false2021Q30001634117--05-01false00016341172020-05-032021-01-30xbrli:shares00016341172021-02-26iso4217:USD00016341172020-11-012021-01-3000016341172019-10-272020-01-2500016341172019-04-282020-01-25iso4217:USDxbrli:shares00016341172021-01-3000016341172020-01-2500016341172020-05-0200016341172019-04-270001634117us-gaap:AdditionalPaidInCapitalMember2019-04-282019-07-2700016341172019-04-282019-07-270001634117us-gaap:CommonStockMember2019-04-282019-07-270001634117us-gaap:TreasuryStockMember2019-04-282019-07-2700016341172019-07-270001634117us-gaap:AdditionalPaidInCapitalMember2019-07-282019-10-2600016341172019-07-282019-10-260001634117us-gaap:CommonStockMember2019-07-282019-10-260001634117us-gaap:TreasuryStockMember2019-07-282019-10-2600016341172019-10-260001634117us-gaap:AdditionalPaidInCapitalMember2019-10-272020-01-250001634117us-gaap:AdditionalPaidInCapitalMember2020-05-032020-08-0100016341172020-05-032020-08-010001634117us-gaap:CommonStockMember2020-05-032020-08-010001634117us-gaap:TreasuryStockMember2020-05-032020-08-0100016341172020-08-010001634117us-gaap:AdditionalPaidInCapitalMember2020-08-022020-10-3100016341172020-08-022020-10-310001634117us-gaap:CommonStockMember2020-08-022020-10-310001634117us-gaap:TreasuryStockMember2020-08-022020-10-3100016341172020-10-31bned:Storebned:Personbned:segment0001634117us-gaap:RetailMember2021-01-300001634117bned:WholesaleMember2021-01-300001634117bned:DSSMember2021-01-300001634117us-gaap:PropertyPlantAndEquipmentMember2020-11-012021-01-300001634117us-gaap:PropertySubjectToOperatingLeaseMember2020-11-012021-01-300001634117us-gaap:OtherIntangibleAssetsMember2020-11-012021-01-300001634117us-gaap:OtherNoncurrentAssetsMember2020-11-012021-01-300001634117bned:DeferredTaxAssetCurrentMember2021-01-300001634117bned:RetailSegmentMemberbned:RetailProductMember2020-11-012021-01-300001634117bned:RetailSegmentMemberbned:RetailProductMember2019-10-272020-01-250001634117bned:RetailSegmentMemberbned:RetailProductMember2020-05-032021-01-300001634117bned:RetailSegmentMemberbned:RetailProductMember2019-04-282020-01-250001634117bned:RetailSegmentMember2020-11-012021-01-300001634117bned:RetailSegmentMember2019-10-272020-01-250001634117bned:RetailSegmentMember2020-05-032021-01-300001634117bned:RetailSegmentMember2019-04-282020-01-250001634117bned:ServiceandOtherMemberbned:RetailSegmentMember2020-11-012021-01-300001634117bned:ServiceandOtherMemberbned:RetailSegmentMember2019-10-272020-01-250001634117bned:ServiceandOtherMemberbned:RetailSegmentMember2020-05-032021-01-300001634117bned:ServiceandOtherMemberbned:RetailSegmentMember2019-04-282020-01-250001634117bned:WholesaleMember2020-11-012021-01-300001634117bned:WholesaleMember2019-10-272020-01-250001634117bned:WholesaleMember2020-05-032021-01-300001634117bned:WholesaleMember2019-04-282020-01-250001634117bned:DSSMember2020-11-012021-01-300001634117bned:DSSMember2019-10-272020-01-250001634117bned:DSSMember2020-05-032021-01-300001634117bned:DSSMember2019-04-282020-01-250001634117us-gaap:CorporateNonSegmentMember2020-11-012021-01-300001634117us-gaap:CorporateNonSegmentMember2019-10-272020-01-250001634117us-gaap:CorporateNonSegmentMember2020-05-032021-01-300001634117us-gaap:CorporateNonSegmentMember2019-04-282020-01-25utr:Rate0001634117bned:PhysicalStoresMember2021-01-300001634117bned:VirtualStoresMember2021-01-300001634117us-gaap:IntersegmentEliminationMember2020-11-012021-01-300001634117us-gaap:IntersegmentEliminationMember2019-10-272020-01-250001634117us-gaap:IntersegmentEliminationMember2020-05-032021-01-300001634117us-gaap:IntersegmentEliminationMember2019-04-282020-01-2500016341172015-12-140001634117us-gaap:AccountsReceivableMember2021-01-300001634117us-gaap:AccountsReceivableMember2020-11-012021-01-300001634117us-gaap:AccountsReceivableMember2020-01-250001634117us-gaap:AccountsReceivableMember2019-04-282020-01-250001634117us-gaap:PropertyPlantAndEquipmentMember2021-01-300001634117us-gaap:PropertyPlantAndEquipmentMember2020-01-250001634117us-gaap:PropertyPlantAndEquipmentMember2019-04-282020-01-250001634117us-gaap:PropertySubjectToOperatingLeaseMember2021-01-300001634117us-gaap:PropertySubjectToOperatingLeaseMember2020-01-250001634117us-gaap:PropertySubjectToOperatingLeaseMember2019-04-282020-01-250001634117us-gaap:OtherIntangibleAssetsMember2021-01-300001634117us-gaap:OtherIntangibleAssetsMember2020-01-250001634117us-gaap:OtherIntangibleAssetsMember2019-04-282020-01-250001634117us-gaap:OtherNoncurrentAssetsMember2021-01-300001634117us-gaap:OtherNoncurrentAssetsMember2020-01-250001634117us-gaap:OtherNoncurrentAssetsMember2019-04-282020-01-250001634117us-gaap:AccruedLiabilitiesMember2021-01-300001634117us-gaap:AccruedLiabilitiesMember2020-11-012021-01-300001634117us-gaap:AccruedLiabilitiesMember2020-01-250001634117us-gaap:AccruedLiabilitiesMember2019-04-282020-01-250001634117us-gaap:PhantomShareUnitsPSUsMember2021-01-300001634117bned:NewCreditFacilityMember2020-05-032021-01-300001634117bned:NewCreditFacilityMember2021-01-300001634117bned:FILOMember2021-01-300001634117us-gaap:RevolvingCreditFacilityMember2021-01-300001634117us-gaap:EmployeeSeveranceMember2020-11-012021-01-300001634117us-gaap:EmployeeSeveranceMember2020-05-032021-01-300001634117us-gaap:EmployeeSeveranceMember2021-01-300001634117us-gaap:OtherRestructuringMember2020-11-012021-01-300001634117us-gaap:OtherRestructuringMember2020-05-032021-01-300001634117us-gaap:FacilityClosingMember2020-11-012021-01-300001634117us-gaap:FacilityClosingMember2020-05-032021-01-300001634117us-gaap:EmployeeSeveranceMember2019-10-272020-01-250001634117us-gaap:EmployeeSeveranceMember2019-04-282020-01-250001634117us-gaap:OtherRestructuringMember2019-10-272020-01-250001634117us-gaap:OtherRestructuringMember2019-04-282020-01-250001634117us-gaap:RestrictedStockUnitsRSUMember2020-05-032021-01-300001634117us-gaap:RestrictedStockMember2020-05-032021-01-300001634117bned:OptionsAtMarketMemberus-gaap:StockOptionMember2020-05-032021-01-300001634117bned:OptionsAtPremiumMemberus-gaap:StockOptionMember2020-05-032021-01-30xbrli:pure0001634117bned:OptionsAtMarketMemberus-gaap:StockOptionMember2021-01-300001634117bned:OptionsAtPremiumMemberus-gaap:StockOptionMember2021-01-300001634117us-gaap:PhantomShareUnitsPSUsMember2020-05-032021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockMember2020-11-012021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockMember2019-10-272020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockMember2020-05-032021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockMember2019-04-282020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockUnitsRSUMember2020-11-012021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockUnitsRSUMember2019-10-272020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockUnitsRSUMember2020-05-032021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockUnitsRSUMember2019-04-282020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PerformanceSharesMember2020-11-012021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PerformanceSharesMember2019-10-272020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PerformanceSharesMember2020-05-032021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PerformanceSharesMember2019-04-282020-01-250001634117bned:PerformanceShareUnitsPSUsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2020-11-012021-01-300001634117bned:PerformanceShareUnitsPSUsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-10-272020-01-250001634117bned:PerformanceShareUnitsPSUsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2020-05-032021-01-300001634117bned:PerformanceShareUnitsPSUsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-04-282020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:StockOptionMember2020-11-012021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:StockOptionMember2019-10-272020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:StockOptionMember2020-05-032021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:StockOptionMember2019-04-282020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-11-012021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-10-272020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-05-032021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-04-282020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PhantomShareUnitsPSUsMember2020-11-012021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PhantomShareUnitsPSUsMember2019-10-272020-01-250001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PhantomShareUnitsPSUsMember2020-05-032021-01-300001634117us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:PhantomShareUnitsPSUsMember2019-04-282020-01-25
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 10-Q
_______________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 30, 2021
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission File Number: 1-37499
_______________________________________________
BARNES & NOBLE EDUCATION, INC.
(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________
Delaware46-0599018
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
120 Mountain View Blvd., Basking Ridge,NJ07920
(Address of Principal Executive Offices)(Zip Code)
(Registrant’s Telephone Number, Including Area Code): (908) 991-2665
Securities registered pursuant to Section 12(b) of the Act:
Title of ClassTrading SymbolName of Exchange on which registered
Common Stock, $0.01 par value per shareBNEDNew York Stock Exchange
_______________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filerx
Non-accelerated filer
¨  
Smaller reporting company¨
Emerging Growth Company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of February 26, 2021, 51,378,913 shares of Common Stock, par value $0.01 per share, were outstanding.


Table of Contents
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Fiscal Quarter Ended January 30, 2021
Index to Form 10-Q
 
   Page No.
2

Table of Contents
PART I - FINANCIAL INFORMATION
 
Item 1:    Financial Statements

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited) 
13 weeks ended39 weeks ended
January 30,
2021
January 25,
2020
January 30,
2021
January 25,
2020
Sales:
Product sales and other$373,502 $453,678 $1,118,544 $1,474,448 
Rental income38,111 48,614 92,568 119,729 
Total sales411,613 502,292 1,211,112 1,594,177 
Cost of sales:
Product and other cost of sales315,607 354,999 933,847 1,146,400 
Rental cost of sales25,394 28,758 60,506 70,635 
Total cost of sales341,001 383,757 994,353 1,217,035 
Gross profit70,612 118,535 216,759 377,142 
Selling and administrative expenses92,708 106,184 254,723 317,279 
Depreciation and amortization expense13,307 15,117 40,563 46,542 
Impairment loss (non-cash)27,630  27,630 433 
Restructuring and other charges1,669 205 10,727 3,240 
Operating (loss) income(64,702)(2,971)(116,884)9,648 
Interest expense, net2,311 1,904 5,876 5,882 
(Loss) income before income taxes(67,013)(4,875)(122,760)3,766 
Income tax (benefit) expense(18,724)(3,182)(35,334)1,683 
Net (loss) income$(48,289)$(1,693)$(87,426)$2,083 
(Loss) Income per share of common stock:
Basic$(0.96)$(0.04)$(1.78)$0.04 
Diluted$(0.96)$(0.04)$(1.78)$0.04 
Weighted average shares of common stock outstanding:
Basic50,082 48,298 49,099 47,911 
Diluted50,082 48,298 49,099 48,767 
See accompanying notes to condensed consolidated financial statements.

3

Table of Contents
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share data) 
January 30,
2021
January 25,
2020
May 2,
2020
 (unaudited)(unaudited)(audited)
ASSETS
Current assets:
Cash and cash equivalents$9,915 $9,798 $8,242 
Receivables, net227,174 238,045 90,851 
Merchandise inventories, net452,611 530,260 428,939 
Textbook rental inventories40,720 48,474 40,710 
Prepaid expenses and other current assets25,281 24,617 16,177 
Total current assets755,701 851,194 584,919 
Property and equipment, net87,405 101,055 97,739 
Operating lease right-of-use assets242,937 251,743 250,837 
Intangible assets, net155,536 179,596 175,125 
Goodwill4,700 4,700 4,700 
Deferred tax assets, net14,984 2,647 7,805 
Other noncurrent assets27,195 37,169 35,307 
Total assets$1,288,458 $1,428,104 $1,156,432 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$318,795 $389,050 $143,678 
Accrued liabilities125,815 193,705 95,420 
Current operating lease liabilities105,624 102,247 92,571 
Short-term borrowings  75,000 
Total current liabilities550,234 685,002 406,669 
Long-term operating lease liabilities190,453 169,227 186,142 
Other long-term liabilities52,814 50,529 46,170 
Long-term borrowings150,800 65,900 99,700 
Total liabilities944,301 970,658 738,681 
Commitments and contingencies   
Stockholders' equity:
Preferred stock, $0.01 par value; authorized, 5,000 shares; 0 shares issued and 0 shares outstanding
   
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 53,327, 52,139 and 52,140 shares, respectively; outstanding, 51,379, 48,297 and 48,298 shares, respectively
533 521 521 
Additional paid-in capital733,019 732,320 732,958 
Accumulated deficit(370,253)(242,494)(282,827)
Treasury stock, at cost(19,142)(32,901)(32,901)
Total stockholders' equity344,157 457,446 417,751 
Total liabilities and stockholders' equity$1,288,458 $1,428,104 $1,156,432 
See accompanying notes to condensed consolidated financial statements.
4

Table of Contents
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 
39 weeks ended
January 30,
2021
January 25,
2020
Cash flows from operating activities:
Net (loss) income$(87,426)$2,083 
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation and amortization expense40,563 46,542 
Content amortization expense3,700 2,973 
Amortization of deferred financing costs811 811 
Impairment loss (non-cash)27,630 433 
Deferred taxes(7,179)(222)
Stock-based compensation expense3,857 6,000 
Changes in other long-term assets and liabilities, net11,291 2,663 
Changes in operating lease right-of-use assets and liabilities11,937 9,890 
Changes in other operating assets and liabilities, net36,402 20,834 
Net cash flows provided by operating activities41,586 92,007 
Cash flows from investing activities:
Purchases of property and equipment(25,910)(26,841)
Net change in other noncurrent assets(78)(507)
Net cash flows used in investing activities(25,988)(27,348)
Cash flows from financing activities:
Proceeds from borrowings under Credit Agreement547,600 383,400 
Repayments of borrowings under Credit Agreement(571,500)(451,000)
Sale of treasury shares10,869  
Purchase of treasury shares(894)(1,265)
Net cash flows used in financing activities(13,925)(68,865)
Net increase (decrease) in cash, cash equivalents and restricted cash1,673 (4,206)
Cash, cash equivalents and restricted cash at beginning of period9,008 14,768 
Cash, cash equivalents and restricted cash at end of period$10,681 $10,562 
Changes in other operating assets and liabilities, net:
Receivables, net$(136,323)$(139,875)
Merchandise inventories(23,672)(109,938)
Textbook rental inventories(10)(1,473)
Prepaid expenses and other current assets(9,104)(12,839)
Accounts payable and accrued liabilities205,511 284,959 
Changes in other operating assets and liabilities, net$36,402 $20,834 
See accompanying notes to condensed consolidated financial statements.

5

Table of Contents
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)
Additional
Common StockPaid-InAccumulatedTreasury StockTotal
SharesAmountCapitalDeficitSharesAmountEquity
Balance at April 27, 201951,030 $510 $726,331 $(244,577)3,467 $(31,636)$450,628 
Stock-based compensation expense
2,321 2,321 
Vested equity awards
56 1 (1)— 
Shares repurchased for tax withholdings for vested stock awards
12 (40)(40)
Net loss(32,155)(32,155)
Balance at July 27, 201951,086 $511 $728,651 $(276,732)3,479 $(31,676)$420,754 
Stock-based compensation expense
1,860 1,860 
Vested equity awards
1,053 10 (10) 
Shares repurchased for tax withholdings for vested stock awards
363 (1,225)(1,225)
Net income35,931 35,931 
Balance at October 26, 201952,139 $521 $730,501 $(240,801)3,842 $(32,901)$457,320 
Stock-based compensation expense
1,819 1,819 
Net loss(1,693)(1,693)
Balance at January 25, 202052,139 $521 $732,320 $(242,494)3,842 $(32,901)$457,446 
Additional
Common StockPaid-InAccumulatedTreasury StockTotal
SharesAmountCapitalDeficitSharesAmountEquity
Balance at May 2, 202052,140 $521 $732,958 $(282,827)3,842 $(32,901)$417,751 
Stock-based compensation expense
1,521 1,521 
Vested equity awards
514 5 (5) 
Shares repurchased for tax withholdings for vested stock awards
179 (342)(342)
Net loss(46,652)(46,652)
Balance August 1, 202052,654 $526 $734,474 $(329,479)4,021 $(33,243)$372,278 
Stock-based compensation expense
1,180 1,180 
Vested equity awards
662 7 (7) 
Shares repurchased for tax withholdings for vested stock awards
231 (539)(539)
Net income7,515 7,515 
Balance October 31, 202053,316 $533 $735,647 $(321,964)4,252 $(33,782)$380,434 
Stock-based compensation expense
1,156 1,156 
Vested equity awards
11    
Sale of treasury shares(3,784)(2,308)14,653 10,869 
Shares repurchased for tax withholdings for vested stock awards
4 (13)(13)
Net loss(48,289)(48,289)
Balance at January 30, 202153,327 $533 $733,019 $(370,253)1,948 $(19,142)$344,157 
See accompanying notes to condensed consolidated financial statements.
6

Table of Contents
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)
Unless the context otherwise indicates, references in these Notes to the accompanying condensed consolidated financial statements to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education or "BNED", Inc., a Delaware corporation. References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC. References to “Student Brands” refer to our direct-to-student subscription-based writing services business operated through our subsidiary Student Brands, 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 May 2, 2020, which includes consolidated financial statements for the Company for each of the three fiscal years ended May 2, 2020, April 27, 2019 and April 28, 2018 (Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively), the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 13 weeks ended August 1, 2020, and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 26 weeks ended October 31, 2020.
Note 1. Organization
Description of Business
Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions. We operate 1,441 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content and tools 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, increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships. We expect general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect the changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, as we improve our e-commerce capabilities through investments we are making in new systems, processes and people.
We believe the BNC and MBS brands are synonymous with innovation in bookselling and campus retail, 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 for 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. For additional information related to our strategies, operations and segments, see Part I - Item 1. Business and Part II - Item 8. Financial Statements and Supplementary Data - Note 6. Segment Reporting in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020.
Partnership with Fanatics and FLC
In December 2020, we entered into a new merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. ("Fanatics") and Fanatics Lids College, Inc. ("FLC"). Through this partnership, we will receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our high margin general merchandise business. We will leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. FLC will manage in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores. FLC has agreed to purchase our logo and emblematic general merchandise inventory, which we expect to be finalized during our fiscal 2021 fourth quarter. We will maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores. We will also work closely with our campus partners to ensure that each campus store will maintain unique aspects of in-store merchandising, including localized product
7

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

assortments and specific styles and designs that reflect each campus’s brand. We expect Fanatics and FLC to go live with this partnership beginning in the second calendar quarter of 2021.
Additionally, Fanatics, Inc. and Lids Holdings, Inc. jointly made a $15,000 strategic equity investment in BNED and received 2,307,692 common shares of BNED in exchange. We expect to use these proceeds to for general corporate purposes. For additional information, see Note 7. Equity and Earnings Per Share.
Wolfram|Alpha Agreement
In December 2020, we entered into an agreement with Wolfram|Alpha to develop a math solver as a new feature in our bartleby suite of homework help and learning solutions. Powered by Wolfram|Alpha’s best-in-class computation engine, the math solver will allow students to access an interactive digital calculator that provides real-time, step-by-step explanations for even the most advanced math problems.
COVID-19 Business Impact
Our business experienced an unprecedented and significant impact as a result of COVID-19 related campus store closures. Beginning in March 2020, colleges and universities nationwide began to close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders. By mid-March, during our fiscal 2020 fourth quarter, we closed the majority of our physical campus stores to protect the health and safety of our customers and employees.
While our campus stores were closed, we continued to serve institutions and students through our campus websites, providing free shipping on all orders and an expanded digital content offering to provide immediate access to course materials to students at our campuses that closed due to COVID-19. We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration. Colleges and universities in the United States continue to adjust their plans for each academic term, with some implementing shortened semesters or choosing to remain fully virtual in order to best protect students and faculty.
Our fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and on-campus activities in response to the pandemic. Fewer students have returned to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities. While many big athletic conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business. Additionally, sales were impacted by overall enrollment declines in higher education. See Note 2. Summary of Significant Accounting Policies - Evaluation of Goodwill and Other Long-Lived Assets related to the impairment loss (non-cash) recognized during the 13 weeks ended January 30, 3021.
The COVID-19 impact on higher education remains a fluid situation, and we are committed to supporting our campus partners through our flexible offerings and our ability to quickly pivot to ensure uninterrupted service as institutions manage the safety of their campuses. There is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic. If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
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”). In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. These condensed consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by GAAP. All material intercompany accounts and transactions have been eliminated in consolidation.
Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. 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 30, 2021 are not indicative of the results expected for the 52 weeks ending May 1, 2021 (Fiscal 2021).
8

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

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.
Use of Estimates
In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Merchandise Inventories
Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory.
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.
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.
Textbook Rental Inventories
Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost.
Leases
We recognize lease assets and lease liabilities on the condensed consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments as required by Accounting Standards Codification ("ASC") Topic 842, Leases. We do not recognize lease assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less). We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset. For additional information, see Note 5. Leases.
Revenue Recognition and Deferred Revenue
Product sales and rentals
The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Note 4. Revenue.
Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical
9

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.
Revenue from the 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. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale.
Revenue 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.
We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.
For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis.
We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year.
Service and other revenue
Service and other revenue is primarily derived from 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.
Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.
Cost of Sales
Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.
Selling and Administrative Expenses
Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment
10

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

subscription-based services business. 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 30, 2021, we had $0, $0 and $4,700 of goodwill on our condensed consolidated balance sheet related to our Retail, Wholesale and DSS reporting units, respectively. 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 2021. 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 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 30, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $87,405, $242,937, $155,536, and $27,195, respectively, on our condensed consolidated balance sheet.
Our fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning models and on-campus activities during the Spring semester of fiscal 2021. Many of the trends observed during the Fall semester continued into the Spring semester, as fewer students have returned to campus for the Spring semester, many colleges and universities continued with remote learning models and on-campus classes and activities have been further curtailed, including many big athletic conferences that have been either eliminated or severely restricted. These combined events continue to impact the Company’s course materials and general merchandise business. During the 13 weeks ended January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $27,630, $20,506 after-tax, comprised of $5,085, $13,328, $6,278 and $2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the 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 8. Fair Value Measurements.
During the 39 weeks ended January 25, 2020, we recorded an impairment loss (non-cash) of $433 in the Retail segment related to net capitalized development costs for a project which were not recoverable.
Income Taxes
As of January 30, 2021, other long-term liabilities includes $25,748 related to the long-term tax payable associated with the LIFO reserve. The LIFO reserve is impacted by changes in the consumer price index (“CPI”) and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle. At the end of the most recent tax year, inventory levels declined as compared to the prior year resulting in approximately $7,597 of the LIFO reserve becoming currently payable. Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remaining long-term tax payable associated with the LIFO reserve could be payable within the next twelve months. We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.
Note 3. Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU replaces the existing incurred loss impairment model for trade receivables with an expected loss model which requires the use of forward-looking information to calculate expected credit loss estimates. These changes may result in earlier recognition of credit losses. We adopted this
11

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

guidance during the first quarter of Fiscal 2021 with no cumulative-effect adjustment to retained earnings. The guidance does not have a material impact on our condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance seeks to simplify the accounting for income taxes by removing the following exceptions: 1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, 2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary and 4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. Additionally, the guidance seeks to further simplify the accounting for income taxes by: 1) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements (although the entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority), 4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date and 5) making minor improvements for income tax accounting related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. We adopted ASU 2019-12 during the current quarter (third quarter of fiscal 2021). As a result of adopting this standard, we did not record a cumulative adjustment and there was not a material impact on our condensed consolidated financial statements.
Note 4. Revenue
Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services. See Note 2. Summary of Significant Accounting Policies for additional information related to our revenue recognition policies and Note 6. 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 ended39 weeks ended
January 30, 2021January 25, 2020January 30, 2021January 25, 2020
Retail
Product Sales$338,495 $400,170 $998,158 $1,320,587 
Rental Income38,111 48,614 92,568 119,729 
Service and Other Revenue (a)
11,063 9,204 32,233 34,097 
Retail Total Sales$387,669 $457,988 $1,122,959 $1,474,413 
Wholesale Sales$39,465 $66,996 $156,146 $179,515 
DSS Sales (b)
$7,206 $6,435 $19,025 $17,024 
Eliminations (c)
$(22,727)$(29,127)$(87,018)$(76,775)
Total Sales$411,613 $502,292 $1,211,112 $1,594,177 
(a)Service and other revenue primarily relates to brand partnerships and other service revenues.
(b)DSS sales primarily relate to direct-to-student subscription-based revenue.
(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.
12

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

Contract Assets and Contract Liabilities
Contract assets represent the sale of goods or services to a customer before we have the right to obtain consideration from the customer. Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract assets (unbilled receivables) were $0 as of January 30, 2021, January 25, 2020 and May 2, 2020 on our condensed consolidated balance sheets.
Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue). Deferred revenue consists of the following:
advanced payments from customers related to textbook rental and subscription-based performance obligations, which are recognized ratably over the terms of the related rental or subscription periods;
unsatisfied performance obligations associated with partnership marketing services, which are recognized when the contracted services are provided to our partnership marketing customers; and
unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the merchandising contracts for Fanatics and FLC as discussed in Note 1. Organization - Partnership with Fanatics and FLC and Note 7. Equity and Earnings Per Share - Sale of Treasury Shares.
Deferred revenue of $47,166, $60,708, and $13,373 is recorded in accrued liabilities and $3,956, $0, and $0 is recorded in other long-term liabilities on our condensed consolidated balance sheets for the periods ended January 30, 2021, January 25, 2020 and May 2, 2020, respectively. As of January 30, 2021, we expect to recognize $47,166 of the deferred revenue balance within the next 12 months. The following table presents changes in contract liabilities:
39 weeks ended
January 30, 2021January 25, 2020
Deferred revenue at the beginning of period$13,373 $20,418 
Additions to deferred revenue during the period148,777 170,375 
Reductions to deferred revenue for revenue recognized during the period(111,028)(130,085)
Deferred revenue balance at the end of period$51,122 $60,708 

Note 5. Leases
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). Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).
We recognize a right of use ("ROU") asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.
Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.
13

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.
The following table summarizes lease expense:
13 weeks ended39 weeks ended
January 30, 2021January 25, 2020January 30, 2021January 25, 2020
Variable lease expense$27,399 $23,402 $62,081 $54,412 
Operating lease expense28,127 37,188 87,558 137,148 
Net lease expense$55,526 $60,590 $149,639 $191,560 
The decrease in lease expense is primarily due to lower sales for contracts based on a percentage of revenue and the impact of the timing and reduction of minimum contractual guarantees.
The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of January 30, 2021:
As of
January 30, 2021
Remainder of Fiscal 2021$84,074 
Fiscal 202252,998 
Fiscal 202345,682 
Fiscal 202437,980 
Fiscal 202531,605 
Thereafter88,819 
Total lease payments341,158 
Less: imputed interest(45,081)
Operating lease liabilities at period end$296,077 
Future lease payment obligations related to leases that were entered into, but did not commence as of January 30, 2021, were not material.
The following summarizes additional information related to our operating leases:
As of
January 30, 2021
Weighted average remaining lease term (in years)5.5 years
Weighted average discount rate4.7 %
Supplemental cash flow information:
Cash payments for lease liabilities within operating activities$75,851 
ROU assets obtained in exchange for lease liabilities from initial recognition$108,873 
14

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

Note 6. 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”.
We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. The following summarizes the three segments. For additional information about each segment's operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020.
Retail
The Retail Segment operates 1,441 college, university, and K-12 school bookstores, comprised of 765 physical bookstores and 676 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 sites which we operate and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class. 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
The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,300 physical bookstores (including our Retail Segment's 765 physical bookstores) and sources and distributes new and used textbooks to our 676 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 400 college bookstores.
DSS
The Digital Student Solutions (“DSS”) Segment includes direct-to-student 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®, a 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.
Intercompany Eliminations
The eliminations are primarily related to the following intercompany activities:
The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale, and
These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.
Our international operations are not material and the majority of the revenue and total assets are within the United States.
15

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

Summarized financial information for our reportable segments is reported below:
13 weeks ended39 weeks ended
January 30,
2021
January 25,
2020
January 30,
2021
January 25,
2020
Sales:
Retail$387,669 $457,988 $1,122,959 $1,474,413 
Wholesale39,465 66,996 156,146 179,515 
DSS7,206 6,435 19,025 17,024 
Elimination (22,727)(29,127)(87,018)(76,775)
Total Sales$411,613 $502,292 $1,211,112 $1,594,177 
Gross Profit
Retail$53,523 $99,790 $165,170 $322,869 
Wholesale10,658 14,235 38,129 41,688 
DSS5,882 5,283 15,290 13,838 
Elimination549 (773)(1,830)(1,253)
Total Gross Profit$70,612 $118,535 $216,759 $377,142 
Depreciation and Amortization
Retail$9,806 $11,699 $30,361 $35,372 
Wholesale1,614 1,483 4,231 4,531 
DSS1,863 1,904 5,883 6,543 
Corporate Services24 31 88 96 
Total Depreciation and Amortization$13,307 $15,117 $40,563 $46,542 
Operating (Loss) Income
Retail$(59,996)$(3,747)$(107,740)$11,478 
Wholesale4,708 8,440 21,625 23,493 
DSS(2,567)(1,608)(6,218)(6,420)
Corporate Services(7,451)(5,412)(22,847)(17,832)
Elimination 604 (644)(1,704)(1,071)
Total Operating (Loss) Income$(64,702)$(2,971)$(116,884)$9,648 
13 weeks ended39 weeks ended
January 30,
2021
January 25,
2020
January 30,
2021
January 25,
2020
The following is a reconciliation of segment Operating (Loss) Income to consolidated (Loss) Income Before Income Taxes:
Total Operating (Loss) Income$(64,702)$(2,971)$(116,884)$9,648 
Interest Expense, net2,311 1,904 5,876 5,882 
(Loss) Income Before Income Taxes$(67,013)$(4,875)$(122,760)$3,766 
During the 13 and 39 weeks ended January 30, 2021, we recognized an impairment loss (non-cash) of $27,630, $20,506 after-tax, in the Retail segment on the condensed consolidated statement of operations. For additional information, see Note 2. Summary of Significant Accounting Policies.
16

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

Note 7. Equity and Earnings Per Share
Equity
Share Repurchases
On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50,000, in the aggregate, of our outstanding Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the 39 weeks ended January 30, 2021, we did not repurchase shares of our Common Stock under the program and as of January 30, 2021, approximately $26,669 remains available under the stock repurchase program.
During the 39 weeks ended January 30, 2021, we repurchased 414,174 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.
Sale of Treasury Shares
In December 2020, we entered into a new merchandising partnership with Fanatics and FLC which included a strategic equity investment in the Company. Fanatics, Inc. and Lids Holdings, Inc. jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $15,000, representing a share price of $6.50 per share. The premium price paid above the fair market value of our common stock at closing was approximately $4,131 and was recorded as a contract liability ($175 in accrued liabilities and $3,956 in other long-term liabilities our condensed consolidated balance sheet) which is expected to be recognized over the term of the merchandising contracts for Fanatics and FLC, as discussed in Note 1. Organization - Partnership with Fanatics and FLC. We expect to use these proceeds for general corporate purposes.
Earnings Per Share
Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. During the 13 weeks ended January 30, 2021 and January 25, 2020, average shares of 4,005,236 and 3,682,169 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively. During the 39 weeks ended January 30, 2021 and January 25, 2020, average shares of 3,234,606 and 1,348,949 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

17

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020
(Thousands of dollars, except share and per share data)
(unaudited)

The following is a reconciliation of the basic and diluted earnings per share calculation:
13 weeks ended39 weeks ended
(shares in thousands)January 30,
2021
January 25,
2020
January 30,
2021
January 25,
2020
Numerator for basic earnings per share:
Net (loss) income available to common shareholders$(48,289)$(1,693)$(87,426)$2,083 
Less allocation of earnings to participating securities   (1)
Net (loss) income available to common shareholders$(48,289)$(1,693)$(87,426)$2,082 
Numerator for diluted earnings per share:
Net (loss) income available to common shareholders$(48,289)$(1,693)$(87,426)$2,082 
Allocation of earnings to participating securities   1 
Less diluted allocation of earnings to participating securities   (1)
Net (loss) income available to common shareholders$(48,289)$(1,693)$(87,426)$2,082 
Denominator for basic earnings per share:
Basic weighted average shares of Common Stock50,082 48,298 49,099 47,911 
Denominator for diluted earnings per share:
Basic weighted average shares of Common Stock50,082 48,298 49,099 47,911 
Average dilutive restricted stock units   403 
Average dilutive performance shares   9 
Average dilutive restricted shares   12 
Average dilutive performance share units   432 
Average dilutive stock options    
Diluted weighted average shares of Common Stock 50,082 48,298 49,099 48,767 
(Loss) Earnings per share of Common Stock:
Basic$(0.96)$(0.04)$(1.78)$0.04 
Diluted$(0.96)$(0.04)$(1.78)$0.04 
 
Note 8. Fair Value Measurements
In accordance with ASC No. 820, Fair Value Measurements and Disclosures, the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1—Observable inputs that reflect quoted prices in active markets
Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions
Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-term debt approximates its carrying value.

18

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the 39 weeks ended January 30, 2021 and January 25, 2020