878 , respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Partnership's merchandising agreement, and $ 912 and $ 897 , respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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 condensed 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 condensed 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 condensed 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, 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 13 weeks ended July 29, 2023, we recorded a Gain on Sale of Business of $ 3,068 in Net Loss from Discontinued Operations related to the sale.

Net cash proceeds from the sale were 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:

13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022

Total sales $ 2,784 $ 9,184

Cost of sales (a)

Gross profit (a)

Selling and administrative expenses 2,281 8,146

Depreciation and amortization — 1,637

Gain on sale of business ( 3,068 ) —

Impairment loss (non-cash) (b)

Restructuring costs (c)

Transaction costs ( 5 ) —

Operating loss ( 397 ) ( 2,299 )

Income tax expense 20 86

Loss from discontinued operations, net of tax $ ( 417 ) $ ( 2,385 )

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $ 0 and $ 1,551 for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively.

(b) During the 13 weeks ended July 29, 2023, we recognized an impairment loss (non-cash) of $ 610 (both pre-tax and after-tax), comprised of $ 119 and $ 491 of property and equipment and operating lease right-of-use assets, respectively, on the condensed consolidated statement of operations as part of discontinued operations.

(c) During the 13 weeks ended July 29, 2023, we recognized restructuring and other charges of $ 3,287 comprised of severance and other employee termination costs.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

(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 condensed consolidated balance sheets:

April 29, 2023 July 30, 2022

Cash and cash equivalents $ 1,057 $ 633

Receivables, net 480 649

Prepaid expenses and other current assets 901 2,043

Property and equipment, net 19,523 20,904

Intangible assets, net 402 1,230

Goodwill 4,700 4,700

Deferred tax assets, net 130 —

Other noncurrent assets 237 266

Assets held for sale $ 27,430 $ 30,425

Accounts payable $ 211 $ 216

Accrued liabilities 8,212 5,235

Other long-term liabilities — 31

Liabilities held for sale $ 8,423 $ 5,482

Re stricted Cash

As of July 29, 2023 and July 30, 2022, we had restricted cash of $ 11,637 and $ 7,492 , respectively, comprised of $ 10,704 and $ 6,593 , respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids Partnership's merchandising agreement, and $ 933 and $ 899 , respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Merchandise Inventories

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

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

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

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

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

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

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

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 courseware from outside suppliers and publishers.

As contemplated by the F/L Partnership merchandising agreement, we sold our logo general merchandise inventory to Lids and received proceeds of $ 41,773 , and recognized a merchandise inventory loss on the sale of $ 10,262 in cost of goods sold in the condensed consolidated statement of operations during the 52 weeks ended May 1, 2021 for the Retail Segment.

The final inventory sale price was determined during the first quarter of Fiscal 2022, at which time, we received additional proceeds of $ 1,906 , and recognized a merchandise inventory loss on the sale of $ 434 in cost of goods sold in the Fiscal 2022 condensed consolidated statement of operations for the Retail Segment.

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

BARNES & NOBLE EDUCATION, INC.

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Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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

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

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

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

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

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

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

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

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

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

When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's 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.

We estimate returns based on an analysis of historical experience.

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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 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

Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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

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

We do not have gift card or customer loyalty programs.

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Service and other revenue

Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers.

Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer.

The majority of subscriptions sold are one month in duration.

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

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

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

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

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

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

Evaluation of Goodwill and Other Long-Lived Assets

As of January 28, 2023, we had $ 4,700 of goodwill on our condensed consolidated balance sheet related to our DSS reporting unit.

In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value.

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

In performing the valuation, we used cash flows that reflected management's forecasts and discount rates that included risk adjustments consistent with the current market conditions.

The fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit;

therefore, no goodwill impairment was recognized.

We review our long-lived assets for impairment whenever events or changes in circumstances, including but not limited to contractual changes, renewals or amendments are made to agreements with our college, university, or K-12 schools, indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets .

As of January 28, 2023, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $ 92,225 , $ 259,470 , $ 114,947 , and $ 19,686 , respectively, on our condensed consolidated balance sheet.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

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

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

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

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

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

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 6,008 (both pre-tax and after-tax), comprised of $ 708 , $ 1,697 , $ 3,599 and $ 4 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

During the 13 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 6,411 (both pre-tax and after-tax), comprised of $ 739 , $ 1,793 , $ 3,668 and $ 211 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

For additional information, see Note 6.

Fair Value Measurements .

The 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.

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Segment Reporting for a description of each segment's product and service offerings.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

Disaggregation of Revenue

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

13 weeks ended 39 weeks ended

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

13 weeks ended

July 29, 2023 July 30, 2022

Course Materials Product Sales $ 138,536 $ 127,493

2 unchanged sentences

Service and Other Revenue (b)

8,423 9,983 32,346 39,155

Retail Product and Other Sales sub-total 233,949 225,595

2 unchanged sentences

Wholesale Sales $ 38,791 $ 37,083

DSS Sales (c)

$ 9,010 $ 9,430 $ 26,659 $ 26,012

Eliminations (d)

Eliminations (c)

$ ( 20,090 ) $ ( 18,916 )

Total Sales $ 264,161 $ 254,674

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

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

(a) Logo general merchandise sales for the Retail Segment are recognized on a net basis as commission revenue in the condensed consolidated financial statements.

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

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

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

Contract Liabilities

1 unchanged sentence

Deferred revenue consists of the following:

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

• 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;

2 unchanged sentences

13 weeks ended

January 28, 2023 January 29, 2022

July 29, 2023 July 30, 2022

Deferred revenue at the beginning of period $ 15,356 $ 16,475

8 unchanged sentences

$ 15,768 $ 18,675

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

As of July 29, 2023, we expect to recognize $ 11,769 of the deferred revenue balance within the next 12 months.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

Segment Reporting

We have three reportable segments:

Retail, Wholesale and DSS.

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

For additional information, see 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.

The following summarizes the two segments.

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

Business in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023 .

Retail Segment

The Retail Segment operates 1,289 college, university, and K-12 school bookstores, comprised of 726 physical bookstores and 563 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,

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

including emblematic apparel and gifts.

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

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

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

Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

Wholesale Segment

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

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Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 330 college bookstores.

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

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

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

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

Summarized financial information for our reportable segments is reported below:

13 weeks ended 39 weeks ended

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

13 weeks ended

July 29, 2023 July 30, 2022

Retail $ 245,460 $ 236,507

Wholesale 38,791 37,083

DSS 9,010 9,430 26,659 26,012

Elimination ( 22,163 ) ( 18,411 ) ( 52,176 ) ( 52,796 )

Eliminations ( 20,090 ) ( 18,916 )

Total Sales $ 264,161 $ 254,674

$ 88,926 $ 69,161 $ 272,421 $ 246,129

Retail $ 50,291 $ 53,993

Wholesale 5,794 6,899

DSS 7,199 7,932 21,376 21,868

Elimination 1,417 1,764 ( 286 ) 423

Eliminations ( 5,451 ) ( 4,887 )

Total Gross Profit $ 50,634 $ 56,005

2 unchanged sentences

Wholesale 3,388 4,131

DSS 7,632 7,775 23,909 21,527

Corporate Services 4,918 7,214

Elimination ( 47 ) ( 36 ) ( 129 ) ( 133 )

Eliminations ( 3 ) ( 8 )

Total Selling and Administrative Expenses $ 77,476 $ 90,341

2 unchanged sentences

Wholesale 1,277 1,349

DSS 506 1,826 2,646 5,627

Corporate Services 10 18

Total Depreciation and Amortization $ 10,253 $ 10,896

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

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

Restructuring and Other Charges (b)

Restructuring and Other Charges

Retail $ 526 $ —

Wholesale 526 —

DSS 1,848 — 1,848 —

Corporate Services 3,581 375

3 unchanged sentences

Wholesale 603 1,419

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

Corporate Services ( 8,509 ) ( 7,607 )

1 unchanged sentence

Total Operating Loss $ ( 41,728 ) $ ( 45,607 )

13 weeks ended

Reconciliation of segment Operating Loss from Continuing Operations to Loss from Continuing Operations Before Income Taxes:

July 29, 2023 July 30, 2022

Total Operating Loss $ ( 41,728 ) $ ( 45,607 )

Interest Expense, net 8,254 3,868

Total Loss from Continuing Operations Before Income Taxes $ ( 49,982 ) $ ( 49,475 )

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

13 weeks ended 39 weeks ended

Reconciliation of segment Operating Loss to Loss Before Income Taxes:

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

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

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

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

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

Summary of Significant Accounting Policies - Merchandise Inventories .

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

For additional information, see Note 9.

Supplementary Information.

Equity and Earnings Per Share

Share Repurchases

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

During the 39 weeks ended January 28, 2023, we repurchased 347,808 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

During the 13 weeks ended July 29, 2023, we did not repurchase shares of our Common Stock under the stock repurchase program and as of July 29, 2023, approximately $ 26,669 remains available under the stock repurchase program.

During the 13 weeks ended July 29, 2023, we repurchased 77,898 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

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

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

During the 39 weeks ended January 28, 2023 and January 29, 2022, average shares of 4,824,844 and 3,295,417 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 13 weeks ended July 29, 2023 and July 30, 2022, average shares of 3,698,357 and 4,722,668 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

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

13 weeks ended 39 weeks ended

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

13 weeks ended

(shares in thousands) July 29, 2023 July 30, 2022

Numerator for basic and diluted earnings per share:

Loss from continuing operations, net of tax $ ( 49,971 ) $ ( 50,322 )

Loss from discontinued operations, net of tax ( 417 ) ( 2,385 )

Net loss available to common shareholders $ ( 50,388 ) $ ( 52,707 )

2 unchanged sentences

Loss per share of Common Stock:

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

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

Basic and Diluted

Continuing operations $ ( 0.95 ) $ ( 0.96 )

Discontinued operations ( 0.01 ) ( 0.05 )

Basic and diluted loss per share of Common Stock $ ( 0.96 ) $ ( 1.01 )

Fair Value Measurements

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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 values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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 goodwill, property and equipment, operating lease right-of-use assets, and intangible assets.

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

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

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

During the 13 weeks ended January 28, 2023 and January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment and based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $ 6,008 and $ 6,411 (both pre-tax and after-tax), respectively, on the condensed consolidated statement of operations.

The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using our best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

For additional information, see Note 2.

Summary of Significant Accounting Policies .

The following table shows the fair values of our non-financial assets and liabilities that were required to be remeasured at fair value on a non-recurring basis for each respective period and the total impairments recorded as a result of the remeasurement process:

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

Carrying Value

Prior to Impairment Fair Value Impairment Loss

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

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

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

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

Other noncurrent assets 4 — 4 211 — 211

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

Other Non-Financial Liabilities

1 unchanged sentence

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

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

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

As of July 29, 2023, we recorded a liability of $ 633 (Level 2 input) which is reflected in accrued liabilities ($ 595 ) and other long-term liabilities ($ 38 ) on the condensed consolidated balance sheet.

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

For additional information, see Note 10.

Long-Term Incentive Plan Compensation Expense .

July 29, 2023 July 30, 2022

Credit Facility $ 249,735 $ 190,300

FILO Facility — 40,000

Term Loan 30,000 30,000

sub-total 279,735 260,300

Deferred financing costs ( 2,072 ) ( 1,750 )

Total debt $ 277,663 $ 258,550

Balance Sheet classification:

Short-term borrowings $ — $ 40,000

Long-term borrowings 277,663 218,550

Total debt $ 277,663 $ 258,550

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended from time to time including on July 28,2023, May 24, 2023, March 8, 2023, March 31, 2021 and March 1, 2019, under which the lenders originally 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 had the option to request an increase in commitments under the Credit Facility of up to $ 100,000 , subject to certain restrictions.

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

The agreement 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 and eliminated according to its terms and future commitments under the FILO Facility were reduced to $ 0 .

March 2023 Credit Agreement Amendment

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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.

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

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

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

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

For additional information, see Note 14.

Subsequent Event.

For additional information including interest terms and covenant requirements related to the Credit Facility, refer to Part II - Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

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

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

As of both January 28, 2023 and January 29, 2022, we have issued $ 4,759 in letters of credit under the Credit Facility.

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).

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.

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $4,081 related to the March 2023 Credit Agreement amendment.

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

May 2023 Credit Agreement Amendment

On May 24, 2023, 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.

We did not incur debt issuance costs related to the May 2023 Credit Agreement amendment.

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 Credit Agreement Amendment

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

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

During the 13 weeks ended July 29, 2023, we incurred debt issuance costs totaling $10,979 related to the July 2023 Credit Agreement amendment.

As of July 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 13 weeks ended July 29, 2023, we borrowed $ 145,187 and repaid $ 49,606 under the Credit Agreement, and had outstanding borrowings of $ 249,735 as of July 29, 2023, comprised entirely of borrowings under the Credit Facility.

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

As of July 29, 2023 and July 30, 2022, we have issued $ 575 and $ 4,759 , respectively, in letters of credit under the Credit Facility.

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered into an amendment to our existing Credit Agreement, which permitted us to incur the Term Loan Facility (as defined below).

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

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

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

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

For additional information, see Note 14.

Subsequent Event.

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

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

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

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

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

The Term Loans do not amortize prior to maturity.

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

The Term 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

During the 13 weeks ended July 29, 2023, we borrowed $ 0 and repaid $ 0 under the Term Loan Credit Agreement, with $ 30,000 of outstanding borrowings as of July 29, 2023.

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

March 2023 Term Loan Credit Agreement Amendment

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

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

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $431 related to the March 2023 Term Loan Credit Agreement amendment.

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

July 2023 Term Loan Credit Agreement Amendment

We must pay a fee of $50 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).

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

During the 13 weeks ended July 29, 2023, we incurred debt issuance costs totaling $369 related to the July 2023 Term Loan Credit Agreement amendment.

The debt issuance costs have been deferred and are presented as a reduction to long-term borrowings in the condensed 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.

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

The Term Loans do not amortize prior to maturity.

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.

14 unchanged sentences

The following table summarizes lease expense:

13 weeks ended 39 weeks ended

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

13 weeks ended

July 29, 2023 July 30, 2022

Variable lease expense $ 12,229 $ 15,183

1 unchanged sentence

Net lease expense $ 34,618 $ 38,045

The increase in lease expense during the 39 weeks ended January 28, 2023 is primarily due to higher sales for contracts based on a percentage of revenue during the 39 weeks ended January 28, 2023, the impact of the timing due to contract renewals, and the increase in minimum contractual guarantees which were temporarily eliminated in the prior year due to limited on campus store traffic resulting from the COVID pandemic.

The decrease in lease expense during the 13 weeks ended July 29, 2023 is primarily due to lower commission rates related to the shift to from physical to digital course materials and the impact of the timing due to contract renewals, partially offset by higher sales for contracts based on a percentage of sales.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

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

January 28, 2023

The following table summarizes our minimum fixed lease obligations, excluding variable commissions:

As of July 29, 2023

Remainder of Fiscal 2024 $ 148,353

7 unchanged sentences

Operating lease liabilities at period end $ 322,071

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

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

The following summarizes additional information related to our operating leases:

January 28, 2023 January 29, 2022

July 29, 2023 July 30, 2022

Weighted average remaining lease term (in years) 4.6 years 5.3 years

4 unchanged sentences

Supplementary Information

Impairment Loss (non-cash)

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

During the 13 and 39 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

For additional information, see Note 2.

Summary of Significant Accounting Policies and Note 6.

Fair Value Measurements .

Restructuring and other charges

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

During the 13 weeks ended July 29, 2023, we recognized restructuring and other charges totaling $ 4,633 comprised primarily of $ 1,051 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($ 1,007 is included in accrued liabilities in the condensed consolidated balance sheet as of July 29, 2023), and $ 3,582 , respectively, for costs primarily associated with professional service costs for restructuring.

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

During the 13 and 39 weeks ended January 29, 2022, we recognized restructuring and other charges totaling $ 46 and $ 3,067 , respectively, comprised primarily of $ 0 and $ 1,250 , respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($ 202 is included in accrued liabilities in the condensed consolidated balance sheet as of January 29, 2022), $ 46 and $ 1,817 , respectively, for costs primarily associated with professional service costs for restructuring, process improvements, development and integration associated with the F/L Partnership.

Long-Term Incentive Plan Compensation Expense

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.

For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model.

The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

During the 39 weeks ended January 28, 2023, we granted the following awards:

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

• 908,247 restricted stock units ("RSU") awards to employees with a three year vesting period.

• 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, which was above the fair market value on the date of grant, (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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as follows:

13 weeks ended 39 weeks ended

2023 January 29,

2022 January 28,

2023 January 29,

During the 13 weeks ended July 29, 2023, we did not grant any long-term incentive plan awards.

We recognized compensation expense for previously granted long-term incentive plan awards in selling and administrative expenses as follows:

13 weeks ended

2023 July 30,

Stock-based awards

8 unchanged sentences

Total compensation expense for long-term incentive awards $ 868 $ 1,764

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

Total unrecognized compensation cost related to unvested awards as of July 29, 2023 was $ 5,131 and is expected to be recognized over a weighted-average period of 1.6 years.

Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS.

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC.

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

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

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

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

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

The matching contributions were reinstated effective July 25, 2021.

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

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

Total employee benefit expense for these plans was $ 1,097 and $ 1,259 during the 13 weeks ended July 29, 2023 and July 30, 2022, respectively.

Commencing in September 2023, we revised the 401(k)-retirement savings plan to an annual end of plan year discretionary match, in lieu of the current pay period match.

Our provision for income taxes during interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary income (loss) (pre-tax income (loss) excluding unusual or infrequently occurring discrete items) for the reporting period.

For the 13 weeks ended July 29, 2023, and in accordance with ASC 740-270-30-18 “ Income Taxes - Interim Reporting - Initial Measurement, ” and paragraph 82 of FASB interpretation No.

18, " Accounting for Income Taxes in Interim Periods " ("FIN 18"), we computed our provision for income taxes based on the actual effective tax rate for the year-to-date period by applying the discrete method.

We determined that as small changes in estimated ordinary income would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the 13 weeks ended July 29, 2023.

We believe that, at this time, the use of this discrete method represents the best estimate of our annual effective tax rate.

We recorded an income tax benefit of $( 11 ) on pre-tax loss of $( 49,982 ) during the 13 weeks ended July 29, 2023, which represented an effective income tax rate of 0 % and an income tax expense of $ 847 on pre-tax loss of $( 49,475 ) during the 13 weeks ended July 30, 2022, which represented an effective income tax rate of ( 1.7 )%.

The effective tax rate for the 13 weeks ended July 29, 2023 is lower than the prior year comparable period due to utilization of the discrete tax provision methodology discussed above.

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

As of January 28, 2023, we determined that it was more likely than not that we would not realize all deferred tax assets and our tax rate for the current fiscal year reflects this determination.

As of July 29, 2023, we determined that it was more likely than not that we would not realize all deferred tax assets and our tax rate for the current fiscal year reflects this determination.

We will continue to evaluate this position.

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

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

2 unchanged sentences

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

Subsequent Event

Credit Agreement Amendment

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

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

Term Loan Agreement Amendment

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

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

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements