What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-12-07 compared with 2023-09-06 · 271 added, 200 removed, 570 unchanged (45% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

13 weeks ended

2023 July 30,

13 weeks ended 26 weeks ended

2023 October 29,

2022 October 28,

2023 October 29,

Product sales and other $ 569,698 $ 567,299 $ 822,348 $ 811,061

9 unchanged sentences

Restructuring and other charges 4,274 260 8,907 635

Operating loss ( 41,728 ) ( 45,607 )

Operating income (loss) 35,832 28,671 ( 5,896 ) ( 16,936 )

Interest expense, net 10,664 4,886 18,918 8,754

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

Income (loss) from continuing operations before income taxes 25,168 23,785 ( 24,814 ) ( 25,690 )

Income tax expense (benefit) 314 ( 383 ) 303 464

Income (loss) from continuing operations $ 24,854 $ 24,168 $ ( 25,117 ) $ ( 26,154 )

Loss from discontinued operations, net of tax of $ 0 , $ 83 , $ 20 , and $ 169 , respectively

$ ( 674 ) $ ( 2,024 ) $ ( 1,091 ) $ ( 4,409 )

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

Loss per share of common stock:

Basic and Diluted:

Net income (loss) $ 24,180 $ 22,144 $ ( 26,208 ) $ ( 30,563 )

Earnings (loss) per share of common stock:

Continuing operations $ 0.47 $ 0.46 $ ( 0.48 ) $ ( 0.50 )

Discontinued operations $ ( 0.01 ) $ ( 0.04 ) $ ( 0.02 ) $ ( 0.08 )

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

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

Total Basic Earnings per share $ 0.46 $ 0.42 $ ( 0.50 ) $ ( 0.58 )

Weighted average common shares outstanding - Basic 52,791 52,438 52,716 52,305

Continuing operations $ 0.47 $ 0.46 $ ( 0.48 ) $ ( 0.50 )

Discontinued operations $ ( 0.01 ) $ ( 0.04 ) $ ( 0.02 ) $ ( 0.08 )

Total Diluted Earnings per share $ 0.46 $ 0.42 $ ( 0.50 ) $ ( 0.58 )

Weighted average common shares outstanding - Diluted 52,870 53,195 52,716 52,305

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In thousands, except per share data)

2023 July 30,

2023 October 29,

2022 April 29,

19 unchanged sentences

Current operating lease liabilities 126,426 130,802 99,980

Short-term borrowings — 40,000 —

Liabilities held for sale — 5,243 8,423

25 unchanged sentences

26 weeks ended

2023 July 30,

2023 October 29,

Cash flows from operating activities:

8 unchanged sentences

Stock-based compensation expense 1,756 3,066

Non-cash interest expense (paid-in-kind)

Changes in operating lease right-of-use assets and liabilities 1,826 ( 298 )

7 unchanged sentences

Changes in other operating assets and liabilities, net ( 49,108 ) 10,816

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

Net cash flows (used in) provided by operating activities from continuing operations ( 47,160 ) 10,073

Net cash flows used in operating activities from discontinued operations ( 3,939 ) ( 703 )

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

Net cash flow (used in) provided by operating activities $ ( 51,099 ) $ 9,370

Cash flows from investing activities:

3 unchanged sentences

Net cash flows provided by (used in) investing activities from discontinued operations 21,395 ( 3,750 )

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

Net cash flow provided by (used in) investing activities $ 13,277 $ ( 20,318 )

Cash flows from financing activities:

6 unchanged sentences

Net cash flows provided by financing activities $ 41,175 $ 23,727

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

Net increase in cash, cash equivalents and restricted cash 3,353 12,779

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

17 unchanged sentences

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

Stock-based compensation expense

Vested equity awards

357 4 ( 4 ) —

Shares repurchased for tax withholdings for vested stock awards

107 ( 245 ) ( 245 )

Net income 22,144 22,144

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

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

499 5 ( 5 ) —

Shares repurchased for tax withholdings for vested stock awards

67 ( 74 ) ( 74 )

Net income 24,180 24,180

Balance October 28, 2023 55,818 $ 558 $ 747,518 $ ( 619,564 ) 2,681 $ ( 22,548 ) $ 105,964

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

2 unchanged sentences

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

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 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).

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) and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended July 29, 2023.

Description of Business

7 unchanged sentences

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.

During the 26 weeks ended October 28, 2023, BNC First Day total revenue increased by $ 72,684 , or 39 %, to $ 261,021 compared to $ 188,337 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 and e-commerce service provider agreement with Fanatics Retail Group Fulfillment, LLC, Inc.

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

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

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

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 Relationship.

Through this relationship, Fanatics and Lids provide unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools on our behalf 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.

5 unchanged sentences

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

BNC First Day Equitable and Inclusive Access Programs

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

We offer our BNC First Day ® equitable and inclusive access

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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.

BNC First Day Equitable and Inclusive Access Programs

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.

• 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.

• First Day Complete is adopted by an institution and includes the majority of 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.

1 unchanged sentence

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.

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, and improve predictability of our future results.

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

1 unchanged sentence

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 47% 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

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

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

During the 26 weeks ended October 28, 2023, First Day Complete sales increased by $ 55,455 , or 52 %, to $ 161,934 as compared to $ 106,479 in the prior year period.

During the 26 weeks ended October 28, 2023, First Day sales increased by $ 17,229 , or 21 %, to $ 99,087 as compared to $ 81,858 in the prior year period.

Relationship with Fanatics and Lids

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

Under the related service provider agreements, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our general merchandise business.

Fanatics and Lids process consumer personal information on our behalf, subject to certain contractual obligations as our service providers, offering our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform.

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

1 unchanged sentence

We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand.

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

As our service provider, we leverage Fanatics’ e-commerce technology and expertise on our behalf for the operational management of the emblematic merchandise and gift sections of our campus store websites.

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

3 unchanged sentences

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 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).

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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 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 and 26 weeks ended October 28, 2023 are not indicative of the results expected for the 52 weeks ending April 27, 2024 ("Fiscal 2024").

Liquidity and Going Concern

6 unchanged sentences

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.

As of October 28, 2023, we had $ 35,341 of cash on hand, including $ 20,333 of restricted cash primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the merchandising service provider 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.

2 unchanged sentences

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.

We recognized Net Income from Continuing Operations of $ 24,854 and $ 24,168 for the 13 weeks ended October 28, 2023 and October 29, 2022, respectively, and a Net Loss from Continuing Operations of $( 25,117 ) and $( 26,154 ) for the 26 weeks ended October 28, 2023 and October 29, 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) Provided by Operating Activities from Continuing Operations were $( 47,160 ) and $ 10,073 for the 26 weeks ended October 28, 2023 and October 29, 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 FILO Facility in fiscal year 2023 of $ 40,000 , had a significant impact on our liquidity during fiscal year 2023 and fiscal year 2024, including our ability to make timely vendor payments and school commission payments.

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.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 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.

Debt amendments

On October 10, 2023, we amended our existing Credit Agreement to revise certain reporting requirements to the administrative agent and lenders under the Credit Agreement.

The amendment introduced a Specified Liquidity Transaction Fee of $3,800 that would become due and payable at the earlier to occur of (1) January 31, 2024, to the extent a Specified Liquidity Transaction (as defined in the Credit Agreement) has not been consummated prior to such date (or such later date that is up to thirty days thereafter to the extent agreed to in writing by the Administrative Agent in its sole discretion) or (b) an Event of Default under the Credit Agreement.

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.

2 unchanged sentences

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.

On July 28, 2023, we amended our Term Loan Agreement 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.

During Fiscal 2023, we implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

We reduced 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.

Over the last year, we have achieved annualized savings of $30,000 to $35,000 from these cost savings initiatives.

Additionally, during Fiscal 2024, Management's planned to implement further cost savings measures, including reduction of gross capital expenditures, amounting to approximately $25,000, of which approximately $14,000 has been achieved during the 26 weeks ended October 28, 2023.

Management believes that these plans are within its control and will be focused on implementing as outlined.

During the 13 weeks ended October 28, 2023, Net Income from Continuing Operations increased by $686 compared to the prior year period.

Excluding interest expense and restructuring and other charges Net Income from Continuing Operations improved by $10,478 during the 13 weeks ended October 28, 2023 compared to the prior year period.

During the 26 weeks ended October 28, 2023, Net Loss from Continuing Operations decreased by $1,037 compared to the prior year period.

Excluding interest expense and restructuring and other charges Net Loss from Continuing Operations decreased by $19,473 during the 26 weeks ended October 28, 2023 compared to the prior year period.

The improvements in Net Income from Continuing Operations during the 13 and 26 weeks are primarily due to operational improvements and cost savings initiatives.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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.

8 unchanged sentences

Actual results could differ from those estimates.

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

4 unchanged sentences

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.

During the 26 weeks ended October 28, 2023, we recorded a Gain on Sale of Business of $ 3,068 in Loss from Discontinued Operations, Net, 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

13 weeks ended 26 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Total sales $ — $ 8,465 $ 2,784 $ 17,649

Cost of sales (a)

— 1,772 76 3,472

Gross profit (a)

— 6,693 2,708 14,177

Selling and administrative expenses 643 8,131 2,924 16,277

7 unchanged sentences

Loss from discontinued operations, net of tax $ ( 674 ) $ ( 2,024 ) $ ( 1,091 ) $ ( 4,409 )

(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.

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $ 1,618 and $ 3,169 for the 13 and 26 weeks ended October 29, 2022, respectively.

(b) During the 26 weeks ended October 28, 2023, we recognized an impairment loss (non-cash) of $ 610 (both pre-tax and after-tax),

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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 26 weeks ended October 28, 2023, we recognized restructuring and other charges of $ 3,297 comprised of severance and other employee termination costs.

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

April 29, 2023 October 29, 2022

Cash and cash equivalents $ 1,057 $ 929

11 unchanged sentences

Liabilities held for sale $ 8,423 $ 5,242

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.

Restricted Cash

As of October 28, 2023 and October 29, 2022, we had restricted cash of $ 20,333 and $ 15,590 , respectively, comprised of $ 19,388 and $ 14,686 , 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 service provider merchandising agreement, and $ 945 and $ 904 , 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

13 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

25 unchanged sentences

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

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

Revenue recognized for our BNC First Day offerings is 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.

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

1 unchanged sentence

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.

As contemplated by the F/L Relationship related merchandising agreement and e-commerce agreement, logo general merchandise sales are fulfilled by Lids and Fanatics on our behalf and we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements.

We do not have gift card or customer loyalty programs.

3 unchanged sentences

Service and other revenue

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

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

Service and other revenue is primarily derived from brand 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.

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

For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract.

The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

The revenue is recognized as each performance obligation is satisfied, typically at a point in time for brand partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Cost of Sales

3 unchanged sentences

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.

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 a specific reporting segment and are recorded in Corporate Services.

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.

1 unchanged sentence

We regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be necessary.

Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services.

Summary of Significant Accounting Policies for additional information related to our revenue recognition policies and Note 4.

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

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This guidance will be effective for the Company for the annual report for the fiscal year ending April 26, 2025 and subsequent interim periods.

Early adoption is permitted and retrospective adoption is required for all prior periods presented.

We are currently assessing this guidance and determining the impact on our condensed consolidated financial statements.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

Summary of Significant Accounting Policies for additional information related to our revenue recognition policies and Note 4.

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

Disaggregation of Revenue

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

13 weeks ended

July 29, 2023 July 30, 2022

13 weeks ended 26 weeks ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Course Materials Product Sales $ 435,370 $ 416,410 $ 573,906 $ 547,262

2 unchanged sentences

Service and Other Revenue (b)

18,263 18,218 24,996 24,137

Retail Product and Other Sales sub-total 558,655 557,276 792,604 782,871

6 unchanged sentences

(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.

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

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

3 unchanged sentences

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

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

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

• unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the e-commerce and merchandising contracts for Fanatics and Lids, respectively .

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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

26 weeks ended

July 29, 2023 July 30, 2022

October 28, 2023 October 29, 2022

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

8 unchanged sentences

$ 41,965 $ 43,920

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)

As of October 28, 2023, we expect to recognize $ 38,105 of the deferred revenue balance within the next 12 months.

Segment Reporting

4 unchanged sentences

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”.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are not allocated to a 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.

5 unchanged sentences

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

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

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

The Retail Segment offers our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty 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.

5 unchanged sentences

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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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 weeks ended July 29, 2023 and July 30, 2022

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

Summarized financial information for our reportable segments is reported below:

13 weeks ended

July 29, 2023 July 30, 2022

13 weeks ended 26 weeks ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Retail $ 599,336 $ 598,610 $ 844,796 $ 835,117

22 unchanged sentences

Total Restructuring and Other Charges $ 4,274 $ 260 $ 8,907 $ 635

Operating Loss

Operating Income (Loss)

Retail $ 39,407 $ 30,547 $ 11,033 $ ( 3,993 )

2 unchanged sentences

Elimination 4,623 3,258 ( 825 ) ( 1,621 )

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 )

Total Operating Income (Loss) $ 35,832 $ 28,671 $ ( 5,896 ) $ ( 16,936 )

Interest Expense, net $ 10,664 $ 4,886 $ 18,918 $ 8,754

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

Total Income (Loss) from Continuing Operations Before Income Taxes $ 25,168 $ 23,785 $ ( 24,814 ) $ ( 25,690 )

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

1 unchanged sentence

Share Repurchases

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.

During the 13 and 26 weeks ended October 28, 2023, we did not repurchase shares of our Common Stock under the stock repurchase program and as of October 28, 2023, approximately $ 26,669 remains available under the stock repurchase program.

During the 13 and 26 weeks ended October 28, 2023, we repurchased 66,852 and 144,750 shares of our Common Stock, respectively, outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

5 unchanged sentences

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

During the 13 weeks ended July 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.

During the 13 weeks ended October 28, 2023 and October 29, 2022, average shares of 3,149,756 and 3,153,516 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

During the 26 weeks ended October 28, 2023 and October 29, 2022, average shares of 3,453,892 and 4,898,303 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

(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 )

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

13 weeks ended 26 weeks ended

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

Numerator for basic earnings per share:

Net income (loss) from continuing operations $ 24,854 $ 24,168 $ ( 25,117 ) $ ( 26,154 )

Less allocation of earnings to participating securities ( 3 ) ( 11 ) — —

Net income (loss) from continuing operations available to common shareholders $ 24,851 $ 24,157 $ ( 25,117 ) $ ( 26,154 )

Loss from discontinued operations, net of tax

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

Denominator for basic and diluted earnings per share:

Basic and diluted weighted average shares of Common Stock 52,642 52,172

Loss per share of Common Stock:

Basic and Diluted

( 674 ) ( 2,024 ) ( 1,091 ) ( 4,409 )

Net income (loss) available to common shareholders $ 24,177 $ 22,133 $ ( 26,208 ) $ ( 30,563 )

Numerator for diluted earnings per share:

Net income (loss) from continuing operations $ 24,851 $ 24,157 $ ( 25,117 ) $ ( 26,154 )

Allocation of earnings to participating securities 3 11 — —

Less diluted allocation of earnings to participating securities ( 3 ) ( 11 ) — —

Net income (loss) from continuing operations available to common shareholders $ 24,851 $ 24,157 $ ( 25,117 ) $ ( 26,154 )

Loss from discontinued operations, net of tax

( 674 ) ( 2,024 ) ( 1,091 ) ( 4,409 )

Net income (loss) available to common shareholders $ 24,177 $ 22,133 $ ( 26,208 ) $ ( 30,563 )

Denominator for basic earnings per share:

Basic weighted average shares of Common Stock 52,791 52,438 52,716 52,305

Denominator for diluted earnings per share:

Basic weighted average shares of Common Stock 52,791 52,438 52,716 52,305

Average dilutive restricted stock units 74 141 — —

Average dilutive restricted shares 5 10 — —

Average dilutive stock options — 606 — —

Diluted weighted average shares of Common Stock 52,870 53,195 52,716 52,305

Earnings (Loss) per share of Common Stock:

Continuing operations $ 0.47 $ 0.46 $ ( 0.48 ) $ ( 0.50 )

Discontinued operations ( 0.01 ) ( 0.05 )

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

Discontinuing operations ( 0.01 ) ( 0.04 ) ( 0.02 ) ( 0.08 )

Total Basic Earnings per share $ 0.46 $ 0.42 $ ( 0.50 ) $ ( 0.58 )

Continuing operations $ 0.47 $ 0.46 $ ( 0.48 ) $ ( 0.50 )

Discontinuing operations ( 0.01 ) ( 0.04 ) ( 0.02 ) ( 0.08 )

Total Diluted Earnings per share $ 0.46 $ 0.42 $ ( 0.50 ) $ ( 0.58 )

Fair Value Measurements

4 unchanged sentences

These tiers include:

Level 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable.

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 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.

Level 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable.

The fair value of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1.

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

6 unchanged sentences

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

As of July 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.

As of October 28, 2023, we recorded a liability of $ 32 (Level 2 input) which is reflected in accrued liabilities on the condensed consolidated balance sheet.

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

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

Maturity Date

October 28, 2023 October 29, 2022

Credit Facility December 28, 2024 $ 204,881 $ 222,000

Term Loan April 7, 2025 30,863 30,000

sub-total 235,744 252,000

6 unchanged sentences

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 have a credit agreement (the “Credit Agreement”), amended from time to time including on October 10, 2023, 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.

2 unchanged sentences

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

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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.

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 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.

11 unchanged sentences

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.

BARNES & NOBLE EDUCATION, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the 13 and 26 weeks ended October 28, 2023 and October 29, 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.

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

For additional information related to the Credit Agreement amendment, see the Company's Report on Form 8-K filed with the SEC on July 28, 2023.

During the 26 weeks ended October 28, 2023, we incurred debt issuance costs totaling $11,516 related to the July 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.

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

October 2023 Credit Agreement Amendment

On October 10, 2023, we amended our existing Credit Agreement to revise certain reporting requirements to the administrative agent and lenders under the Credit Agreement.

During the 26 weeks ended October 28, 2023, we incurred debt issuance costs totaling $1,428 related to the October 2023 Credit Agreement amendment.

As of October 28, 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.

During the 26 weeks ended October 28, 2023, we borrowed $ 284,698 and repaid $ 233,970 under the Credit Agreement, and had outstanding borrowings of $ 204,881 as of October 28, 2023, comprised entirely of borrowings under the Credit Facility.

During the 26 weeks ended October 29, 2022, we borrowed $ 348,200 and repaid $ 321,900 under the Credit Agreement, and had outstanding borrowings of $ 222,000 as of October 29, 2022, comprised entirely of borrowings under the Credit Facility.

As of October 28, 2023 and October 29, 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”) and matures on June 7, 2024.

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 April 7, 2025.

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

During the 13 weeks ended July 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.

During the 26 weeks ended October 28, 2023, we incurred $ 863 for interest in kind on the Term Loans and repaid $ 0 under the Term Loan Credit Agreement, with $ 30,863 of outstanding borrowings as of October 28, 2023.

During the 26 weeks ended October 29, 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).

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

consent from lenders under the Term Loan Credit Agreement).

For additional information, see the Company's Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.

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.

4 unchanged sentences

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.

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 $369 related to the July 2023 Term Loan Credit Agreement amendment.

For additional information, see the Company's Report on Form 8-K filed with the SEC on July 28, 2023.

During the 26 weeks ended October 28, 2023, we incurred debt issuance costs totaling $480 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.

All interest on the Term Loan prior to the July 29, 2023 was paid in cash.

During the 13 weeks ended October 28, 2023, all interest on the Term Loan was incurred in kind as permitted under the July 2023 Term Loan Amendment.

The Term Loans do not amortize prior to maturity.

2 unchanged sentences

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.

Interest Expense

During the 13 weeks ended October 28, 2023 and October 29, 2022, we recognized interest expense of $ 10,664 and $ 4,886 , respectively, and during the 26 weeks ended October 28, 2023 and October 29, 2022, we recognized interest expense of $ 18,918 and $ 8,754 , respectively.

Cash interest paid during the 26 weeks ended October 28, 2023 and October 29, 2022 was $ 13,972 and $ 7,301 , respectively.

We recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements as required by FASB ASC 842, Leases (Topic 842).

6 unchanged sentences

Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on:

5 unchanged sentences

The following table summarizes lease expense:

13 weeks ended

July 29, 2023 July 30, 2022

13 weeks ended 26 weeks ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Variable lease expense $ 25,436 $ 25,281 $ 37,665 $ 40,465

1 unchanged sentence

Net lease expense $ 72,338 $ 78,279 $ 106,956 $ 116,325

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.

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 decrease in lease expense during the 26 weeks ended October 28, 2023 is primarily due to lower commission rates related to the shift from physical to digital course materials, closed stores, and the impact of the timing due to contract renewals, partially offset by higher sales for contracts based on a percentage of sales.

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

As of July 29, 2023

As of October 28, 2023

Remainder of Fiscal 2024 $ 106,034

7 unchanged sentences

Operating lease liabilities at period end $ 286,611

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

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

The following summarizes additional information related to our operating leases:

July 29, 2023 July 30, 2022

October 28, 2023 October 29, 2022

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

3 unchanged sentences

Right-of-use assets obtained in exchange for lease liabilities from initial recognition $ 69,959 $ 86,045

Supplementary Information

Restructuring and other charges

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 weeks ended July 29, 2023 and July 30, 2022

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

Supplementary Information

Restructuring and other charges

During the 13 and 26 weeks ended October 28, 2023, we recognized restructuring and other charges totaling $ 4,274 and $ 8,907 , respectively, comprised primarily of $ 4,245 and $ 7,827 , respectively, for costs primarily associated with professional service costs for restructuring and $ 29 and $ 1,080 , respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($ 2,311 is included in accrued liabilities in the condensed consolidated balance sheet as of October 28, 2023).

Pursuant to the July 28, 2023 Credit Agreement amendment, the Board established a committee consisting of three independent directors 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).

Restructuring and other expenses associated with the costs of this committee, as well as other related professional service costs, are expected to decrease when the Company concludes on a strategic alternative.

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

Long-Term Incentive Plan Compensation Expense

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

During the 13 and 26 weeks ended October 28, 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,

13 weeks ended 26 weeks ended

2023 October 29,

2022 October 28,

2023 October 29,

Stock-based awards

8 unchanged sentences

Total compensation expense for long-term incentive awards $ 758 $ 1,541 $ 1,627 $ 3,305

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.

Total unrecognized compensation cost related to unvested awards as of October 28, 2023 was $ 4,001 and is expected to be recognized over a weighted-average period of 1.5 years.

Employee Benefit Plans

2 unchanged sentences

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

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

Total employee benefit expense for these plans was $ 590 and $ 1,026 during the 13 weeks ended October 28, 2023 and October 29, 2022, respectively.

Total employee benefit expense for these plans was $ 1,687 and $ 2,285 during the 26 weeks ended October 28, 2023 and October 29, 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.

BARNES & NOBLE EDUCATION, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 28, 2023 and October 29, 2022

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

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.

For the 26 weeks ended October 28, 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.

We recorded an income tax expense of $ 314 on pre-tax income of $ 25,168 during the 13 weeks ended October 28, 2023, which represented an effective income tax rate of 1.2 % and an income tax benefit of $( 383 ) on pre-tax income of $ 23,785 during the 13 weeks ended October 29, 2022, which represented an effective income tax rate of ( 1.6 )%.

We recorded an income tax expense of $ 303 on pre-tax loss of $( 24,814 ) during the 26 weeks ended October 28, 2023, which represented an effective income tax rate of ( 1.2 )% and an income tax expense of $ 464 on pre-tax loss of $( 25,690 ) during the 26 weeks ended October 29, 2022, which represented an effective income tax rate of ( 1.8 )%.

The effective tax rate for the 26 weeks ended October 28, 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 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.

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

We will continue to evaluate this position.

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)

Legal Proceedings

2 unchanged sentences

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