Serving all who work to elevate
their lives through education
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Dear Fellow Shareholders,
As we entered Fiscal 2021, we had an7cipated that fall rush would be significantly impacted by
the COVID-19 pandemic, which had just begun to grip the na7on. At the 7me, liHle could we or
many others foresee the long-las7ng and devasta7ng impact the virus would have on so many
lives. While it’s been a very difficult period for so many, I am extremely proud of the efforts
made by our en7re organiza7on to seamlessly serve our campus partners, their faculty, staff and
students.
At this 7me last year, BNED was involved in a strategic review authorized by our Board to
explore all op7ons to op7mize shareholder value. ASer extensive delibera7ons, in August 2020,
the Board made the unanimous decision to terminate the formal strategic review and con7nue
the execu7on of the Company’s current business plan as the best path forward for the Company
and its shareholders, given the widespread uncertainty at that 7me. BNED ended Fiscal 2021
with a debt level virtually unchanged from the prior year end, while suffering a loss of over $400
million in revenue due to campus closures — a testament to the dedica7on and skill of our
en7re team.
Our value and bond as a trusted partner to the ins7tu7ons we serve increased throughout the
pandemic. This was only possible because of the forward-thinking investments we made in our
eCommerce plaXorm, tools for faculty and administra7on, virtual fulfillment capabili7es, new
course material delivery models and digital learning solu7ons. These new enhanced plaXorms
allowed us to quickly adapt to COVID’s total disrup7on of the higher educa7on “normal”
delivery model, enabling us to seamlessly con7nue serving our customers, both ins7tu7onally
and direct-to-student.
As colleges and universi7es shiSed to remote learning in response to COVID, last spring, we
worked closely with our clients to help them adapt and overcome the challenges they faced.
We were able to serve students with minimal disrup7on by leveraging our individualized school
eCommerce sites, providing course materials to students whether they were learning on
campus or remotely, and providing on-demand tutoring and wri7ng services through our
innova7ve bartleby® suite of digital tools, so students could con7nue to learn anywhere and at
any 7me that was convenient for them.
At the same 7me, we con7nued to execute and make significant progress on our strategic
ini7a7ves, including the expansion of our footprint through new school contracts; growing the
number of schools and students served through our First Day® inclusive access models;
significantly increasing our gross bartleby subscriber count to over 300,000; and forging a
strategic partnership with Fana7cs and Lids, the leaders in the licensed sports and emblema7c
merchandise category, and now also BNED shareholders.
We are the only solu7ons provider in our industry that already has the scale, unique asset mix
and compe77ve posi7oning to truly meet both the digital and physical demands of the higher
educa7on ins7tu7ons and students we serve. As we eagerly an7cipate the upcoming fall rush
season, our new courseware delivery models are delivering on their promise of tackling the
issues of access, affordability and achievement, and will create significant growth opportuni7es
for us and our campus partners. Our offerings ensure that millions of students are beHer
equipped for the classroom and beyond, and provide tremendous value to the schools we
serve.
Through the focused execu7on of these ini7a7ves, we expect to grow our First Day® Complete
courseware sales, accelerate the growth of our general merchandise business and expand our
direct-to-student bartleby® digital subscrip7on business. We also believe we will con7nue
driving new business growth as prospec7ve clients will want access to our offerings for their
students as the differen7a7on becomes even more apparent in the marketplace. Most
importantly, as aligned with BNED’s purpose, we are now seeing evidence that our academic
solu7ons have the ability to improve student outcomes.
The educa7on industry has been evolving rapidly, and while the COVID-19 pandemic upended
the tradi7onal learning model, it did not stop the industry’s evolu7on. Rather, we believe the
pandemic has further accelerated higher educa7on’s transforma7on. Our recent changes in
leadership bring strengths and exper7se to beHer strategically align with our purpose and
business plan and will help transform BNED’s next chapter to meet the evolving needs of higher
educa7on and increase market share.
While we have learned that COVID is a formidable foe that we have not yet completely
defeated, given the demonstrated efficacy of the vaccines and forecasted openings by the
schools we serve, we are also op7mis7c about BNED’s ability to leverage our new growth
plaXorms to significantly impact both our near-term and longer-term value.
As we enter fiscal 2022 and contemplate BNED’s future, we are confident that our strategic
investments, ini7a7ves and solu7ons will posi7on BNED as the leader in the higher educa7on
industry, increasing our market share, cash flow and profitability.
On behalf of BNED’s Board and management team, please accept our apprecia7on and gra7tude for
your support and con7nued interest in BNED. I hope and trust that you share our enthusiasm and
excitement for BNED’s future!
Very truly yours,
Michael P. Huseby
Chief Execu7ve Officer and Chairman
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x
¨
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 1, 2021 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
BARNES & NOBLE EDUCATION, INC.
Commission File Number: 1-37499
(Exact Name of Registrant as Specified in Its Charter)
Delaware
46-0599018
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
120 Mountain View Blvd.
Basking Ridge NJ
(Address of Principal Executive Offices)
07920
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (908) 991-2665
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Common Stock, $0.01 par value per share
Trading Symbol
BNED
Name of Exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x
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, a smaller
reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☐
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 has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant was approximately
$109 million based upon the closing market price of $2.30 per share of Common Stock on the New York Stock Exchange as of
October 31, 2020. As of June 17, 2021, 51,384,234 shares of Common Stock, par value $0.01 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated by reference into Part III.
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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
INDEX TO FORM 10-K
Page No.
Disclosure Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations . . . . . .
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results Of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted Earnings, Adjusted EBITDA, and Free Cash Flow (non-GAAP) . . . . . . . . . . . . . . . . . . .
Liquidity And Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Policies And Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A.
Quantitative And Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Financial Statements And Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes In And Disagreements With Accountants On Accounting And Financial Disclosure . . . . . .
Controls And Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Directors, Executive Officers And Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships And Related Transactions, And Director Independence . . . . . . . . . . . . . . . . . .
Principal Accountant Fees And Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
4
5
18
28
28
29
29
29
30
32
32
34
42
45
48
53
54
89
89
92
92
92
92
92
93
93
95
96
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains certain “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 and information relating to us and our business that are based on the beliefs of our
management as well as assumptions made by and information currently available to our management. When used in this
communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and
similar expressions, as they relate to us or our management, identify forward-looking statements. Moreover, we operate in a
very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management
to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Form 10-K may not occur
and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks,
including, among others:
• risks associated with COVID-19 and the governmental responses to it, including its impacts across our businesses on
demand and operations, as well as on the operations of our suppliers and other business partners, and the effectiveness of
our actions taken in response to these risks;
• general competitive conditions, including actions our competitors and content providers may take to grow their
businesses;
• a decline in college enrollment or decreased funding available for students;
• decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the
operation of their bookstores;
• implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability;
• risk that digital sales growth does not exceed the rate of investment spend;
• the performance of our online, digital and other initiatives, integration of and deployment of, additional products and
services including new digital channels, and enhancements to higher education digital products, and the inability to
achieve the expected cost savings;
• the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues
and margin;
• the general economic environment and consumer spending patterns;
• decreased consumer demand for our products, low growth or declining sales;
• the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various
acquisitions, may not be fully realized or may take longer than expected;
• the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls
being found ineffective;
• changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms
with our suppliers;
• our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute
upon additional acquisitions and strategic investments;
• risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold
to college bookstore customers;
• technological changes;
• risks associated with counterfeit and piracy of digital and print materials;
• our international operations could result in additional risks;
• our ability to attract and retain employees;
• risks associated with data privacy, information security and intellectual property;
• trends and challenges to our business and in the locations in which we have stores;
• non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings;
• disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking
and phishing attacks, resulting in harm to our business and results of operations;
• disruption of or interference with third party web service providers and our own proprietary technology;
• work stoppages or increases in labor costs;
3
• possible increases in shipping rates or interruptions in shipping service;
• product shortages, including decreases in the used textbook inventory supply associated with the implementation of
publishers’ digital offerings and direct to student textbook consignment rental programs, as well as the risks associated
with the impacts that public health crises may have on the ability of our suppliers to manufacture or source products,
particularly from outside of the United States;
• changes in domestic and international laws or regulations, including U.S. tax reform, changes in tax rates, laws and
regulations, as well as related guidance;
• enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest
based online advertising, recurring billing or similar marketing and sales activities;
• the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing;
• our ability to satisfy future capital and liquidity requirements;
• our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;
• adverse results from litigation, governmental investigations, tax-related proceedings, or audits;
• changes in accounting standards; and
• the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A of this Form 10-K.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual
results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or
planned. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements in this paragraph. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this
Form 10-K.
AVAILABILITY OF INFORMATION
Our website address is www.bned.com and our Investor Relations website address is investor.bned.com. Our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed
pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are filed with the
U.S. Securities and Exchange Commission (SEC), which maintains an Internet site at www.sec.gov to access such reports. We
are subject to the informational requirements of the Exchange Act and file or furnish reports, proxy statements, and other
information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge
on our website at investor.bned.com when such reports are available on the SEC’s website. We use our investor.bned.com
website as a means of disclosing material non-public information and for complying with our disclosure obligations under
Regulation FD. Accordingly, investors should monitor investor.bned.com, in addition to following our press releases, SEC
filings and public conference calls and webcasts.
The contents of the websites referred to above are not incorporated into this filing. Further, our references to the URLs for
these websites are intended to be inactive textual references only.
4
Item 1. BUSINESS
PART I
Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble
Education, Inc. or “BNED”, a Delaware corporation. References to “Barnes & Noble College” or “BNC” refer to our
subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our subsidiary MBS Textbook Exchange,
LLC. References to “Student Brands” refer to our subsidiary Student Brands, LLC.
Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. “Fiscal 2021”
means the 52 weeks ended May 1, 2021, “Fiscal 2020” means the 53 weeks ended May 2, 2020, and “Fiscal 2019” means the
52 weeks ended April 27,2019.
General
OVERVIEW
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 1,417 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational
content and tools within a dynamic omni channel retail environment. Additionally, we offer direct-to-student products and
services to help students study more effectively and improve academic performance.
The strengths of our business include our ability to compete by developing new products and solutions to meet market
needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with
academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable
and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such
capabilities through our recent Fanatics partnership, increase market share with new accounts, and expand our strategic
opportunities through acquisitions and partnerships.
We expect 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 our partnership with Fanatics Retail Group Fulfillment, LLC,
Inc. and Fanatics Lids College, Inc. (collectively referred to herein as the “FLC Partnership”). Through this partnership, we
receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value
for customers and accelerate growth of our logo and emblematic general merchandise business.
We believe the Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS,
are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the
United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts
to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of
their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.
We have made significant progress in the ongoing rollout of the BNC Adoption & Insights Portal, an innovative platform that
provides enhanced support for faculty and academic leadership to research, submit and monitor course material selections,
further driving affordability and student success.
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® inclusive access programs,
consisting of First Day and First Day Complete, in which course materials, including both physical and digital content, are
offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of
class. During Fiscal 2021, First Day total revenue increased 94% from the prior year period.
Technology-enabled learning is a rapid growth area in the higher education industry, as a growing number of students are
enrolling in online services to complement print and digital course materials and classroom activities. We continue to enhance
our digital content and services in an efficient, low-cost/high-value manner to complement our course materials business.
Through our suite of online services, on both Student Brands and bartleby.com®, we provide critical services for students to
achieve better success throughout their academic journey accessible anytime and anywhere. During Fiscal 2021, over 300,000
new subscribers paid for our bartleby® suite of products and services, representing 70% growth over Fiscal 2020.
During Fiscal 2021 and the fourth quarter of Fiscal 2020, our business was significantly negatively impacted by the
COVID-19 pandemic, resulting in an unprecedented material decline in revenue. Please see our Part II - Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations for further discussion.
5
Segments
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.
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”. The
following discussion provides information regarding the three segments.
General
RETAIL SEGMENT
The Retail Segment operates 1,417 college, university, and K-12 school bookstores, comprised of 769 physical campus
bookstores and 648 virtual bookstores. Our bookstores typically operate under agreements with college, university, or K-12
schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital
products. The majority of the physical campus bookstores have school-branded e-commerce sites which we operate
independently or along with our merchant partners, and which offer students access to affordable course materials and affinity
products, including emblematic apparel and gifts. Our physical and virtual bookstores, e-commerce sites and digital platforms
serve and interact with the key constituents in our business ecosystem and enable us to act as a key partner for students,
universities and publishers.
The Retail Segment offers existing and prospective clients the flexibility of physical, virtual or custom store solutions,
which afford students a ship-to-campus option where course materials are conveniently delivered to a centralized campus
location. Students have access to the right course materials at the right time, combined with a superior in-house customer
service department to help with ordering, delivery, and digital content inquiries. Students also have the flexibility of using
financial aid, and for certain institutions, proprietary campus debit cards for their course material purchases.
The Retail Segment also offers our First Day and First Day Complete inclusive access programs, in which course
materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition,
and delivered to students on or before the first day of class. We have entered into several agreements with major publishers,
including Cengage Learning, McGraw-Hill Education and Pearson Education, to distribute their digital content through First
Day. Through First Day, digital course materials are adopted by a faculty member for a single course, and students receive their
materials through their learning management system. First Day Complete is adopted by an institution and includes all classes,
providing students both physical and digital materials. The First Day Complete model drives substantially greater adoption
rates and unit sell-through against enrollment for the bookstore. Offering courseware sales through our inclusive access First
Day and First Day Complete models is a key and increasingly important strategic initiative of ours to meet the market demands
of supporting improved student outcomes, enhanced convenience and substantially reduced pricing to students. In Fiscal 2021,
First Day total sales increased by 94% from the prior year.
Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a
variety of open education resources (“OER”) courseware.
In Fiscal 2021, in the Retail Segment, we signed contracts for 98 new physical and virtual bookstores for estimated first
year annual sales of approximately $103 million, which is generally fully achieved as store becomes fully-operational in their
first full year of operations. On a net basis, we generated $77 million in net new business, as we looked to prune some under-
performing, less profitable stores, and certain other contracts were awarded to competitors. Currently, we estimate that
approximately 30% of college and university affiliated bookstores in the United States are operated by their respective
institutions. We anticipate an increasing trend towards outsourcing by schools in the campus bookstore market, and we intend
to aggressively pursue these opportunities to grow our businesses. We evaluate each new contract based on established
profitability measures to ensure we maintain a portfolio of profitable accounts. Our ability to offer existing and prospective
clients physical, virtual and custom store solutions is a key element of our competitive strategy.
During all of Fiscal 2021 and the fourth quarter of Fiscal 2020, our business experienced an unprecedented and significant
impact as a result of COVID-19 related campus and school closures. As colleges and universities moved to online remote
learning, our wholesale operations continued to serve our bookstore and virtual retail customers. Additionally, the Wholesale
operations assumed direct-to-student fulfillment of course material orders for the Retail Segment campus bookstores that were
not fully operational due to COVID-19 campus store closures. Together, our Retail and Wholesale businesses responded very
quickly to the store closures, transitioning more than 300 stores to a Custom Store Solutions, or “CSS,” model. Through the
CSS model, a customer places their courseware order on a bookstore website, and that order is then directed to the MBS
warehouse, which fills and ships the order directly to the customer. This back-end solution is unnoticed by the customer but
ensures there is no service delay. It underscores the strength of the virtual and fulfillment capabilities that MBS provides for the
company and allows us to support customers through a difficult and uncertain time.
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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 receive unparalleled product assortment, e-
commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our
general merchandise business. Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded
product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with
FLC, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus
stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.
We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day
operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store
maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that
reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of
the emblematic merchandise and gift sections of our campus store websites. FLC manages in-store assortment planning and
merchandising of emblematic apparel, headwear, and gift products for our partner campus stores.
In December 2020, Fanatics, Inc. and Lids Holdings, Inc. jointly made a strategic equity investment in BNED. On April 4,
2021, as contemplated under the merchandising partnership agreement, FLC purchased our logo and emblematic general
merchandise inventory. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize
commission revenue earned for these sales on a net basis. For additional information, see Part II - Item 8. Financial Statements
and Supplementary Data - Note 2. Summary of Significant Accounting Policies and Note 6. Equity and Earnings Per Share.
Contracts
Physical and Custom Campus Bookstore Solutions
We operate 769 physical campus bookstores. Our physical bookstores are typically operated under management
agreements with the college or university to be the official university bookstore and the exclusive seller of course materials and
supplies, including physical and digital products sold in-store, online or through learning management systems. We pay the
school a percentage of sales for the right to be the official college or university bookstore and the use of the premises;
approximately half of our agreements do not have any minimum guaranteed amount to be paid to our partners. In addition, we
have the non-exclusive right to sell all items typically sold in a college bookstore both in-store and online. We also have the
ability to integrate the store's systems with the university’s systems in order to accept student financial aid, university debit
cards and other forms of payment. Our decentralized management structure empowers local teams to make decisions based on
the local campus needs and fosters collaborative working relationships with our partners.
We also offer “Custom Store Solutions”, as discussed above, where an institution has a physical on-campus store for
general merchandise sales, but course materials are offered virtually and fulfilled direct-to-student (either to an individual
address or a central campus pick-up point). Additionally, our virtual-only solutions, discussed below, also have the ability to
offer ship-to-campus options.
The physical bookstore management contracts with colleges and universities typically include five year terms with renewal
options and are typically cancelable by either party without penalty with 90 to 120 days' notice. Our campus bookstores have an
average relationship tenure of 15 years. From Fiscal 2018 through Fiscal 2021, approximately 90% of these contracts were
renewed or extended, often before their termination dates.
Virtual Campus Bookstore Solutions
We operate 648 virtual campus bookstores. Our virtual bookstores operate under a contract with the school as the exclusive
online seller of course materials. We operate as the institution’s official source of course materials with exclusive rights to
booklists and access to online programs that link course materials to the courses offered by the school. Our virtual-only
solutions typically ship course materials directly to students, but also have the ability to offer ship-to-campus options.
Virtual bookstore agreements typically have a term that ranges between three to five years, with automatic renewal periods.
For the past three years, we have retained over 90% of our contracts annually, with the majority of the contracts being
automatically renewed as per the contract terms or renewed before their expiration dates. We pay the school a percentage of
sales for the right to be the official college or university bookstore.
We also operate Textbooks.comSM which is one of the largest e-commerce sites for new and used textbooks. This division
is primarily for direct-to-student sales.
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Customers and Distribution Network
As of May 1, 2021, we operate 769 physical college and university bookstore operations and 648 virtual bookstore
operations (420 K-12 virtual stores or 65% and 228 Higher Education virtual stores or 35%) located in the United States, in 50
states and the District of Columbia. Our Retail sales team is organized by specific territory and offer all solutions (physical,
virtual or custom store solutions) to public, state, private, community college, trade and technical, for-profit, online education
institutions, including K-12 locations, within their respective territories.
Product and Service Offerings
We offer a broad suite of affordable course materials, including new and used print textbooks (which are available for sale
or rent), digital textbooks and publisher hosted digital courseware, at our physical and virtual bookstores, as well as directly to
students through Textbooks.com. We offer a robust used textbook selection, unique guaranteed buyback program, dynamic
pricing, and marketplace offerings.
We service our physical and virtual bookstores with a comprehensive e-commerce experience and a broad suite of
affordable course materials. Additionally, our physical campus stores are social and academic hubs through which students can
access affordable course materials, along with emblematic apparel and gifts, trade books, technology, school supplies, café
offerings, convenience food and beverages, and graduation products. The majority of physical campus stores also have school-
branded e-commerce sites which we operate independently or along with our merchant partners, and which offer the same
products as the on campus stores.
Product and service offerings include:
• Course Material Sales and Rentals. Sales and rentals of course materials are a core revenue driver and our faculty and
student platforms operate as a seamless extension of our partner schools’ registration, student information and learning
management systems. Students can purchase affordable course materials, including new and used print, eTextbooks, and
publisher digital courseware platforms, which are available for sale or rent. We work directly with faculty to ensure the
course materials they have chosen for their courses are available in all required formats before the start of classes. Our
wholesale distribution channel enables our Retail Segment to optimize textbook sourcing so they are able to more
efficiently source and distribute a comprehensive inventory of affordable course materials to customers. In Fiscal 2021, we
made significant progress in the ongoing rollout of BNC Adoption & Insights Portal (“AIP”), an innovative platform that
provides enhanced support for faculty and academic leadership to research, submit and monitor course material selections,
further driving affordability and student success.
• Inclusive Access. We offer our BNC First Day® inclusive access programs, consisting of First Day and First Day Complete
in which course materials are offered at a reduced price through a course fee or included in tuition, and delivered to
students on or before the first day of class. We have partnered with VitalSource®, to use their technology to power our First
Day inclusive access platform, for digitally formatted courseware, allowing us to accelerate and optimize First Day
implementations. We have entered into several agreements with major publishers, including Cengage Learning, McGraw-
Hill Education and Pearson, to provide their digital content through First Day. The seamless delivery is made possible by
our First Day technology and publishers' technology integrations with campus systems. These initiatives provide students,
faculty and institutions greater access to more affordable course materials. First Day offers the inclusive access model on a
class-by-class basis, as adopted by the individual instructors on a campus, as compared to our First Day Complete program,
in which the entire school adopts the inclusive access model for essentially all of their courses. In Fiscal 2021, First Day
programs' total sales increased by 94% from the prior year. First Day Complete offers the delivery of both digital and
physical courseware priced at substantial discounts compared to traditional individual student sales offerings. Offering
courseware sales through our inclusive access First Day and First Day Complete models is a key and increasingly
important strategic initiative of ours to meet the market demands of substantially reduced pricing to students while, at the
same time, increasing our market share, revenue and relative gross margins of courseware sales given the higher volumes
of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.
• BNC OER+. BNC OER+, a turnkey solution for colleges and universities, offers advanced, affordable learning materials
built on a high-quality foundation of OER and enhanced with digital content that includes videos, activities and auto-
graded practice assessments that faculty can easily customize to align with class objectives. BNC OER+ significantly
reduces course material costs for students and is easy for faculty to implement. BNC OER+ is delivered digitally and can
be seamlessly integrated with an institution's campus LMS. Optional print companions of the eTextbook are available to
students. In Fiscal 2021, we offered 60 courses, including general education courses, sociology, psychology, economics,
business, early childhood and criminal justice. In Fiscal 2021, we had BNC OER+ sales to over 7,000 students at 52 unique
colleges and universities, including technical colleges and online programs.
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• eTextbooks. We have partnered with VitalSource®, a global leader in building, enhancing and delivering digital content, on
our digital reading platform and digital content catalog. The partnership with VitalSource allows us to use its technology to
power our First Day inclusive access platform, for digitally formatted courseware, allowing us to accelerate and optimize
First Day implementations.
• General Merchandise. For our physical campus bookstores and custom store solutions, we drive general merchandise sales
through both in-store and online channels and feature collegiate and athletic apparel, other custom-branded school spirit
products, lifestyle products, technology products, supplies and convenience items. We continue to see significant growth in
our general merchandise e-commerce sales, which we expect to be further bolstered through our FLC Partnership, as
discussed above. We have made continued progress in the development of our next generation e-commerce platform,
which launched in Fiscal 2021 to deliver increased high-margin general merchandise sales.
We operate 148 True Spirit e-commerce websites, which are dedicated virtual stores that appeal specifically to the alumni
and sports fan base. We also operate pop-up retail locations at major sporting events, such as football and basketball games,
for our partner colleges and universities. The True Spirit e-commerce websites for athletic branded merchandise and the
physical pop-up retail locations continue to build our partner schools’ brands through alumni and athletics, fostering school
spirit and capturing the excitement of collegiate sports. We utilize event driven direct marketing strategies for events, such
as tournament playoffs or homecoming events, to target an online population of students, alumni and sports fans, with
emails and search engine marketing.
• Cafés and Convenience Stores. At our physical campus locations, we operate 77 customized cafés, featuring Starbucks
Coffee®, as well as regional coffee roasters, and 12 stand-alone convenience stores. Our Café locations and convenience
marketplaces offer diverse grab-and-go options including organic, vegan, gluten-free and regional fresh food products.
These offerings increase traffic and time spent in our physical stores. As market needs change, we are adapting our model
to include more grab-and-go pre-packed fresh food items, simplified menus to reduce food waste and new technology to
reduce operating complexity and make the customer experience more efficient. During Fiscal 2021, we reduced the number
of our cafe locations and their product offerings due to the COVID-19 pandemic.
• Brand Partnerships. Through our unique relationship with students, colleges and universities, and our premier position on
campus, we operate as a media channel for brands looking to target the college demographic, and derive revenue from
these marketing programs. We also focus on promoting lifestyle products to students and faculty by promoting various
brands to connect on a much more personal level. We create strategic, integrated campaigns which include research, email,
social media, display advertising, on-campus events, signage, and sampling. Our client list includes brands such as Chase,
Target, Masterpass, GEICO, DirecTV, GrubHub, Shutterfly, The New York Times and Tom's of Maine. Revenue from
these services have higher margin rates due to the relatively low incremental cost structure to provide these services.
Merchandising and Supply Chain Management
Our purchasing procedures vary based on type of bookstore (physical or virtual) and by product type (i.e. course materials,
general merchandise or trade books).
Course Materials and Trade Books
Purchases are made at the bookstore level with strategic corporate oversight to determine purchase quantities and maintain
appropriate inventory levels. After titles are adopted for an upcoming term, we determine how much inventory to purchase
based on several factors, including student enrollment and the previous term’s course material sales history. For physical
campus bookstores, we use an automated sourcing system to determine if another store has the necessary new or used textbooks
on hand and may transfer the inventory to the appropriate store.
The Retail Segment fulfillment order is directed first to our wholesale business before other sources of inventory are
utilized. Our wholesale business significantly increases our textbook supply at competitive prices, as well as our ability to
liquidate non-returnable inventory. Our broad wholesale distribution channel and warehousing systems also drive inventory
efficiencies by using real-time information regarding title availability, edition status and market prices, allowing the Retail
Segment to optimize its course material sourcing and purchasing processes. During Fiscal 2020, we have restructured our
management of physical courseware inventory ordering and fulfillment functions to better integrate our Retail and Wholesale
personnel and centralize decision-making to achieve efficiencies, cost savings and a more streamlined approach.
After internal sourcing, the bookstore purchases remaining inventory needs from outside suppliers and publishers. For
course material sales and rentals, we utilize sophisticated inventory management platforms to manage pricing and inventory
across all stores. Our primary suppliers of new textbooks are publishers, including Pearson Education, Cengage Learning,
McGraw-Hill Education, Macmillan Learning, and John Wiley & Sons. Both unsold textbooks and trade books are generally
returnable to publishers for full credit. Our primary suppliers of used textbooks are students, through returns of previously
rented and purchased books. We offer a “Cash for Books” program in which students can sell their books back to the physical
or virtual bookstore at the end of the semester, typically in December and May. Students typically receive up to 50% of the
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price they originally paid for the book if it has been adopted for a future class or the current wholesale price if it has not.
Recently, the impact of fewer students on campus due to COVID-19 has significantly impacted our on-campus buyback
programs.
The larger physical bookstores feature an expanded selection of trade books (general reading). Merchants meet with
publishers on a regular basis to identify new titles and trends to support this changing business.
General Merchandise
General merchandise vendors and product selection is driven by our central merchant organization that is responsible for
curating the overall product assortment for the academic year, as well as in partnership with FLC for logo and emblematic
general merchandise. Benchmarks are established across school type, region and the demographics of each of our schools to
allow for store level insights and customization for a product assortment that is unique to address the needs of each school that
we serve. Our ability to support and promote our partner schools’ brands strengthens our relationships with the administration,
faculty, alumni, fans, parents and students.
Customer Engagement and Marketing
Campus Community
Our campus relationships and contractual agreements allow us to seamlessly integrate into the college and university
community. With direct access to our customer base through both physical and digital channels, we drive awareness, revenue
and loyalty for the schools that we serve. We actively market and promote to all segments of our customer base for our physical
and virtual bookstores, as well as Textbooks.com. We develop fully-integrated marketing programs to drive engagement with
the students, parents, alumni and fans to promote all of our product and services, with a focus on academic course material
needs, as well as school spirit, supply and technology categories. Textbooks.com marketing strategies target an online
population of students, lifelong learners, parents and general textbook shoppers through a variety of channels including email,
search engine marketing and affiliate marketing.
We have robust research capabilities that keep us ahead of the rapidly changing needs and behaviors of our customers,
which allow us to proactively respond with relevant and dynamic solutions. Our Barnes & Noble College Insights® platform
connects us to a community of over 11,000 students who help guide and inform our strategies and direction. In addition, we
expect to benefit from the FLC Partnership for insights on logo and emblematic merchandise, brand selection and style
preferences, as FLC may be able to identify certain retail trends for similar age demographics at their 1,100 Lids retail
locations. We believe Lids has its finger on the pulse of the buyer behavior of the 12-20 year old student consumer to identify
and act on trends prior to other retailers.
Our customizable technology delivers a seamless experience providing students and faculty with the ability to research,
locate and purchase the most affordable course materials. Our platforms include single sign-on (“SSO”), student information
system integration, registration integration, learning management system integration, real-time financial aid platform, point of
sale platform and course fee solutions. Through our fully-integrated purchasing process, students can purchase their course
materials in-store, online, or when registering for classes.
Faculty and School Administrators
We support faculty and academic leadership with our proprietary online platform which allows content search, discovery
and course material adoption, enabling them to offer course materials that are both relevant and affordable for their students.
Seasonality
Our retail business is highly seasonal, with the major portion of sales and operating profit realized during the second and
third fiscal quarters, when college students generally purchase and rent textbooks for the upcoming semesters. Revenue from
the rental of physical textbooks is deferred and recognized over the rental period commencing at point of sale. Revenue from
the rental of digital textbooks is recognized at time of sale.
General
WHOLESALE SEGMENT
The Wholesale Segment is comprised of the wholesale and virtual retail fulfillment, and support operations of our MBS
subsidiary. The Wholesale Segment enables the Company to generate more value from the textbook marketplace through
inventory and procurement synergies. Since our acquisition of MBS in 2017, we have achieved certain operational and cost
synergies by our ongoing integration of various activities and functions, such as new business sales, inventory management,
customer support, and information technology support, amongst other activities.
We are one of the largest textbook wholesalers in the country, providing a comprehensive selection of new and used
textbooks at a lower cost of supply to approximately 3,300 physical bookstores, including our Retail Segment's 769 physical
campus bookstores. Our wholesale business also sources and distributes new and used textbooks to our 648 virtual bookstores.
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Additionally, through our Wholesale Segment, we sell hardware and a software suite of applications that provides inventory
management and point-of-sale solutions to approximately 400 college bookstores.
As discussed in the Overview above, our business experienced an unprecedented and significant impact as a result of
COVID-19 related campus and school closures. As colleges and universities moved to online remote learning, our wholesale
operations continued to serve our bookstore and virtual retail customers. Additionally, the Wholesale operations assumed
direct-to-student fulfillment of course material orders for the Retail Segment campus bookstores that were not fully operational
due to COVID-19 campus store closures. Together, our Retail and Wholesale businesses responded very quickly to the store
closures, transitioning more than 300 stores to a Custom Store Solutions, or “CSS,” model. Through the CSS model, a customer
places their courseware order on a bookstore website, and that order is then directed to the MBS warehouse, which fills and
ships the order directly to the customer. This back-end solution is unnoticed by the customer but ensures there is no service
delay. It underscores the strength of the virtual and fulfillment capabilities that MBS provides for the company and allowed us
to support customers through a difficult and uncertain time.
Product and Service Offerings
Product and Service offerings include:
• Wholesale Textbook Distribution. Our large inventory of used textbooks consists of approximately 280,000 textbook titles
in stock, and utilizes a highly automated distribution facility that is capable of processing over 21 million textbooks
annually.
Additionally, we are a national distributor for rental textbooks offered through McGraw-Hill Education's consignment
rental program (which includes approximately 730 titles) and Pearson Education’s consignment rental program (which
includes approximately 587 titles). Through our centrally located, advanced distribution center, we offer the seamless
integration of these consignment rental programs and centralized administration and distribution to 1,649 stores, including
the Retail Segment stores. These consignment rental programs are available to our wholesale customers, including
institutionally run and contract managed campus bookstores, as well as our physical and virtual bookstores.
• Wholesale Inventory Management, Hardware and POS Software. We sell hardware and a software suite of applications
that provides inventory management and point-of-sale solutions to approximately 400 college bookstores. We provide on-
site installation for point-of-sale terminals and servers, and offer technical assistance through user training and our support
center facility. The cost savings and ease of deployment ensure clients get the most out of their management systems and
create strong customer loyalty.
Supply Chain Management
An extensive national sales force secures a steady supply of high demand used textbooks, which is critical to the success of
the wholesale business. A primary supplier of used textbooks are students, through the return of previously rented and
purchased books to their campus bookstore. We purchase new and used textbooks from our physical and virtual bookstores,
other bookstore operators, institutional bookstores, book dealers, publishers, other distributors and other wholesalers. We offer
a “Cash for Books” program in which students can sell their books back to the store at the end of the semester, typically in
December and May. Recently, the impact of fewer students on campus due to COVID-19 has significantly impacted our on-
campus buyback programs which supplies Wholesale’s used textbook inventory for future selling periods.
Our broad wholesale distribution channel and warehousing systems also drives inventory efficiencies, allowing us to
optimize our textbook sourcing, purchasing and liquidation processes. We leverage our wholesale distribution channel and
warehousing systems to more efficiently source and distribute a robust, comprehensive inventory of affordable course materials
to our bookstore customers. Through our proprietary Database Buying Guide, we have access to the best maintained, most
accurate, and most complete source of college textbook information available - a key asset that allows us to develop superior
supply and demand insights and risk management capabilities.
Customer Marketing Strategies
We have developed deep relationships with our wholesale customer base as a result of our substantial inventory of used
textbooks, a comprehensive catalog of textbooks, and superior service and systems support. We continue to maintain a portfolio
of profitable accounts, given the demand for used and new textbooks has historically been greater than the available supply.
Seasonality
Our wholesale business is highly seasonal, as a major portion of sales and operating profit is realized during the first,
second and third fiscal quarters, when textbooks are sold for retail distribution.
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General
DIGITAL STUDENT SOLUTIONS SEGMENT
The Digital Student Solutions (“DSS”) Segment includes direct-to-student product and service offerings to assist students
to study more effectively and improve academic performance, thus enabling them to gain the valuable skills necessary to
succeed after college. DSS 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 services.
We offer these online solutions to students via the internet, and market our offerings directly to students in our physical and
virtual bookstore footprint and nationally to students through search engine optimization. Our physical and virtual bookstore
footprint, and associated student relationships, present a sizable addressable market for our digital products and services. We
continue to enhance and invest in our digital content and solutions to complement and leverage our bookstore and wholesale
businesses. Our well-established, deep relationships with college and university partners, as well as our physical presence on
campus, provides us with a competitive advantage as we roll out new products and services on the campuses and universities
we serve. This integration with our other operating segments allows us to offer students products and services in an increasingly
relevant, cost effective, and targeted way. The addressable market outside our physical and virtual bookstore footprint is an
additional area where we market these products and services to students.
We continue to expand our ecosystem of products and services through our own internal development, as well as by
partnering with other companies to provide products and services designed to improve student success and outcomes. 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.
Customers and Service Offerings
Student Brands
Student Brands provides writing services in a direct-to-student subscription-based model. Subscription revenue is deferred
and recognized over the service period. Student Brands also generates revenue from digital advertisements.
Student Brands has a community of online learners, across its digital properties, which include bartleby.com,
123HelpMe.com, PaperRater.com and StudyMode.com in the United States and TrabalhosFeitos.com, Etudier.com and
Monografias.com in Brazil, France and Mexico, respectively.
Student Brands addresses writing pain points; students can search for a topic, develop an outline, and access authenticity
technology. The content database allows students to leverage academic resources and references, with 60 million essays across
4 languages with subscribers representing more than 200 different countries. Student Brands utilizes deep data analytics and
artificial intelligence to drive its content management system, the “Content Brain” which is also leveraged across the bartleby
service offering. The study tools supplement the student’s learning ecosystem by assisting across multiple subjects and varied
assignments on a digital platform.
bartleby
Bartleby is a central offering in our developing ecosystem of direct-to-student digital products and services, accessible
anytime and anywhere. bartleby.com provides critical services for students to achieve better success throughout their academic
journey. The bartleby product offerings consist of bartleby learn™ available on the web or via the bartleby app, comprised of
over 2 million textbook solutions, over 3 million question and answer solutions, and student guides; bartleby write™ comprised
of revision, plagiarism, citation and scoring tools; and bartleby tutor™ comprised of online tutoring services.
We offer these online solutions to students via the internet, and market our offerings directly to students in our physical and
virtual bookstore footprint and nationally to students through search engine optimization. We provide these services in a direct-
to-student subscription-based model. Subscription revenue is deferred and recognized over the service period.
Customer Marketing Strategies
The implementation of our digital strategy initially relies on leveraging our bookstore relationships, both physical and
virtual, to help accelerate the adoption of our digital products and services. By leveraging our physical and virtual bookstore
footprints among students and faculty of both K-12 schools and higher education institutions, as well with our search engine
optimization efforts and marketing investment in other channels such as search engine marketing (“SEM”), we have
substantially more opportunities to market the solutions students need to improve success in the classroom and beyond. For
Fiscal 2021, we have achieved over 300,000 customers subscribed for bartleby homework solutions and writing services
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utilizing marketing and promotional offers, both within our managed bookstore footprint and nationally to students,
representing a small percentage of the total addressable market opportunity.
Seasonality
Revenues and operating profit are realized relatively consistently throughout the year, although quarterly results may
fluctuate depending on the timing of the start of the various schools' semesters.
COMPETITION
We operate within a competitive and rapidly changing business environment, and each of our lines of business face
competition for the products and services they offer. As it relates to our full service campus bookstore operations, Follett is the
primary competitor for institutional contracts. We also compete with other vendors for mostly smaller accounts, including BBA
Solutions, Texas Book Company, and Slingshot. Our online/virtual course material store operations primarily face competition
from eCampus and Akademos, and on occasion, Ambassador Educational Solutions. We also face competition from direct-to-
student course material channels, including Amazon, Chegg.com, publishers (e.g. Cengage Learning, Pearson Education and
McGraw-Hill Education) that bypass the retail distribution channel by selling directly to students and institutions and other
third-party websites and/or local bookstores. We face competition from eTextbook/digital content providers VitalSource
Technologies, Inc. and Red Shelf, which offer independent bookstores a catalog of digital content and distribution services and
also have direct-to-student selling channels for digital materials.
Competitors for institutional contracts for our cafe and convenience general merchandise offerings include Sodexo and
Aramark. Our general merchandise business also faces competition from direct-to-student sales from Walmart, Amazon, Dick’s
Sporting Goods, other third-party online retailers, physical and online office supply stores and local and national retailers that
offer college-themed and other general merchandise.
Competitors for our wholesale new and used textbook inventory and distribution include Amazon, BBA Solutions,
Nebraska Book Company and Texas Book Company.
Our DSS Segment faces competition from other digital student solutions providers including Chegg.com, CourseHero,
Grammarly, Quizlet, Noodle Tools, and Turnitin (iParadigms). As we develop a wider range of products and services, our
competitive landscape will change and include other competitors in the broader student services market.
TRENDS AND OTHER BUSINESS CONDITIONS AFFECTING OUR BUSINESS
The market for educational materials continues to undergo significant change. As tuition and other costs rise, colleges and
universities face increasing pressure to attract and retain students and provide them with innovative, affordable educational
content and tools that support their educational development. Current trends, competition and other factors affecting our
business include:
• Overall Economic Environment, College Enrollment and Consumer Spending Patterns. Our business is affected by the
impact of the COVID-19 pandemic, the overall economic environment, funding levels at colleges and universities, by
changes in enrollments at colleges and universities, and spending on course materials and general merchandise.
• Impact of the COVID-19 Pandemic: The COVID-19 pandemic has materially and adversely impacted certain segments
of the U.S. economy, with legislative and regulatory responses including unprecedented monetary and fiscal policy
actions across all sectors, and there is significant uncertainty as to timing of stabilization and recovery, including the
ability to gain adequate herd-immunity levels through vaccine programs and their resilience to future virus variants.
Many colleges and K-12 schools have been required to cease in-person classes in an attempt to limit the spread of the
COVID-19 virus and ensure the safety of their students. Although many academic institutions have reopened, they are
considering alternatives to traditional in-person instruction, including online learning and significantly reduced
classroom sizes. Additionally, while many athletic conferences resumed their sport activities, fan attendance at the
games was either eliminated or severely restricted, which further impacted the company’s general merchandise
business.
• Economic Environment: Retail general merchandise sales are subject to short-term fluctuations driven by the broader
retail environment.
• Enrollment Trends. The growth of our business depends on our ability to attract new customers and to increase the
level of engagement by our current student customers. We continue to see downward enrollment trends and shrinking
resources from state and federal government for colleges and universities. Enrollment trends, specifically at
community colleges, generally correlate with changes in the economy and unemployment factors, e.g. low
unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment
trends, as students generally enroll to obtain skills that are in demand in the workforce. Enrollment trends have been
negatively impacted overall by COVID-19 concerns at physical campuses. A significant reduction in U.S. economic
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activity and increased unemployment could lead to decreased enrollment and consumer spending. Additionally,
enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional
18-24 year-old college age. Online degree program enrollments continue to grow, even in the face of declining overall
higher education enrollment.
• Increased Use of Online and Digital Platforms as Companions or Alternatives to Printed Course Materials. Students and
faculty can now choose from a wider variety of educational content and tools than ever before, delivered across both print
and digital platforms.
• Distribution Network Evolving. The way course materials are distributed and consumed is changing significantly, a trend
that is expected to continue. The market for course materials, including textbooks and supplemental materials, is intensely
competitive and subject to rapid change.
◦ Disintermediation. We are experiencing growing competition from alternative media and alternative sources of
textbooks and other course materials. In addition to the official physical or virtual campus bookstore, course materials
are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including
Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to
students and educational institutions, and student-to-student transactions over the Internet.
◦ Supply Chain and Inventory. Since the demand for used textbooks has historically been greater than the available
supply, our financial results are highly dependent upon Wholesale’s ability to build its textbook inventory from
suppliers in advance of the selling season. Recently, the impact of fewer students on campus due to COVID-19 has
significantly impacted our on-campus buyback programs which supplies Wholesale’s used textbook inventory for
future selling periods. Some textbook publishers have begun to supply textbooks pursuant to consignment or rental
programs which could impact used textbook supplies in the future. Additionally, Wholesale is a national distributor for
rental textbooks offered through McGraw-Hill Education's and Pearson Education’s consignment rental program, both
of which are relatively nascent.
◦ Price Competition. In addition to the competition in the services we provide to our customers, our textbook and other
course materials business faces significant price competition. Students purchase textbooks and other course materials
from multiple providers, are highly price sensitive, and can easily shift spending from one provider or format to
another.
• A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced.
◦ Outsourcing Trends. We continue to see the trend towards outsourcing in the campus bookstore market and also
continue to see a variety of business models being pursued for the provision of course materials (such as inclusive
access programs and publisher subscription models) and general merchandise.
◦ New and Existing Bookstore Contracts. We expect awards of new accounts resulting in new physical and virtual store
openings will continue to be an important driver of future growth in our business. We also expect that certain less
profitable or essential bookstores we operate may close. Such stores could be included in contracts for stores we
operate that may be deemed non-essential; and such stores could be operated by others or independently by schools.
The scope of any such store closures remains uncertain, although we are not aware, at this time, of any significant
volume of stores which we operate that are likely to close or have informed us of upcoming closures.
GOVERNMENT REGULATIONS
We are subject to a number of laws and regulations that affect companies conducting business on the Internet and in the
education industry, many of which are still evolving and could be interpreted in ways that could harm our business. For
example, we often cannot be certain how existing laws and regulation, or new laws and regulations, will apply in the e-
commerce and online context, including, but not limited to such topics as privacy, antitrust, credit card fraud, advertising,
taxation, sweepstakes, promotions, content regulation, financial aid, scholarships, student matriculation and recruitment, quality
of products and services and intellectual property ownership and infringement.
Numerous laws and regulatory schemes have been adopted at the national and state level in the United States, and in some
cases internationally, that have a direct impact on our business and operations. For example:
The Controlling and Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM Act”) and
similar laws adopted by a number of states, regulate unsolicited commercial emails, create criminal penalties for emails
containing fraudulent headers and control other abusive online marketing practices. Similarly, the U.S. Federal Trade
Commission (“FTC”) has guidelines that impose responsibilities on us with respect to communications with consumers and
impose fines and liability for failure to comply with rules with respect to advertising or marketing practices they may deem
misleading or deceptive.
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The Telephone Consumer Protection Act of 1991 (“TCPA”) restricts telemarketing and the use of automated telephone
equipment. The TCPA limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text
messages and fax machines. It also applies to unsolicited text messages advertising the commercial availability of goods or
services. Additionally, a number of states have enacted statutes that address telemarketing. For example, some states, such
as California, Illinois and New York, have created do-not-call lists. Other states, such as Oregon and Washington, have
enacted “no rebuttal statutes” that require the telemarketer to end the call when the consumer indicates that he or she is not
interested in the product being sold. Restrictions on telephone marketing, including calls and text messages, are enforced
by the FTC, the Federal Communications Commission, states and through the availability of statutory damages and class
action lawsuits for violations of the TCPA.
The Restore Online Shopper Confidence Act (“ROSCA”), and similar state laws, impose requirements and restrictions
on online services that automatically charge payment cards on a periodic basis to renew a subscription service, if the
consumer does not cancel the service.
Regulations related to the Program Participation Agreement of the U.S. Department of Education and other similar
laws regulate the recruitment of students to colleges and other institutions of higher learning.
The Digital Millennium Copyright Act (“DMCA”) provides relief for claims of circumvention of copyright protected
technologies and includes a safe harbor intended to reduce the liability of online service providers for hosting, listing or
linking to third-party content that infringes copyrights of others.
The Communications Decency Act provides that online service providers will not be considered the publisher or
speaker of content provided by others, such as individuals who post content on an online service provider’s website.
The Company is subject to certain laws relating to the collection, use, retention, security and transfer of personal
information. In many cases, these laws apply to not only third-party transactions, but also may impact transfers of personal
information among the company and its affiliates. For example:
The General Data Protection Regulation (“GDPR”), became effective on May 18, 2018. This European Union
(“EU”) law governing data practices and privacy applies to all of our activities conducted from an establishment in the
EU or related to certain of our products and services offered in the EU, and imposes a range of new compliance
obligations regarding the handling of personal data.
The California Consumer Privacy Act (“CCPA”), became effective on January 1, 2020. CCPA provides
consumers the right to know what personal data companies collect, how it is used, and the right to access, delete and
opt out of sale of their personal information to third parties. It also expands the definition of personal information and
gives consumers increased privacy rights and protections for that information. The CCPA also includes special
requirements for California consumers under the age of 16.
The California Privacy Rights Act of 2020 (“CPRA”) will go into effect on January 1, 2023. CPRA expands upon
CCPA by strengthening rights of California consumers, further restricting business use of consumer personal
information, and establishing a new government agency for enforcement.
Overview
HUMAN CAPITAL
As of May 1, 2021, we had 4,095 domestic employees, of which approximately 2,761 were full-time and the remaining
were regularly scheduled part-time employees. In addition, we employed approximately 6,500 temporary and seasonal
employees during peak periods during Fiscal 2021. Of our 2,761 full-time employees, approximately 2,014 work in our Retail
Segment, 675 work in our Wholesale Segment, 45 work in our Digital Student Solutions Segment and 27 work in corporate
support functions. Our employees are not represented by unions, except for 11 employees. We believe that our relationship with
our employees is good.
Personnel recruitment and training
We believe our continued success is dependent in part on our ability to attract, retain and motivate quality employees. Our
success depends on our ability to promote and recruit qualified corporate personnel, regional and store managers and full-time
and part-time store employees. Regional managers are primarily responsible for recruiting new store managers, while store
managers are responsible for the hiring and training of store employees. Many of our part-time retail store employees are
students attending the colleges and universities we serve. To attract and retain motivated and talented people, we look for
opportunities to promote from within the Company. We recently completed an organizational restructuring in our Retail
Segment that resulted in a significant number of employees being promoted to field leadership roles.
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We invest in our employees through structured training programs that offer all employees opportunities for development.
We create, manage, or offer a large collection of courses for employees that cover a range of subjects such as goal setting, how
to be an effective leader, situational leadership, and effective communication.
Compensation and benefits
We are committed to providing competitive pay and benefits to our employees. Corporate and store management, including
store directors, regional managers and store managers, are compensated with base pay plus annual bonuses based on
performance. We also offer equity awards to employees in several levels of management. Non-management employees are
compensated on an hourly basis in addition to periodic contests and rewards. Many of our employees participate in one of our
various incentive programs, which provide the opportunity to receive additional compensation based upon department or
Company performance. We also provide our eligible employees the opportunity to participate in a 401(k) retirement savings
plan which includes a 100% Company match of the employee’s elective contributions up to 4% of eligible compensation.
Although the 401(k) match was suspended as part of the Company’s cost-saving measures in response to the COVID-19
pandemic, we expect to reinstate it during Fiscal 2022. We offer a competitive benefits package for eligible employees and an
employee discount on merchandise purchased from our stores.
We also offer an employee assistance program that provides employees and their family members immediate support and
guidance, including access to free short-term licensed counseling services, as well as assessments and referrals for further
services. Employees have 24-hour access by phone and through an interactive website to find information and resources for
hundreds of everyday work and life issues, search for clinicians, submit online service requests and participate in interactive,
customizable self-improvement programs.
Inclusion and Diversity
We are focused on creating an inclusive culture and a diverse employee base to better serve our diverse customer base. We
provide programming to our employees on inclusion and diversity topics Approximately, 63% of our full-time and part-time
employees identify as women and approximately 30% identify as ethnically diverse.
We have required all employees to complete training aimed at preventing harassment and discrimination and will be adding
courses in Fiscal 2022 regarding inclusion and diversity and unconscious bias. We have also created a D&I taskforce and
engaged an outside consultant to evaluate current practices and impressions and assist us in educating employees on aspects of
diversity and inclusion about which they may not have been aware.
Safety
Employee safety is a top priority. We have developed policies to ensure the safety of each employee and compliance with
Occupational Safety and Health Administration (“OSHA”) standards. In response to the COVID-19 pandemic, we implemented
measures to protect our employees and our customers consistent with OSHA standards and Centers for Disease Control and
Prevention (“CDC”) guidelines such as temporary store closures, increased sanitization efforts at our stores, distribution centers
and headquarters offices, limiting travel, physical distancing, adopting a mask policy for all customers and employees, and
remote work arrangements for the majority of non-retail employees.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following sets forth information regarding our executive officers, including their positions (ages as of June 25, 2021):
Name
Michael P. Huseby . . . . . . .
Thomas D. Donohue . . . . . .
David G. Henderson . . . . . .
Michael C. Miller . . . . . . . .
Seema C. Paul . . . . . . . . . . .
Jonathan Shar . . . . . . . . . . .
Age
66
51
63
49
57
52
Position
Chairman and Chief Executive Officer
Executive Vice President, Chief Financial Officer
Executive Vice President, Strategic Services, and President, MBS
Textbook Exchange, LLC
Executive Vice President, Corporate Development and Affairs, and
Chief Legal Officer, Secretary
Senior Vice President, Chief Accounting Officer
Executive Vice President, Retail
Michael P. Huseby, age 66, serves as our Chairman of the Board of Directors and Chief Executive Officer. He was a
member of the Board of Directors of Barnes & Noble from January 2014 and served as the Chief Executive Officer of Barnes &
Noble until the complete legal and structural separation of the Company from Barnes & Noble on August 2, 2015. Mr. Huseby
was elected to the Board of Directors of the Company and was appointed Executive Chairman effective August 2, 2015.
Effective September 19, 2017, Mr. Huseby became Chief Executive Officer of the Company in addition to his role as Chairman
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of the Board of Directors. Previously, Mr. Huseby was appointed President of Barnes & Noble in July 2013, and Chief
Financial Officer of Barnes & Noble in March 2012. From 2004 to 2011, Mr. Huseby served as Executive Vice President and
Chief Financial Officer of Cablevision Systems Corporation, a leading telecommunications and media company, which was
acquired by the Altice Group in June 2016. He served on the Cablevision Systems Corporation Board of Directors in 2000 and
2001. Prior to joining Cablevision, Mr. Huseby served as Executive Vice President and Chief Financial Officer of Charter
Communications, Inc., a large cable operator in the United States. Mr. Huseby served on the Board of Directors of Charter
Communications from May 2013 through May 2016. Mr. Huseby served as Executive Vice President, Finance and
Administration, of AT&T Broadband, a leading provider of cable television services from 1999 to 2002, when it was sold to
Comcast Corporation. In addition, Mr. Huseby spent over 20 years at Arthur Andersen, LLP and Andersen Worldwide, S.C.,
where he held the position of Global Equity Partner serving a myriad of clients, including a number of large publicly-traded
companies. Mr. Huseby served on the Board of Directors of CommerceHub, Inc., a cloud-based e-commerce fulfillment and
marketing software platform company previously listed on Nasdaq, from July 2016 until May 2018 with his tenure ending upon
the consummation of the sale of CommerceHub to financial sponsors. While on the Board of CommerceHub, Mr. Huseby
served as chair of the Audit Committee and as a member of the Compensation Committee. Since October 2019, Mr. Huseby has
served on the Board of Directors of Whip Media Group, a private technology-based company engaged in transforming the
global entertainment content licensing ecosystem.
Thomas D. Donohue, age 51, serves as our Executive Vice President, Chief Financial Officer. In this role he is responsible
for overseeing accounting, tax and enterprise risk management, internal audit, treasury and investor relations. Previously, he
served as Senior Vice President, Treasurer and Investor Relations for the Company since 2015. Prior to joining Barnes & Noble
Education, Mr. Donohue served as Treasurer of Barnes & Noble, Inc. since June 2012. Prior to joining Barnes & Noble, he
spent 12 years at the Interpublic Group of Companies, a global provider of advertising and marketing services, where he served
as Vice President, Assistant Treasurer, International.
David G. Henderson, age 63, serves as Executive Vice President, Strategic Services, and President, MBS Textbook
Exchange, LLC. Mr. Henderson has been with MBS for more than 25 years, where he held various sales and marketing roles
before being named President in 2017. Prior to joining MBS in 1993, Mr. Henderson served as Vice President of Sales at First
Financial Management Corporation. He has also held management roles at Toy Distributors and Best Products, Inc.
Michael C. Miller, age 49, serves as our Executive Vice President, Corporate Development and Affairs, and Chief Legal
Officer, Secretary. Previously, Mr. Miller served as Executive Vice President, Corporate Strategy and General Counsel. Mr.
Miller joined Barnes & Noble Education in April 2017 and also serves as Corporate Secretary. Before joining the Company, he
served as Executive Vice President, General Counsel and Secretary of Monster Worldwide, Inc. from December 2008 through
December 2016, as Vice President and Deputy General Counsel from July 2008 to December 2008, and as Vice President and
Associate General Counsel from October 2007 to July 2008. Prior to Monster, Mr. Miller was Senior Counsel for Motorola,
Inc. from February 2007 to September 2007. From June 2002 to January 2007, he served in various capacities as Senior
Corporate Counsel for Symbol Technologies, Inc. Prior to joining Symbol, Mr. Miller was associated with both Sullivan &
Cromwell, LLP and Winthrop, Stimson, Putnam & Roberts in New York.
Seema C. Paul, age 57, joined the Company in July 2015 and serves as our Senior Vice President, Chief Accounting
Officer. In this role she manages external reporting and technical accounting, corporate accounting, and financial reporting
functions of the Company. Prior to joining the Company, Ms. Paul held positions of increasing responsibility at Covanta
Holding Corporation, including Corporate Controller from July 2014 to July 2015, Senior Director-External Reporting &
Technical Accounting from June 2013 to July 2014, Director-External Reporting from January 2011 to May 2013 and
Manager-External Reporting from August 2005 to December 2010. Ms. Paul is a Certified Public Accountant and has held
various senior financial roles with several large companies, including Net2Phone, Sybase, Inc. and Liberty Mutual Insurance
Company.
Jonathan Shar, age 52, serves as Executive Vice President, Retail. Mr. Shar has overall responsibility for the growth and
profitability of the Company’s Retail segment, including the development and implementation of client-focused solutions that
deliver innovation and increased value to the higher education marketplace. Previously, Mr. Shar served as Senior Vice
President, Revenue and Product Development for the Company. Prior to joining BNED in 2018, Mr. Shar was Chief Marketing
Officer at Akademos, Inc., an e-commerce and digital marketing company that provides online bookstore services, from 2014
to 2018. He previously was the General Manager of NOOK Digital Content at Barnes & Noble, Inc. where he oversaw business
development, product development and marketing for the Global NOOK Newsstand, NOOK Video and NOOK Apps digital
businesses. Prior to his nearly five years with NOOK, he served as Senior Vice President and General Manager at CNNMoney,
responsible for the CNNMoney website and mobile franchise. Prior to that, he was Vice President of Consumer Marketing at
Sports Illustrated Group and Director of Consumer Marketing for FORTUNE Magazine Group.
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Item 1A. RISK FACTORS
The risks and uncertainties set forth below, as well as other risks and uncertainties described elsewhere in this Annual
Report on Form 10-K including in our consolidated financial statements and related notes and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” or in other filings by BNED with the SEC, could adversely affect
our business, financial condition, results of operations and the trading price of our common stock. Additional risks and
uncertainties that are not currently known to us or that are not currently believed by us to be material may also harm our
business operations and financial results. Because of the following risks and uncertainties, as well as other factors affecting our
financial condition and operating results, past financial performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Risks Relating to the COVID-19 Pandemic
The impact of the COVID-19 pandemic, or the impact of any future pandemic, is uncertain and difficult to predict, but the
COVID-19 pandemic and the measures taken to contain it has had a material adverse effect on our business and revenues to
date and may have a material adverse effect on our business, financial condition, results of operations, stock price, and
liquidity in the future.
The COVID-19 pandemic has materially and adversely impacted the U.S. economy and financial markets, with legislative
and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there is significant
uncertainty as to timing of stabilization and recovery. Our business, results of operations and financial condition were adversely
affected by the COVID-19 pandemic in the fourth quarter of 2020, especially beginning in mid-March, and such impact has
continued throughout Fiscal 2021. The COVID-19 pandemic, and measures taken to contain it, have subjected our business,
results of operations, financial condition, stock price and liquidity to a number of material risks and uncertainties, all of which
may continue or worsen.
Many colleges and K-12 schools were required or opted to cease or limit in-person classes in an attempt to limit the spread
of COVID-19 and ensure the safety of their students and faculty. Although some academic institutions have reopened, most are
still utilizing online learning as an alternative to traditional in-person instruction. An increase in the spread of COVID-19 or
variants could force schools to close again. In addition, as a result of individual health concerns or financial difficulties,
enrollment could be negatively impacted. If colleges and schools are required to close or significantly fewer students are on
campus, we may experience lower customer engagement with our products and services, which could lead to a materially
adverse impact on our business and result of operations.
COVID-19, related governmental reactions and economic conditions may have a negative impact on our business,
liquidity, results of operations, and stock price due to the occurrence of some, or all, of the following events or circumstances:
• the closing or limited operations of our campus retail stores;
• reductions in government funding of education could negatively impact the budgets of colleges and K-12 schools public
colleges, which could impact the demand for our products and services;
• our inability to realize our expected return on textbooks in our print textbook library as educators transition to online
curriculums and the lack of supply of used textbooks as a result of limited on campus buyback opportunities;
• disruptions to the operations of our logistics and distribution partners, which could impact our ability to timely deliver
our print textbooks to students;
• our partners’ inability to fill our textbook or general merchandise orders due to disruptions to their operations, supply
chains or overwhelming demand from their own customers;
• system interruptions that slow our website or make our website unavailable as our third-party software and service
providers experience increased usage;
• a significant reduction in U.S. economic activity and increased unemployment, which could lead to decreased enrollment
and consumer spending;
• the potential negative impact on the health of our employees, particularly if a significant number of them are impacted,
could affect our ability to ensure business continuity during the period of disruption related to the pandemic;
• governmental orders have forced many of our on-site and management office employees to work remotely, which may
adversely impact our ability to effectively manage our business and maintain our financial reporting processes and
related controls, as well as introduce operational risk, including an increased vulnerability to potential cyber security
attacks; and
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• actions we have taken and may take in the future in response to the COVID-19 pandemic, including significantly
reducing our non-essential capital expenditures, reducing our workforce, and other cost reduction efforts, may negatively
impact our operations.
Taken individually, or together in any combination, the above could cause a material adverse effect on our business,
financial condition, results of operations, and liquidity, although the extent of the potential effect will depend on future actions
and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration
of the outbreak, the short-term and long-term economic impact of the outbreak, the actions taken to mitigate the impact of the
virus, the availability of vaccinations and the pace of economic and financial market recovery when the COVID-19 pandemic
subsides, among others. In addition, our results of operations significantly impact our determination of whether we will record a
valuation allowance against certain deferred tax assets. 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 and it is possible we will conclude, in future periods, that a higher valuation allowance, than has currently been
recorded, will be appropriate. Further, many of the Risk Factors described in this report may be more likely to occur and be
further intensified as a result of the impact of the COVID-19 pandemic.
Risks Relating to Our Business and Industry
We face significant competition for our products and services, and we expect such competition to increase.
We operate within a competitive and rapidly changing business environment, in general, and each of our lines of business
faces competition for the products and services they offer. We face competition from other college bookstore operators and
educational content providers, including Follett Corporation, a contract operator of campus bookstores; Texas Book Company,
bookstore management and operations; Slingshot; and BBA Solutions, a college textbook retailer. Our online/virtual course
material store operations also face competition from eCampus, an online provider of course materials, and Akademos, a virtual
bookstore and marketplace for academic institutions, and on occasion, Ambassador Educational Solutions. We also face
competition from other third-party sellers and local bookstores, as well as direct-to-student platforms including, bn.com, the e-
commerce platform of Barnes & Noble, Inc.; Chegg.com, an online textbook rental company; publishers, including Cengage
Learning, Pearson Education and McGraw-Hill Education, which bypass the traditional retail distribution channel by selling
directly to students and institutions. We face competition from eTextbooks/digital content providers, VitalSource Technologies,
Inc., and Red Shelf. Our wholesale business competes with Amazon, BBA Solutions, Nebraska Book Company, and Texas
Book Company. Competitors that compete with our general merchandise offerings include Amazon, Sodexo and Aramark,
online retailers, physical and online office supply stores and local and national retailers that offer college themed and other
general merchandise. Students often purchase from multiple textbook providers, are highly price sensitive, and can easily shift
spending from one provider or format to another. As a consequence, in addition to being competitive in the services we provide
to our customers, our textbook business faces significant price competition. Some of our competitors have adopted, and may
continue to adopt, aggressive pricing policies and devote substantial resources to marketing, website and systems development.
In addition, a variety of business models are being pursued for the provision of print and digital textbooks, some of which may
be more profitable or successful than our business model. Furthermore, the market for course materials is diluted from
counterfeiting and piracy of digital and print copies or illegal copies of selected chapters made by students or others; user and
faculty created content; and sharing or non-purchase of required course materials by students.
Our Digital Student Solutions business faces competition from other providers of online instruction platforms and other
direct-to-student writing skills, study tools and tutor services, such as Chegg.com, CourseHero, Grammarly, Quizlet, Noodle
Tools, and Turnitin (iParadigms). As we develop a wider range of products and services, our competitive landscape will change
and include other competitors in the broader student services market. We have been focused on expanding these offerings, in
many instances through the acquisition of other companies, like Student Brands, LLC, or through commercial arrangements. In
Fiscal 2019, we launched bartleby textbook solutions and expert question and answers, our first internally developed product
within DSS, on bartleby.com. Our newer products and services, or any other products and services we may introduce or
acquire, may not be integrated effectively into our business, achieve or sustain profitability or achieve market acceptance at
levels sufficient to justify our investment. Our ability to fully integrate new products and services into our platforms or achieve
satisfactory financial results from them is unproven. Because we have a limited history in operating a fully digital platform, and
the market for our products and services, including newly acquired or developed products and services, is rapidly evolving, it is
difficult for us to predict our operating results, particularly with respect to our newer offerings, and the ultimate size of the
market for our products and services. If the market for a learning platform does not develop as we expect, or if we fail to
address the needs of this market, our business will be harmed.
We have encountered and will continue to encounter these risks and if we do not manage them successfully, our business,
financial condition, results of operations and prospects may be materially and adversely affected.
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We may not be able to enter into new managed bookstore contracts or successfully retain or renew our managed bookstore
contracts on profitable terms.
An important part of our business strategy for our retail operation is to expand sales for our college bookstore operations by
being awarded additional contracts to manage physical and/or virtual bookstores for colleges and universities, and K-12
schools, across the United States. Our ability to obtain those additional contracts is subject to a number of factors that we are
not able to control. In addition, the anticipated strategic benefits of new and additional college and university bookstores may
not be realized at all or may not be realized within the time frames contemplated by management. In particular for the operation
of physical bookstores, contracts for additional managed stores may involve a number of special risks, including adverse short-
term effects on operating results, diversion of management’s attention and other resources, standardization of accounting
systems, dependence on retaining, hiring and training key personnel, unanticipated problems or legal liabilities, and actions of
our competitors and customers. Because certain terms of any contract are generally fixed for the initial term of the contract and
involve judgments and estimates that may not be accurate, including for reasons outside of our control, we have contracts that
are not profitable and may have such contracts in the future. The retail price charged to the consumer for textbooks is set by our
contracts with colleges and universities to be a maximum markup based on the publishers’ costs and as colleges continue to
focus on affordability those prices have been reduced, which has negatively impacted our revenue and margin and further
reductions could continue to have a negative impact. Even if we have the right to terminate a contract, we may be reluctant to
do so even when a contract is unprofitable due to, among other factors, the potential effect on our reputation.
In addition, we may face significant competition in retaining existing physical and virtual store contracts and when
renewing those contracts as they expire. Our physical bookstore contracts are typically for five years with renewal options, and
most contracts are cancelable by either party without penalty with 90 to 120 days' notice. Our virtual bookstore contracts are
typically for three to five years and most are cancelable without penalty with notice. Despite the lower startup and ongoing
operating expense associated with virtual stores, the loss of such contracts could impact revenue and profitability. We may not
be successful in retaining our current contracts, renewing our current contracts or renewing our current contracts on terms that
provide us the opportunity to improve or maintain the profitability of managing stores that are the subject matter of such
contracts.
We face the risk of disruption of supplier relationships.
The products that we sell originate from a wide variety of domestic and international vendors. During Fiscal 2021, our four
largest retail suppliers, excluding our wholesale business which fulfills orders for all our physical and virtual bookstores,
accounted for approximately 34% of our merchandise purchased, with the largest supplier accounting for approximately 13% of
our merchandise purchased. Our wholesale business sources over 90% of its inventory from two primary channels,
approximately 63% from retail bookstores (including our retail bookstores) and approximately 29% from third-party suppliers.
While we believe that our relationships with our suppliers are good, suppliers may modify the terms of these relationships due
to general economic conditions or otherwise or, especially with respect to wholesale inventory, publishers could terminate
distribution to wholesalers, including our wholesale business.
We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, content or
services, particular payment terms or the extension of credit limits. If our current suppliers were to stop selling merchandise,
content or services to us on acceptable terms, including as a result of one or more supplier bankruptcies due to poor economic
conditions, we may be unable to procure the same merchandise, content or services from other suppliers in a timely and
efficient manner and on acceptable terms, or at all. Furthermore, certain of our merchandise is sourced indirectly from outside
the United States. Political or financial instability, merchandise quality issues, product safety concerns, trade restrictions, work
stoppages, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation, civil unrest, natural disasters,
outbreaks of pandemics and other factors relating to foreign trade are beyond our control and could disrupt our supply of
foreign-sourced merchandise.
We face the risk of fluctuating inventory supplies as a consequence of changes in the way publishers distribute course
materials.
Our traditional retail and wholesale businesses are dependent on the continued supply of textbooks. The publishing
industry generally has suffered recently due to, among other things, changing consumer preferences away from the print
medium and the economic climate. A significant disruption in this industry generally or a significant unfavorable change in our
relationships with key suppliers could adversely impact our business. In addition, any significant change in the terms that we
have with our key suppliers including, purchase or rental terms, payment terms, return policies, the discount or margin on
products or changes to the distribution model of textbooks, could adversely affect our financial condition and liquidity. For
example, some textbook publishers have proposed to supply textbooks on consignment terms, instead of selling to us, which
would eliminate those titles from the used textbook inventory supply. With respect to our wholesale business, the demand for
used and new textbooks is typically greater than the available supply, and our wholesale business is highly dependent upon its
ability to build its textbook inventory from publishers and suppliers in advance of the selling season. These relationships are not
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generally governed by long-term contracts and publishers and suppliers could choose not to sell to us. Any negative impact on
our ability to build our textbook inventory could have an adverse impact on financial results.
In response to changes in the market, over the last few years, we have also significantly increased our textbook rental
business, offering students a lower cost alternative to purchasing textbooks, which is also subject to certain inventory risks,
such as textbooks not being resold or re-rented due to textbooks being returned late or in poor condition, faculty members not
continuing to adopt or use certain textbooks, or, as discussed below, changes in the way publishers supply textbooks to us.
Some textbook publishers rent textbooks on consignment terms directly to students. Accordingly, we have entered into
agreements with a number of textbook publishers to administer their consignment rental programs with distributors and their
direct to student textbook consignment rental programs. These programs, if successful, will result in a substantial decrease in
the supply of those titles from the used textbook inventory supply, which impacts our wholesale business.
Our wholesale business is a national distributor for rental textbooks offered through McGraw-Hill Education's consignment
rental program (which includes approximately 730 titles) and Pearson Education’s consignment rental program (which includes
approximately 587 titles). Through its centrally located, advanced distribution center, our wholesale business offers the
seamless integration of these consignment rental programs and centralized administration and distribution to approximately
1,649 stores, including our Retail Segment stores. These consignment rental programs are available to our wholesale customers,
including institutionally run and contract managed campus bookstores, as well as our physical and virtual bookstores.
In addition, the profit margins associated with the traditional distribution model are fairly predictable and constant, but the
move to a model of increased consignment rental programs combined with pressure to provide more affordable course materials
to students could result in lower profit margins for a substantial part of our wholesale and retail business.
Our wholesale business may not be able to manage its inventory levels effectively which may lead to excess inventory or
inventory obsolescence.
Our wholesale business sources new textbooks from publishers and new and used textbooks from other suppliers to resell
to its customers. If it is unable to appropriately manage its inventory and anticipate the release of new editions of titles, faculty’s
change in choice of titles, return rate, or use of alternative educational material, our wholesale business could be exposed to
risks of excess inventory and less marketable or obsolete inventory. This may lead to excess or obsolete inventory which might
have to be sold at a deep discount impacting its revenues and profit margin and may have a negative impact on our financial
condition and results of operations.
Our business is dependent on the overall economic environment, college enrollment and consumer spending patterns.
A deterioration of the current economic environment could have a material adverse effect on our financial condition and
operating results, as well as our ability to fund our growth and strategic business initiatives. Our business is affected by funding
levels at colleges and universities and by changes in enrollments at colleges and universities, changes in student enrollments
and lower spending on course materials and general merchandise. The growth of our business depends on our ability to attract
new students and to increase the level of engagement by current student customers. To the extent we are unable to attract new
students or students spend less generally, our business could be adversely affected.
Our business depends on our ability to attract and retain talented employees, including senior management.
Management believes that our continued success will depend to a significant extent upon the efforts and abilities of certain
of our executive officers and senior management, many of whom have significant experience and strong commercial
relationships in our industry and capital market relationships. The loss of any of these individuals could harm our business,
financial condition and results of operations. We do not maintain “key man” life insurance on any of our officers or other
employees. Experienced management and technical, marketing and support personnel in our industry are in high demand, and
competition for their talents is intense. If we are less successful in our recruiting efforts, or if we are unable to retain key
employees, our ability to develop and deliver successful products and services may be adversely affected.
Our business is seasonal.
Our business is seasonal, particularly with respect to textbook sales and rentals, with sales and rentals attributable to our
retail businesses generally highest in the second and third fiscal quarters, when college students generally purchase textbooks
for the upcoming semesters, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are
generally highest in our first, second and third quarter as it sells textbooks for retail distribution. Less than satisfactory net sales
during our peak fiscal quarters could have a material adverse effect on our financial condition or operating results for the year,
and our results of operations from those quarters may not be sufficient to cover any losses that may be incurred in the other
fiscal quarters of the year.
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Our international operations could result in additional risks.
Our operations are substantially limited to the United States; however, we have operations in India, offer services and
products to students and other customers internationally, contract with service providers outside the United States and may
continue to expand internationally. Such international expansion may result in additional risks that are not present domestically
and which could adversely affect our business or our results of operations, including compliance with additional United States
regulations and those of other nations applicable to international operations; cultural and language differences; currency
fluctuations between the U.S. dollar and foreign currencies, which are harder to predict in the current adverse global economic
climate; restrictions on the repatriation of earnings; potentially adverse tax consequences and limitations on our ability to utilize
losses generated in our foreign operations; different regulatory requirements and other barriers to conducting business; and
different or less stable political and economic environments. Further, conducting business abroad subjects us to increased
regulatory compliance and oversight. For example, in connection with our international operations, we are subject to laws
prohibiting certain payments to governmental officials, such as the Foreign Corrupt Practices Act. A failure to comply with
applicable regulations could result in regulatory enforcement actions, as well as substantial civil and criminal penalties assessed
against us and our employees.
We are dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for liquidity
needs.
We must have sufficient sources of liquidity to fund working capital requirements. We believe that the combination of
cash-on-hand, cash flow received from operations, funds available under our credit agreements and short-term vendor financing
will be sufficient to meet our normal working capital and debt service requirements for at least the next twelve months. If these
sources of liquidity do not satisfy our requirements, we may need to seek additional financing. In addition, we may require
additional capital in the future to sustain or grow our business. The future availability of financing will depend on a variety of
factors, such as economic and market conditions, and the availability of credit. These factors could materially adversely affect
our costs of borrowing, and our financial position and results of operations would be adversely impacted. Volatility in global
financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital,
which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if the economy
worsens, our business, results of operations and financial condition could be materially and adversely affected.
Risks relating to our Strategic Plan
Our results also depend on the successful implementation of our strategic initiative to grow our digital products and
services. We may not be able to implement this strategy successfully, on a timely basis, or at all.
In response to our changing business environment and to adapt to industry trends, we are focused on our digital initiatives
to retain and expand existing customer relationships, acquire new accounts, expand sales channels and marketing efforts,
integrate and develop direct-to-student digital solutions, and develop and market higher education digital products. While we
believe we have the capital resources, experience, management resources and internal systems to successfully operate our
digital business, we may not be successful in implementing this strategy. The implementation of our digital strategy is a
complex process and relies on leveraging our core products, services and relationships to help accelerate the adoption of our
new digital products and services. Success of our future operating results will be dependent upon rapid customer adoption of
our new digital products and services and our ability to scale our business to meet customer demand appropriately. If colleges
and universities, faculty and students are not receptive to our new products and services or our new products and services do not
meet the expectations of these constituencies, there could be a negative impact on the implementation of our strategy. To
successfully execute on this strategy, we need to continue to further evolve the focus of our organization towards the delivery of
cost effective and unique solutions for our customers. Any failure to successfully execute this strategy could adversely affect
our operating results. Further, even if successfully implemented, our business strategy may not ultimately produce positive
results.
Part of our strategy includes pursuing strategic acquisitions and partnerships and we may not be able to identify and
successfully complete such transactions.
As part of our strategy, we will continue to seek, and, may in the future acquire, businesses or business operations, or enter
into other business transactions to grow our business and expand our product and service offerings. We may not be able to
identify suitable candidates for additional business combinations and strategic investments, obtain financing on acceptable
terms for such transactions, obtain necessary regulatory approvals, if any, or otherwise consummate such transactions on
acceptable terms, or at all. In addition, we compete for acquisitions with other potential acquirers, some of which may have
greater financial or operational resources than we do. This competition may increase costs of acquiring desirable businesses,
and, as a result, we may be unable to make acquisitions or be forced to pay more or agree to less advantageous acquisition
terms for the businesses that we are able to acquire. Any strategic acquisitions or investments that we are able to identify and
complete may also involve a number of risks, including our inability to successfully or profitably integrate, operate, maintain
and manage our newly acquired operations or employees; the diversion of our management’s attention from our existing
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business to integrate operations and personnel; possible material adverse effects on our results of operations during the
integration process; becoming subject to contingent or other liabilities, including liabilities arising from events or conduct
predating the acquisition that were not known to us at the time of the acquisition; and our possible inability to achieve the
intended objectives of the transaction, including the inability to achieve cost savings and synergies. Acquisitions may also have
unanticipated tax, legal, regulatory and accounting ramifications, including recording goodwill and non-amortizable intangible
assets that are subject to impairment testing on a regular basis and potential periodic impairment charges and incurring
amortization expenses related to certain intangible assets.
We intend to offer new products and solutions to students to grow our business. If our efforts are not successful, our
business and financial results would be adversely affected.
Our ability to attract and retain students and increase their engagement with our learning platform depends on our ability to
connect them with the product, person or service they need to save time, save money, and get smarter. For example, in Fiscal
2019, we launched bartleby textbook solutions and expert question and answers, our first internally developed product within
DSS, on bartleby.com. The markets for these new products and services may be unproven, and these products may include
technologies and business models with which we have little or no prior development or operating experience or may
significantly change our existing products and services. In addition, we may be unable to obtain long-term licenses from third-
party content providers necessary to allow a product or service, including a new or planned product or service, to function. If
our new or enhanced products and services fail to engage our students or attract new students, or if we are unable to obtain
content from third parties that students want, we may fail to grow our student base or generate sufficient revenues, operating
margin or other value to justify our investments, and our business would be adversely affected.
In the future, we may invest in new products and services and other initiatives to generate revenues, but there is no
guarantee these approaches will be successful. Acquisitions of new companies, products and services create integration risk,
while development of new products and services and enhancements to existing products and services involve significant time,
labor and expense and are subject to risks and challenges, including managing the length of the development cycle, entry into
new markets, integration into our existing business, regulatory compliance, evolution in sales and marketing methods and
maintenance and protection of intellectual property and proprietary rights. If we are not successful with our new products and
services, we may not be able to maintain or increase our revenues as anticipated or recover any associated acquisition or
development costs, and our financial results could be adversely affected.
Risks relating to Data Privacy, Information Technology and Cybersecurity
We face data security risks with respect to personal information.
Our business involves the receipt, storage, processing and transmission of personal information about customers and
employees. We may share information about such persons with vendors and third parties that assist with certain aspects of our
business. Also, in connection with our student financial aid platform and the processing of university debit cards, we secure and
have access to certain student personal information that has been provided to us by the universities we serve. Our handling and
use of personal information is regulated at the international, federal and state levels and by industry standards, such as the
Payment Card Industry Data Security Standard. As an entity that provides services to institutions of higher education, we are
contractually bound to handle certain personal information from student education records in accordance with the requirements
of Family Educational Rights and Privacy Act (“FERPA”). Privacy and information security laws, regulations, and industry
standards change from time to time, and compliance with them may result in cost increases due to necessary systems changes
and the development of new processes and may be difficult to achieve. If we fail to comply with these laws, regulations and
standards, we could be subjected to legal risk. In addition, even if we fully comply with all laws, regulations and standards, and
even though we have taken significant steps to protect personal information, we could experience a data security breach, and
our reputation could be damaged, possibly resulting in a material breach of contract with one or more of our clients, lost future
sales or decreased usage of credit and debit card products. Further, in the event that we disclose student information in violation
of FERPA, the U.S. Department of Education could require a client to suspend our access to their student information for at
least five years. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems
change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques
or to implement adequate preventative measures. A party that is able to circumvent our security measures could misappropriate
our or our users’ proprietary information and cause interruption in our operations. Any compromise of our data security could
result in a violation of applicable privacy and other laws or standards, significant legal and financial exposure beyond the scope
or limits of insurance coverage, increased operating costs associated with remediation, equipment acquisitions or disposal and
added personnel, and a loss of confidence in our security measures, which could harm our business or affect investor
confidence. Data security breaches may also result from non-technical means, for example, actions by an employee.
Our business is subject to a variety of domestic and international laws, rules, policies and other obligations regarding data
protection.
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Although most of our operations are in the United States, we do have some operations and offer services and products
internationally. Our international operations subject us to a complex array of federal, state and international laws relating to the
collection, use, retention, disclosure, security and transfer of personally identifiable data. Many jurisdictions have passed laws
in this area, and other jurisdictions are considering imposing additional restrictions. The interpretation and application of data
protection laws in the United States, Europe, including but not limited to the GDPR, and elsewhere are uncertain and evolving.
It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. Complying
with these various laws is difficult and could cause us to incur substantial costs or require us to change our business practices in
a manner adverse to our business.
Further, although we are implementing internal controls and procedures designed to protect sensitive information and
confidential and personal data and comply with the GDPR and other privacy-related laws, rules and regulations, our facilities,
and systems may be vulnerable to security breaches and other data loss, including cyber-attacks. Such a security breach or data
loss could lead to negative publicity, damage to our reputation, exposure to litigation and liability, theft, modification or
destruction of proprietary information or key information, damage to or inaccessibility of critical systems, manufacture of
defective products, production downtimes, operational disruptions and remediation and other significant costs, which could
adversely affect our reputation, financial condition and results of operations.
Computer malware, viruses, hacking and phishing attacks could harm our business and results of operations.
We are increasingly dependent upon information technology systems, infrastructure and data. Our computer systems may
be vulnerable to service interruption or destruction, malicious intrusion, ransomware and random attack. Cyber-attacks are
increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could
include the deployment of harmful malware, denial-of service, social engineering, ransomware and other means to affect
service reliability and threaten data confidentiality, integrity and availability. Our key business partners face similar risks, and a
security breach of their systems could adversely affect our security posture. While we continue to invest in data protection and
information technology to prevent or minimize these risks and, to date, we have not experienced any material service
interruptions and are not aware of any material breaches, there can be no assurance that our efforts will prevent service
interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the
loss of critical or sensitive information, which could result in financial, legal, business or reputational harm.
Defects, errors, installation difficulties or performance issues with our point-of-sales and other systems could expose us to
potential liability, harm our reputation and negatively impact our business.
Our wholesale business sells and services point-of-sales systems to its college bookstore customers. These systems are
complex and incorporate third-party hardware and software. Despite testing and quality control, we cannot be certain that
defects or errors will not be found in these systems. In addition, because these systems are installed in different environments,
we may experience difficulty or delay in installation. Our products may be integrated with other components or software, and,
in the event that there are defects or errors, it may be difficult to determine the origin of defects or errors. Additionally, any
difficulty or failure in the operation of these systems could cause business disruption for our customers. If any of these risks
materialize, they could result in additional costs and expenses, exposure to liability claims, diversion of technical and other
resources to engage in remediation efforts, loss of customers or negative publicity, each of which could impact our business and
operating results.
We rely upon third party web service providers to operate certain aspects of our service and any disruption of or interference
with such services would impact our operations and our business would be materially and adversely impacted.
Amazon Web Services (“AWS”) and other third-party web service providers provide a distributed computing infrastructure
platform for business operations, or what is commonly referred to as a “cloud” computing service. We have architected our
software and computer systems so as to utilize data processing, storage capabilities, and other services provided by AWS and
other providers.
We rely on third-party software and service providers, including AWS, to provide systems, storage and services, including
user log in authentication, for our website. Any technical problem with, cyber-attack on, or loss of access to such third parties’
systems, servers or technologies could result in the inability of our students to rent or purchase print textbooks, interfere with
access to our digital content and other online products and services or result in the theft of end-user personal information.
Our reliance on AWS or other third-party providers makes us vulnerable to any errors, interruptions, or delays in their
operations. Any disruption in the services provided by AWS could harm our reputation or brand or cause us to lose students or
revenues or incur substantial recovery costs and distract management from operating our business.
Any disruption of or interference with our use of AWS or other third-party service providers would impact our operations
and our business would be materially and adversely impacted.
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AWS may terminate its agreement with us upon 30 days' notice. Upon expiration or termination of our agreement with
AWS, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including
service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to
operational delays and inefficiencies until the transition is complete.
Risks relating to Laws and Regulations
Laws or regulations may be enacted which restrict or prohibit use of emails or similar marketing activities that we currently
rely on.
Our marketing and sales efforts are centered around an active digital community, which includes engaged email
subscribers, text messaging, interest-based online advertising, recurring billing and our continuous dialogue with customers on
our school-customized social media channels. For example, the following laws and regulations may apply:
• the CAN-SPAM Act of 2003 and similar laws adopted by a number of states regulate unsolicited commercial emails,
create civil and criminal penalties for emails containing fraudulent headers and control other abusive online marketing
practices;
• the U.S. Federal Trade Commission (the “FTC”) has guidelines that impose responsibilities on companies with respect
to communications with consumers and impose fines and liability for failure to comply with rules with respect to advertising
or marketing or sales practices they may deem misleading or deceptive;
• the Telephone Consumer Protection Act of 1991 (“TCPA”) restricts telemarketing and the use of automated telephone
equipment. The TCPA limits the use of automatic dialing systems, artificial or prerecorded voice messages and SMS text
messages. It also applies to unsolicited text messages advertising the commercial availability of goods or services.
Additionally, a number of states have enacted statutes that address telemarketing. For example, some states, such as
California, Illinois and New York, have created do-not-call lists. Other states, such as Oregon and Washington, have enacted
“no rebuttal statutes” that require the telemarketer to end the call when the consumer indicates that he or she is not interested
in the product being sold. Restrictions on telephone marketing, including calls and text messages, are enforced by the FTC,
the Federal Communications Commission, states and through the availability of statutory damages and class action lawsuits
for violations of the TCPA;
• The Restore Online Shopper Confidence Act (“ROSCA”), and similar state laws, impose requirements and restrictions
on online services that automatically charge payment cards on a periodic basis to renew a subscription service, if the
consumer does not cancel the service;
• the General Data Protection Regulation (“GDPR”), became effective in May 2018. This European Union (“EU”) law
governing data practices and privacy which applies to certain of our activities related to products and services offered in the
EU, imposes a range of new compliance obligations regarding the handling of personal data; and
• the California Consumer Privacy Act of 2018 (“CCPA”), which came into effect on January 1, 2020, requires
companies that process information on California residents to make new disclosures to consumers about their data collection,
use and sharing practices, allows consumers to request the deletion of certain data, and allows consumers to opt out of certain
data sharing with third parties and provides a new cause of action for data breaches. The burdens imposed by the CCPA and
other similar laws that may be enacted at the federal and state level may require us to modify our data processing practices
and policies and how we advertise to our users and to incur substantial expenditure in order to comply.
Even if no relevant law or regulation is enacted, we may discontinue use or support of these activities if we become
concerned that students or potential students deem them intrusive or they otherwise adversely affect our goodwill and brand. If
our marketing activities are curtailed, our ability to attract new students may be adversely affected.
Our business could be impacted by changes in federal, state, local or international laws, rules or regulations.
We are subject to general business regulations and laws relating to all aspects of our business. These regulations and laws
may cover taxation, privacy, data protection (including complying with GDPR), our access to student financial aid, pricing and
availability of educational materials, competition and/or antitrust, content, copyrights, distribution, college distribution, mobile
communications, electronic contracts and other communications, consumer protection, the provision of online payment
services, unencumbered Internet access to our services, the design and operation of websites and mobile application (including
complying with the Americans with Disabilities Act), digital content (including governmental investigations and litigation
relating to the agency pricing model for digital content distribution), the characteristics and quality of products and services and
labor and employee benefits (including the costs associated with complying with the Patient Protection and Affordable Care Act
or any legislation enacted in connection with repeal of the Affordable Care Act). Changes in federal, state, local or international
laws, rules or regulations relating to these matters could increase regulatory compliance requirements in addition to increasing
our costs of doing business or otherwise impact our business. For example, changes in federal and state minimum wage laws
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could raise the wage requirements for certain of our employees at our retail locations, which would increase our selling costs
and may cause us to reexamine our wage structure for such employees.
Changes in tax laws and regulations might adversely impact our businesses or financial performance.
We collected sales tax on the majority of the products and services that we sold in our respective prior fiscal years that
were subject to sales tax, and we generally have continued the same policies for sales tax within the current fiscal year. While
management believes that the financial statements included elsewhere in this Form 10-K reflect management’s best current
estimate of any potential additional sales tax liability based on current discussions with taxing authorities, we cannot assure you
that the outcome of any discussions with any taxing authority will not result in the payment of sales taxes for prior periods or
otherwise, or that the amount of any such payments will not be materially in excess of any liability currently recorded. In the
future, our businesses may be subject to claims for not collecting sales tax on the products and services we currently sell for
which sales tax is not collected. In addition, our provision for income taxes and our obligation to pay income tax is based on
existing federal, state and local tax laws. Changes to these laws, in particular as they relate to depreciation, amortization and
cost of goods sold, could have a significant impact on our income tax provision, our projected cash tax liability, or both.
Risks relating to Intellectual Property
We rely on third-party digital content and applications, which may not be available to us on commercially reasonable terms
or at all.
We contract with certain third-parties to offer their digital content. Our licensing arrangements with these third-parties do
not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all. Some third-party content
providers currently, or in the future, may offer competing products and services, and could take action to make it more difficult
or impossible for us to license our content in the future. Other content owners, providers or distributors may seek to limit our
access to, or increase the total cost of, such content. If we are unable to offer a wide variety of content at reasonable prices with
acceptable usage rules, our business may be materially adversely affected.
We rely heavily on proprietary technology and sophisticated equipment to manage certain aspects of our business, including
to manage textbook inventory, process deliveries and returns of the textbooks and manage warehousing and distribution.
We use a proprietary system to source, distribute and manage inventory of textbooks and to manage other aspects of our
operations, including systems to consider the market pricing for textbooks, general availability of textbook titles and other
factors to determine how to buy textbooks and set prices for textbooks and other content in real time. We have invested
significant amounts of resources in the hardware and software to develop this system. We rely on the expertise of our
engineering and software development teams to maintain and enhance the equipment and software used for our distribution
operations. We cannot be sure that the maintenance and enhancements we make to our distribution operations will achieve the
intended results or otherwise be of value to students. If we are unable to maintain and enhance our technology to manage
textbook sourcing, distribution and inventory, it could disrupt our business operations and have a material adverse impact on
our results.
Our wholesale business is also dependent on sophisticated equipment and related software technology for the warehousing
and distribution of the vast majority of textbooks supplied to our retail business and others, which is located at MBS’
warehouse facility in Columbia, Missouri. Our ability to efficiently manage our wholesale business depends significantly on the
reliability and capacity of these systems. The failure of these systems to operate effectively, problems with maintenance,
upgrading or transitioning to replacement systems, especially if such events were to occur during peak periods, could adversely
affect our operations, the ability to serve our customers and our results of operations. In addition, substantially all of our
wholesale inventory is located in the Columbia warehouse facility. We could experience significant interruption in the operation
of this facility or damage or destruction of our inventory due to physical damage to the facility caused by natural disasters,
accidents or otherwise. If a material portion of our inventory were to be damaged or destroyed, we would likely incur
significant financial loss, including loss of revenue and harm to our customer relationships.
We may not be able to adequately protect our intellectual property rights or may be accused of infringing upon intellectual
property rights of third parties.
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology and similar
intellectual property as important to our success, and we rely on trademark, copyright and patent law, domain name regulations,
trade secret protection and confidentiality or license agreements to protect our proprietary rights, including our use of the
Barnes & Noble trademark. Laws and regulations may not adequately protect our trademarks and similar proprietary rights. We
may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or diminish the value of
our trademarks and other proprietary or licensed rights.
We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. The protection of
our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we
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take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or
misappropriating our proprietary rights. We also cannot be certain that others will not independently develop or otherwise
acquire equivalent or superior technology or other intellectual property rights.
Other parties also may claim that we infringe their proprietary rights. Because of the changes in Internet commerce and
digital content businesses, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible that
certain of our products, content and business methods may unknowingly infringe existing patents or intellectual property rights
of others. Successful intellectual property infringement claims against us could result in monetary liability or a material
disruption in the conduct of our business. We cannot be certain that our products, content and business methods do not or will
not infringe valid patents, trademarks, copyrights or other intellectual property rights held by third parties. We expect that
infringement claims in our markets will increase in number. We may be subject to legal proceedings and claims from time to
time relating to the intellectual property of others in the ordinary course of our business. If we were found to have infringed the
intellectual property rights of a third party, we could be liable to that party for license fees, royalty payments, lost profits or
other damages, and the owner of the intellectual property might be able to obtain injunctive relief to prevent us from using the
technology or software in the future. If the amounts of these payments were significant or we were prevented from
incorporating certain technology or software into our products, our business could be significantly harmed.
We may incur substantial expenses in defending against these third-party infringement claims, regardless of their merit. As
a result, due to the diversion of management time, the expense required to defend against any claim and the potential liability
associated with any lawsuit, any significant litigation could significantly harm our business, financial condition and results of
operations.
Our digital content offerings depend in part on effective digital rights management technology to control access to digital
content. If the digital rights management technology that we use is compromised or otherwise malfunctions, we could be
subject to claims, and content providers may be unwilling to include their content in our service.
In addition, the publishing industry has been, and we expect in the future will continue to be, the target of counterfeiting
and piracy. We have entered into agreements with major textbook publishers to implement the textbook industry’s Anti-
Counterfeit Best Practices. These best practices were developed as a mechanism to assist publishers and distributors in the
eradication of counterfeit copies of textbooks in the marketplace. While we have agreed to implement the Anti-Counterfeit Best
Practices and have in place our anti-counterfeit policies and procedures (which include removing from distribution suspected
counterfeit titles) for preventing the proliferation of counterfeit textbooks, we may inadvertently purchase counterfeit textbooks
which may unknowingly be included in the textbooks we offer for sale or rent to students or we may purchase such textbooks
through our buyback program. As such, we may be subject to allegations of selling counterfeit books. We have in the past and
may continue to receive communications from publishers alleging that certain textbooks sold or rented by us are counterfeit.
When receiving such communications, we cooperate, and will continue to cooperate in the future, with such publishers in
identifying fraudulent textbooks and removing them from our inventory. We may implement measures in an effort to protect
against these potential liabilities that could require us to spend substantial resources. Any costs incurred as a result of liability or
asserted liability relating to sales of counterfeit textbooks could harm our business, reputation and financial condition.
We do not own the Barnes & Noble trademark and instead rely on a license of that trademark and certain other trademarks,
which license imposes limits on what those trademarks can be used to do.
In connection with the Spin-Off, Barnes & Noble, Inc. granted us an exclusive, perpetual, fully paid up, non-transferable
and non-assignable license to use the trademarks “Barnes & Noble College,” “B&N College,” “Barnes & Noble Education” and
“B&N Education” and the non-exclusive, perpetual, fully paid up, non-transferable and non-assignable license to use the marks
“Barnes & Noble,” “B&N” and “BN,” solely in connection with the contract management of college and university bookstores
and other bookstores associated with academic institutions and related websites, as well as education products and services
(including digital education products and services) and related websites. These restrictions may materially limit our ability to
use the licensed marks in the expansion of our operations in the future. In addition, we are reliant on Barnes & Noble, Inc. to
maintain the licensed trademarks.
Risks Relating to our Common Stock and the Securities Market
Our stock price may fluctuate significantly.
We cannot predict the prices at which our Common Stock may trade. The market price of our Common Stock may
fluctuate widely, depending on many factors, some of which may be beyond our control, including:
• actual or anticipated fluctuations in our operating results due to factors related to our businesses;
• success or failure of our business strategies, including our digital education initiative;
• our quarterly or annual earnings or those of other companies in our industries;
• our ability to obtain financing as needed;
• announcements by us or our competitors of significant acquisitions or dispositions;
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• changes in accounting standards, policies, guidance, interpretations or principles;
• the failure of securities analysts to cover our Common Stock;
• changes in earnings estimates by securities analysts or our ability to meet those estimates;
• the operating and stock price performance of other comparable companies;
• investor perception of our Company and the higher education industry;
• overall market fluctuations;
• results from any material litigation or government investigation;
• changes in laws and regulations (including tax laws and regulations) affecting our business;
• changes in capital gains taxes and taxes on dividends affecting stockholders; and
• general economic conditions and other external factors.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a
particular company. These broad market fluctuations could adversely affect the trading price of our Common Stock.
Provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws and of Delaware
law may prevent or delay an acquisition of the Company, which could affect the trading price of our Common Stock.
Our Amended and Restated Certificate of Incorporation and our Amended and Restated By-laws contain provisions which,
together with applicable Delaware law, may discourage, delay or prevent a merger or acquisition that our stockholders consider
favorable, including provisions that:
• authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the
number of outstanding shares of capital stock, making a takeover more difficult and expensive;
• provide that special meetings of the stockholders may be called only by or at the direction of a majority of our Board or
the chairman of our Board of Directors; and
• require advance notice to be given by stockholders for any stockholder proposals or director nominations.
In addition, Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, may affect the ability of
an “interested stockholder” to engage in certain business combinations, for a period of three years following the time that the
stockholder becomes an “interested stockholder”.
These provisions may discourage, delay or prevent certain types of transactions involving an actual or a threatened
acquisition or change in control of the Company, including unsolicited takeover attempts, even though the transaction may offer
our stockholders the opportunity to sell their Common Stock at a price above the prevailing market price.
Our Amended and Restated By-laws designate courts in the State of Delaware as the sole and exclusive forum for certain
types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to
obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our Amended and Restated By-laws provide that, subject to limited exceptions, the state and federal courts of the State of
Delaware are the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action
asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our
stockholders, (c) any action asserting a claim arising pursuant to any provision of the DGCL, our Amended and Restated
Certificate of Incorporation or our Amended and Restated By-laws or (d) any other action asserting a claim that is governed by
the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our
capital stock will be deemed to have notice of and to have consented to these provisions. This provision may limit a
stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or
other employees, which may discourage such lawsuits against us and our directors, officers and employees.
Alternatively, if a court were to find this provision of our Amended and Restated By-laws inapplicable to, or unenforceable
in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with
resolving such matters in other jurisdictions.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
Facilities
We lease various office space in New Jersey, New York, Missouri, California, and India and we lease warehouse space in
Missouri.
28
For our physical campus retail operations, we typically have the exclusive right to operate the official physical school
bookstore on college campuses through multi-year management service agreements with our schools. In turn, we pay the
school a percentage of store sales and, in some cases, a minimum fixed guarantee. These contracts with colleges and
universities are typically five years with renewal options, but can range from one to 15 years, and are typically cancelable by
either party without penalty with 90 to 120 days' notice.
As of May 1, 2021, these contracts for the 769 physical stores that we operate expire as follows:
Contract Terms to Expire During
(12 months ending on or about April 30)
Number of Physical
Campus Stores
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 and later . . . . . . . . . . . . . . . . . . .
104
50
34
70
79
432
Item 3. LEGAL PROCEEDINGS
We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary
course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits,
personal injuries and other matters. We record a liability when we believe that it is both probable that a loss has been incurred
and the amount of loss can be reasonably estimated. Based on our current knowledge, we do not believe that there is a
reasonable possibility that the final outcome of any pending or threatened legal proceedings to which we or any of our
subsidiaries are a party, either individually or in the aggregate, will have a material adverse effect on our future financial results.
However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond our
control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect our
business, financial condition, results of operations or cash flows.
Between January 22, 2020 and June 15, 2020, thirteen purported class action complaints were filed in the United States
District Court for the District of Delaware, the United States District Court for the District of New Jersey, and the United States
District Court for the Northern District of Illinois against the Company, along with several publishers, another collegiate
bookstore retailer, and an industry association. The plaintiffs are retailers of collegiate course materials or current or former
college students. Although the specific allegations vary, the plaintiffs generally claim, on their own behalf and on behalf of the
purported classes, that the Company and the other defendants violated Section 1 of the Sherman Act (15 U.S.C. § 1), Section 2
of the Sherman Act (15 U.S.C. § 2), Section 13(a) of the Robinson-Patman Act (15 U.S.C. §13(a)), and various state antitrust
and unfair trade practices laws for alleged activities in connection with inclusive access and the sale of course materials to
universities and their students. The United States Judicial Panel on Multidistrict Litigation has consolidated these and other
related cases in a consolidated proceeding before the Hon. Denise L. Cote of the United States District Court for the Southern
District of New York. On October 16, 2020, three named student plaintiffs filed a Consolidated Amended Complaint, as did the
retailer plaintiffs. The student plaintiffs and retailer plaintiffs each filed a Second Consolidated Amended Complaint on
December 18, 2020, which all Defendants jointly moved to dismiss on January 22, 2021. On June 14, 2021, the Court ordered
both cases dismissed with prejudice. Should Plaintiffs pursue an appeal, we intend to vigorously defend this matter. We are
currently unable to estimate any potential losses.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share. Our common stock trades on the New York Stock Exchange (“NYSE”)
under the symbol “BNED.”
As of May 1, 2021, 51,378,913 shares of our common stock and 0 shares of our preferred stock were outstanding. We have
reserved 10,409,345 shares of common stock for future grants in accordance with the Barnes & Noble Education Inc. Equity
Incentive Plan. See Item 8. Financial Statements and Supplementary Data - Note 13. Long-Term Incentive Compensation
Expense.
29
Repurchase of Shares
On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, 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 Fiscal 2021, 2020 and 2018, we did not repurchase shares under the stock repurchase
program. As of May 1, 2021, approximately $26.7 million remains available under the stock repurchase program.
During the years ended May 1, 2021, May 2, 2020, and April 27, 2019, we also repurchased 414,174 shares, 374,733
shares, and 351,043 shares of our common stock in connection with employee tax withholding obligations for vested stock
awards, respectively.
Dividends
We paid no other dividends to common stockholders during Fiscal 2021, Fiscal 2020 and Fiscal 2019. We do not intend to
pay dividends on our common stock in the foreseeable future.
Item 6. SELECTED FINANCIAL DATA
The selected financial information presented below should be read in conjunction with Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.
(In thousands of dollars,
except for share and per share amounts)
STATEMENT OF OPERATIONS DATA:
Sales:
Fiscal Year (a)
2021 (b)
2020 (b)
2019 (c)
2018 (c)
2017 (c)
Product sales and other . . . . . . . . . . . . . . .
Rental income . . . . . . . . . . . . . . . . . . . . . .
Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,299,740
134,150
1,433,890
$
1,671,200 $ 1,838,760
195,883
2,034,643
179,863
1,851,063
$ 1,984,472
219,145
2,203,617
$ 1,641,881
232,481
1,874,362
Cost of sales: (d)
Product and other cost of sales . . . . . . . . .
Rental cost of sales . . . . . . . . . . . . . . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . .
Selling and administrative expenses . . . . . . . . . .
Depreciation and amortization expense . . . . . . . .
Impairment loss (non-cash) (d) . . . . . . . . . . . . . . .
Restructuring and other charges (d) . . . . . . . . . . . .
Transaction costs (e) . . . . . . . . . . . . . . . . . . . . . . .
Operating (loss) income . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . .
(Loss) earnings before taxes . . . . . . . . . . . . . .
Income tax (benefit) expense . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . .
1,093,989
87,240
1,181,229
252,661
338,280
52,967
27,630
9,960
—
(176,176)
8,087
(184,263)
(52,476)
(131,787)
$
(Loss) Earnings per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(2.65)
(2.65)
Weighted average common shares (thousands):
1,303,702
104,812
1,408,514
442,549
404,472
61,860
433
18,567
—
(42,783)
7,445
(50,228)
(11,978)
(38,250) $
1,395,339
111,578
1,506,917
527,726
423,880
65,865
57,748
7,233
654
(27,654)
9,780
(37,434)
(13,060)
(24,374)
(0.80) $
(0.80) $
(0.52)
(0.52)
$
$
$
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,669
49,669
48,013
48,013
47,306
47,306
1,522,687
123,697
1,646,384
557,233
433,746
65,586
313,130
5,429
2,045
(262,703)
10,306
(273,009)
(20,443)
(252,566)
(5.40)
(5.40)
46,763
46,763
$
$
$
1,281,043
134,258
1,415,301
459,061
380,793
53,318
—
1,790
9,605
13,555
3,464
10,091
4,730
5,361
0.12
0.11
46,317
46,763
$
$
$
30
(In thousands of dollars,
except for share and per share amounts)
OTHER OPERATING DATA:
Adjusted EBITDA (non-GAAP) (f) . . . . . . . . . . . .
Adjusted Earnings (non-GAAP) (f) . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . .
OTHER OPERATING DATA - STORE
COUNT:
Number of physical stores at period end . . . . . . . .
Number of virtual stores at period end . . . . . . . . .
(In thousands of dollars,
except for share and per share amounts)
BALANCE SHEET DATA
(at period end):
Fiscal Year (a)
2021 (b)
2020 (b)
2019 (c)
2018 (c)
2017 (c)
$
$
$
(65,625) $
42,159 $
104,942 $
126,760 $
(89,033) $
(21,126) $
25,412 $
56,949 $
37,223 $
36,192 $
46,420 $
42,809 $
78,268
12,347
34,670
769
648
772
647
772
676
768
676
769
712
Fiscal Year (a)
2021 (b)
2020 (b)
2019 (c)
2018 (c)
2017 (c)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,038,418
$ 1,156,432
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . .
$
$
$
$
737,384
50,000
127,600
301,034
$
$
$
$
738,681
75,000
99,700
417,751
$
$
$
$
$
946,180
$ 1,039,211
$ 1,299,832
495,552
100,000
33,500
450,628
$
$
$
$
571,248
100,000
96,400
467,963
$
$
$
$
586,124
100,000
59,600
713,708
(a) Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. “Fiscal 2021” means the 52 weeks
ended May 1, 2021, “Fiscal 2020” means the 53 weeks ended May 2, 2020, “Fiscal 2019” means the 52 weeks ended April 27, 2019,
“Fiscal 2018” means the 52 weeks ended April 28, 2018, and “Fiscal 2017” means the 52 weeks ended April 29, 2017.
(b) During Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19
pandemic. The impact of which affects the comparability of our results of operations and cash flows.
(c) We acquired PaperRater on August 21, 2018. The consolidated financial statements for Fiscal 2019 include the financial results of
PaperRater from the acquisition date, August 21, 2018, to April 27, 2019.
We acquired Student Brands, LLC on August 3, 2017. The consolidated financial statements for Fiscal 2018 include the financial results
of Student Brands from the acquisition date, August 3, 2017, to April 28, 2018.
We acquired MBS Textbook Exchange, LLC on February 27, 2017. The consolidated financial statements for Fiscal 2017 include the
financial results of MBS from the acquisition date, February 27, 2017, to April 29, 2017.
(d) For additional information, see Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting
Policies and Note 10. Supplementary Information.
(e) Transaction costs are costs incurred for business development and acquisitions.
(f) To supplement our results prepared in accordance with GAAP, we use the measure of Adjusted EBITDA and Adjusted Earnings, which
are non-GAAP financial measures as defined by the Securities and Exchange Commission (the “SEC”). See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations - Adjusted Earnings (non-GAAP) and - Adjusted EBITDA
(non-GAAP).
31
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble
Education, Inc. or “BNED”, a Delaware corporation. References to “Barnes & Noble College” or “BNC” refer to our
subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our subsidiary MBS Textbook Exchange,
LLC. References to “Student Brands” refer to our subsidiary Student Brands, LLC.
Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. “Fiscal 2021”
means the 52 weeks ended May 1, 2021, “Fiscal 2020” means the 53 weeks ended May 2, 2020, and “Fiscal 2019” means the
52 weeks ended April 27,2019.
Overview
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 1,417 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational
content and tools within a dynamic omni channel retail environment. Additionally, we offer direct-to-student products and
services to help students study more effectively and improve academic performance.
The strengths of our business include our ability to compete by developing new products and solutions to meet market
needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with
academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable
and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such
capabilities through our recent Fanatics Partnership, increase market share with new accounts, and expand our strategic
opportunities through acquisitions and partnerships.
We expect 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 our partnership with Fanatics Retail Group Fulfillment, LLC,
Inc. and Fanatics Lids College, Inc. Through this partnership, we receive unparalleled product assortment, e-commerce
capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo and
emblematic general merchandise business.
We believe the Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS,
are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the
United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts
to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of
their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.
For a discussion of our business, see Part I - Item 1. Business.
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 receive unparalleled product assortment, e-
commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our
general merchandise business. Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded
product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with
FLC, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus
stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.
We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day
operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store
maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that
reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of
the emblematic merchandise and gift sections of our campus store websites. FLC manages in-store assortment planning and
merchandising of emblematic apparel, headwear, and gift products for our partner campus stores.
In December 2020, Fanatics, Inc. and Lids Holdings, Inc. jointly made a strategic equity investment in BNED. On April 4,
2021, as contemplated under the merchandising partnership agreement, FLC purchased our logo and emblematic general
merchandise inventory. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize
32
commission revenue earned for these sales on a net basis. For additional information, see Part II - Item 8. Financial Statements
and Supplementary Data - Note 2. Summary of Significant Accounting Policies and Note 6. Equity and Earnings Per Share.
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.
Our Fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools adjusted
their learning model and on-campus activities in response to the pandemic. Fewer students returned to campus, as many schools
implemented a remote learning model and curtailed on-campus classes and activities. While many athletic conferences resumed
their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the
company’s general merchandise business. Additionally, sales were impacted by overall enrollment declines in higher education.
See Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies -
Other Long-Lived Assets related to the impairment loss (non-cash) recognized during Fiscal 2021.
To mitigate the impact of the business disruption, we have taken steps to significantly reduce costs, including periodically
furloughing the majority of our Retail workforce during non-rush seasonal sales periods. We have implemented a significant
cost reduction program designed to streamline our operations, maximize productivity and drive profitability. Certain elements
of this plan were implemented in late Fiscal 2020, while other actions occurred in Fiscal 2021. We have achieved meaningful
annualized cost savings from this program.
Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. We cannot
accurately predict the duration or extent of the impact of COVID-19 on enrollments, university budgets, athletics and other
areas that directly affect our business operations. Although most schools expect to return to a traditional on-campus
environment for learning in the upcoming Fall semester, as well as host traditional on campus sporting activities, there is still
uncertainty about the duration and extent of the impact of the COVID-19 pandemic. We will continue to assess our operations
and will continue to consider the guidance of local governments and our campus partners to determine when our operations can
begin returning to normal levels of business. 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.
Segments
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”. The
following discussion provides information regarding the three segments.
Retail Segment
The Retail Segment operates 1,417 college, university, and K-12 school bookstores, comprised of 769 physical bookstores
and 648 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 independently or along
with our merchant partners, and which offer students access to affordable course materials and affinity products, including
emblematic apparel and gifts. The Retail Segment also offers inclusive access programs, in which course materials are offered
at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first
day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities,
including a variety of open educational resource-based courseware.
Wholesale Segment
The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in
the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,300
physical bookstores (including our Retail Segment's 769 physical bookstores) and sources and distributes new and used
textbooks to our 648 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.
33
DSS Segment
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.
Seasonality
Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various
schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our
results across periods. Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April.
For our retail operations, sales are generally highest in the second and third fiscal quarters, when students generally
purchase and rent textbooks and other course materials, and lowest in the first and fourth fiscal quarters. Sales attributable to
our wholesale business are generally highest in our first, second and third quarter, as it sells textbooks and other course
materials for retail distribution. For our DSS segment, or direct-to-student business, sales and operating profit are realized
relatively consistently throughout the year.
Trends and Other Factors Affecting Our Business
For a discussion of our trends and other factors affecting our business, see Part I - Item 1. Business.
Results of Operations
Elements of Results of Operations
Our consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States (“GAAP”).
Our sales are primarily derived from the sale of course materials, which include new, used and digital textbooks, and at
college and university bookstores which we operate, we sell high margin general merchandise, including emblematic apparel
and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our
rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as
sales of inventory management, hardware and point-of-sale software, direct-to-student subscription-based services, and other
services.
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.
Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and
administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as
merchandising, procurement, field support, finance and accounting, and operating costs related to our direct-to-student
subscription-based services business. 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 as discussed in the Overview - Segments discussion above.
Basis of Consolidation
The results of operations reflected in our consolidated financial statements are presented on a consolidated basis. All
material intercompany accounts and transactions have been eliminated in consolidation.
34
Results of Operations - Summary
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. See "Overview" for more information. A
detailed discussion of Fiscal 2019 items and year-over-year comparisons between Fiscal 2020 and Fiscal 2019 can be found in
Part II Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report
on Form 10-K for the year ended May 2, 2020 filed with the SEC on July 14, 2020.
Dollars in thousands
Sales: (a)
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Product sales and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted Earnings (non-GAAP) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA (non-GAAP) (b)
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
1,299,740 $
1,671,200 $
1,838,760
134,150
179,863
195,883
1,433,890 $
1,851,063 $
2,034,643
(131,787) $
(38,250) $
(24,374)
(89,033) $
(21,126) $
25,412
(66,827) $
36,227 $
18,598
4,491
(22,079)
192
21,567
3,409
(19,403)
359
89,094
35,018
6,169
(24,873)
(466)
Total Adjusted EBITDA (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(65,625) $
42,159 $
104,942
(a)
In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19
pandemic. The impact of which affects the comparability of our results of operations and cash flows.
(b) Adjusted Earnings and Adjusted EBITDA are a non-GAAP financial measures. See Adjusted Earnings (non-GAAP) and Adjusted
EBITDA (non-GAAP) discussion below.
The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales:
Sales:
Product sales and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales:
Product and other cost of sales (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental cost of sales (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss (non-cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
90.6 %
90.3 %
90.4 %
9.4
100.0
84.2
65.0
82.4
17.6
23.6
3.7
1.9
0.7
9.7
100.0
78.0
58.3
76.1
23.9
21.9
3.3
—
1.0
9.6
100.0
75.9
57.0
74.1
25.9
20.8
3.2
2.8
0.4
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12.3) %
(2.3) %
(1.4) %
(a) Represents the percentage these costs bear to the related sales, instead of total sales.
35
Results of Operations - 52 weeks ended May 1, 2021 compared with the 53 weeks ended May 2, 2020
Retail
Wholesale
52 weeks ended, May 1, 2021 (a)
Corporate
Services
DSS
Eliminations (b)
Total
1,196,320 $
165,825 $
27,374 $
— $
(89,779) $
1,299,740
134,150
1,330,470
—
165,825
1,047,613
131,142
87,240
1,134,853
195,617
—
131,142
34,683
—
27,374
5,056
—
5,056
22,318
—
—
—
—
—
—
—
134,150
(89,779)
1,433,890
(89,822)
1,093,989
—
87,240
(89,822)
1,181,229
43
252,661
278,149
16,085
22,116
22,079
(149)
338,280
39,634
5,461
7,763
109
Sub-Total: $
(122,166) $
13,137 $
(7,561) $
(22,188) $
—
192
52,967
(138,586)
27,630
9,960
$
(176,176)
Retail
Wholesale
53 weeks ended, May 2, 2020 (a)
Corporate
Services
DSS
Eliminations (b)
Total
1,533,029 $
198,353 $
23,661 $
— $
(83,843)
1,671,200
179,863
1,712,892
—
198,353
1,224,798
104,812
1,329,610
383,282
158,548
—
158,548
39,805
—
23,661
4,348
—
4,348
19,313
—
—
—
—
—
—
—
179,863
(83,843)
1,851,063
(83,992)
1,303,702
—
104,812
(83,992)
1,408,514
149
442,549
347,869
18,238
19,172
19,403
(210)
404,472
Dollars in thousands
Sales:
Product sales and other . . . $
Rental income . . . . . . . . . .
Total sales . . . . . . . . . .
Cost of sales:
Product and other cost of
sales . . . . . . . . . . . . . . .
Rental cost of sales . . . . . .
Total cost of sales . . . .
Gross profit . . . . . . . . . . . . . .
Selling and administrative
expenses . . . . . . . . . . . . . .
Depreciation and
amortization expense . . . . .
Impairment loss (non-cash) . .
Restructuring and other
charges . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . .
Dollars in thousands
Sales:
Product sales and other . . . $
Rental income . . . . . . . . . .
Total sales . . . . . . . . . .
Cost of sales:
Product and other cost of
sales . . . . . . . . . . . . . . .
Rental cost of sales . . . . . .
Total cost of sales . . . .
Gross profit . . . . . . . . . . . . . .
Selling and administrative
expenses . . . . . . . . . . . . . .
Depreciation and
amortization expense . . . . .
47,099
5,963
8,670
128
Sub-Total: $
(11,686) $
15,604 $
(8,529) $
(19,531) $
Impairment loss (non-cash) . .
Restructuring and other
charges . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . .
—
359
61,860
(23,783)
433
18,567
$
(42,783)
(a) In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19
pandemic. The impact of which affects the comparability of our results of operations and cash flows.
(b) For additional information related to the intercompany activities and eliminations, see Part II - Item 8. Financial Statements and
Supplementary Data - Note 5. Segment Reporting.
36
Sales
The following table summarizes our sales:
Dollars in thousands
Product sales and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
1,299,740
134,150
1,671,200
179,863
Total Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,433,890 $
1,851,063
%
(22.2)%
(25.4)%
(22.5)%
Our total sales decreased by $417.2 million, or 22.5%, to $1,433.9 million during the 52 weeks ended May 1, 2021 from
$1,851.1 million during the 53 weeks ended May 2, 2020. The sales decrease is primarily related to the impact of the additional
week for Fiscal 2020, the impact from temporary store closings related to COVID-19 earlier in the fiscal year, as well as lower
in store foot traffic, lower enrollments and fewer on-campus events due to COVID-19. The components of the variances are
reflected in the table below.
Sales variances
Dollars in millions
Retail Sales
52 weeks ended
May 1,
2021
New stores . . . . . . . . . . . . . . . . . $
Closed stores . . . . . . . . . . . . . . .
Comparable stores (a) . . . . . . . . .
Textbook rental deferral . . . . . .
Service revenue (b) . . . . . . . . . . .
Other (c) . . . . . . . . . . . . . . . . . . .
Retail Sales subtotal: . . . . . . . . . . .
$
Wholesale Sales . . . . . . . . . . . . . . . $
$
DSS Sales . . . . . . . . . . . . . . . . . . .
Eliminations (d) . . . . . . . . . . . . . . .
$
Total sales variance $
64.2
(35.4)
(409.2)
(3.3)
(0.7)
2.0
(382.4)
(32.5)
3.7
(6.0)
(417.2)
(a) Comparable store sales includes sales from physical stores that have been open for an entire fiscal year period and virtual
store sales for the period, does not include sales from closed stores for all periods presented. Sales for logo and emblematic
general merchandise fulfilled by FLC inventory and digital agency sales are included on a gross basis.
(b) Service revenue includes brand partnerships, shipping and handling, and revenue from other programs.
(c) Other includes inventory liquidation sales to third parties, marketplace sales and certain accounting adjusting items related
to return reserves, and other deferred items.
(d) Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale. See discussion of
intercompany activities and eliminations below.
Retail
Retail total sales decreased by $382.4 million, or 22.3%, to $1,330.5 million during the 52 weeks ended May 1, 2021 from
$1,712.9 million during the 53 weeks ended May 2, 2020. Retail added 98 new stores and closed 100 stores (not including
temporary store closings due to COVID-19) during the 52 weeks ended May 1, 2021, ending the period with a total of 1,417
stores.
Number of stores at beginning of period .
Opened . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of stores at end of period . . . . . . .
Fiscal 2021
Fiscal 2020
Physical
Virtual
Physical
Virtual
647
58
57
648
772
50
50
772
676
71
100
647
772
40
43
769
37
Product and other sales for Retail decreased by $336.7 million, or 22.0%, to $1,196.3 million during the 52 weeks ended
May 1, 2021 from $1,533.0 million during the 53 weeks ended May 2, 2020. Product and other sales are impacted by
comparable store sales (as noted in the chart below), new store openings and store closings, as well as the impact from the
COVID-19 pandemic. Sales were impacted by the temporary store closings due to COVID-19 earlier in the fiscal year, as well
as the impact of fewer students returning to campus, as many schools implemented a remote learning model and curtailed on-
campus classes and activities. While many big-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. Textbook (Course Materials) revenue for
Retail decreased primarily due to lower new and used textbook and other course materials sales, while First Day (our inclusive
access program), digital and eTextbook revenue increased.
Effective April 4, 2021, as per the FLC merchandising partnership agreement, logo and emblematic general merchandise
sales were fulfilled by FLC and we recognized commission revenue earned for these sales on a net basis. Additionally, general
merchandise sales for Retail decreased primarily due to lower emblematic apparel sales (as many athletic events were canceled
due to COVID-19), lower supply product sales and lower graduation product sales (primarily due to COVID-19 related campus
closures). We have made continued progress in the development of our next generation e-commerce platform, which launched
in Fiscal 2021 to deliver increased high-margin general merchandise sales.
Rental income for Retail decreased by $45.7 million, or 25.4%, to $134.2 million during the 52 weeks ended May 1, 2021
from $179.9 million during the 53 weeks ended May 2, 2020. Rental income is impacted by comparable store sales, new store
openings and store closings. The decrease in rental income is primarily due to decreased rental activity due to the COVID-19
pandemic as discussed above and the impact of increased digital offerings.
Comparable store sales for Retail decreased for the 52 week sales period. Comparable store sales were impacted primarily
by COVID-19 related campus temporary store closures, lower enrollment and on-campus events (all discussed above), a shift to
lower cost options and more affordable solutions, including digital offerings, increased consumer purchases directly from
publishers and other online providers, lower general merchandise sales (including graduation products and logo products for
athletic events). These decreases were partially offset by increased First Day, digital and eTextbook revenue. Comparable store
sales variances for Retail by category for the 52 week period is as follows:
Comparable Store Sales variances for Retail (a)
Dollars in millions
Textbooks (Course Materials) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Merchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Comparable Store Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
$
$
(158.4)
(235.3)
(20.9)
(414.6)
(15.2) %
(45.9) %
(64.3) %
(26.1) %
(a) Comparable sales data exclude the impact of the additional week for Fiscal 2020. Comparable store sales includes
sales from physical stores that have been open for an entire fiscal year period and virtual store sales for the period,
does not include sales from closed stores for all periods presented. Sales for logo and emblematic general
merchandise fulfilled by FLC inventory and digital agency sales are included on a gross basis. We believe the current
comparable store sales calculation method reflects the manner in which management views comparable sales, as well
as the seasonal nature of our business.
Wholesale
Wholesale sales decreased by $32.5 million, or 16.4%, to $165.8 million during the 52 weeks ended May 1, 2021 from
$198.3 million during the 53 weeks ended May 2, 2020. The decrease is primarily due to decreased gross sales impacted by the
COVID-19 pandemic, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to
digital products, and lower demand from other third-party clients, partially offset by a lower returns and allowances.
DSS
DSS total sales increased by $3.7 million, or 15.7%, to $27.4 million during the 52 weeks ended May 1, 2021 from $23.7
million during the 53 weeks ended May 2, 2020, primarily due to higher bartleby subscription sales, which were partially offset
by lower Student Brands sales.
Cost of Sales and Gross Margin
Our cost of sales increased as a percentage of sales to 82.4% during the 52 weeks ended May 1, 2021 compared to 76.1%
during the 53 weeks ended May 2, 2020. Our gross margin decreased by $189.9 million, or 42.9%, to $252.7 million, or 17.6%
of sales, during the 52 weeks ended May 1, 2021 from $442.5 million, or 23.9% of sales, during the 53 weeks ended May 2,
2020.
38
During the 52 weeks ended May 1, 2021, we recognized a merchandise inventory loss and write-off of $15.0 million in
cost of goods sold in the Retail Segment discussed below. Excluding the merchandise inventory loss and write-off, cost of
goods sold and gross margin was 81.3% and 18.7%, respectively, of sales during the 52 weeks ended May 1, 2021 compared to
76.1% and 23.9%, respectively, of sales during the 53 weeks ended May 2, 2020. For additional information, see Part II - Item
8. Financial Statements and Supplementary Data - Note 1. Organization and Note 2. Summary of Significant Accounting
Policies - Merchandise Inventories.
Retail
The following table summarizes the Retail cost of sales:
52 weeks ended
53 weeks ended
Dollars in thousands
Product and other cost of sales . . . . . . . . . . . . . . . . . . $
Rental cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
May 1,
2021
1,047,612
87,240
1,134,852
% of
Related Sales
87.6%
65.0%
85.3%
The following table summarizes the Retail gross margin:
Dollars in thousands
Product and other gross margin . . . . . . . . . . . . . . . . . $
Rental gross margin . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52 weeks ended
May 1,
2021
% of
Related Sales
148,708
46,910
195,618
12.4%
35.0%
14.7%
May 2,
2020
1,224,798
104,812
1,329,610
% of
Related Sales
79.9%
58.3%
77.6%
53 weeks ended
May 2,
2020
% of
Related Sales
308,231
75,051
383,282
20.1%
41.7%
22.4%
$
$
$
$
For the 52 weeks ended May 1, 2021, the Retail gross margin as a percentage of sales decreased as discussed below:
• Product and other gross margin decreased (770 basis points), driven primarily by lower margin rates (435 basis points)
due to higher markdowns, an unfavorable sales mix (370 basis points) due to lower high-margin general merchandise
sales of approximately $231.2 million and the shift to lower margin digital courseware, and a merchandise inventory loss
and write-off (100 basis points) of $15.0 million, comprised of a loss of $10.3 million related to the sale of our logo and
emblematic general merchandise inventory below cost to FLC and an inventory write-off of $4.7 million related to our
initiative to exit certain product offerings and streamline/rationalize our overall non-logo general merchandise product
assortment resulting from the centralization of our merchandising decision-making during the year, partially offset by
higher contract costs as a percentage of sales related to our college and university contracts (130 basis points) resulting
from contract renewals and new store contracts.
• Rental gross margin decreased (670 basis points), driven primarily by higher contract costs as a percentage of sales
related to our college and university contracts (620 basis points) and unfavorable rental mix (80 basis points), partially
offset by higher rental margin rates (30 basis points).
Wholesale
The cost of sales and gross margin for Wholesale were $131.1 million, or 79.1% of sales, and $34.7 million, or 20.9% of
sales, respectively, during the 52 weeks ended May 1, 2021. The cost of sales and gross margin for Wholesale were $158.5
million, or 79.9% of sales, and $39.8 million, or 20.1% of sales, respectively, during the 53 weeks ended May 2, 2020. The
gross margin increased to 20.9% during the 52 weeks ended May 1, 2021 from 20.1% during the 53 weeks ended May 2, 2020.
The increase was primarily due to the favorable impact of returns and allowances and lower markdowns, partially offset by an
unfavorable sales mix.
DSS
Gross margin for the DSS segment was $22.3 million, or 81.5% of sales, during the 52 weeks ended May 1, 2021 and
$19.3 million, or 81.6% of sales, during the 53 weeks ended May 2, 2020. The increase in gross margin was primarily due to
higher bartleby subscription sales.
Intercompany Eliminations
During the 52 weeks ended May 1, 2021 and 53 weeks ended May 2, 2020, sales eliminations were $89.8 million and
$83.9 million, respectively. These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to
Retail and the elimination of Retail commissions earned from Wholesale.
39
During the 52 weeks ended May 1, 2021 and 53 weeks ended May 2, 2020, the cost of sales eliminations were $89.8
million and $84.0 million, respectively. 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.
The $0.1 million of gross margin elimination reflects the net impact of the sales eliminations and cost of sales eliminations
during both the 52 weeks ended May 1, 2021 and 53 weeks ended May 2, 2020, respectively. The gross margin eliminations
reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.
Selling and Administrative Expenses
Dollars in thousands
May 1,
2021
Selling and Administrative Expenses . . . . . . . . . . . . . $
338,280
% of
Sales
23.6%
May 2,
2020
$
404,472
% of
Sales
21.9%
52 weeks ended
53 weeks ended
During the 52 weeks ended May 1, 2021, selling and administrative expenses decreased by $66.2 million, or 16.4%, to
$338.3 million from $404.5 million during the 53 weeks ended May 2, 2020. The variances by segment are as follows:
Retail
For Retail, selling and administrative expenses decreased by $69.7 million, or 20.0%, to $278.2 million during the 52
weeks ended May 1, 2021 from $347.9 million during the 53 weeks ended May 2, 2020. This decrease was primarily due to a
$59.3 million decrease in stores payroll and operating expenses, including comparable stores, primarily due to temporary
furloughed store employees, lower virtual stores and new/closed stores payroll and operating expenses, and a decrease of $10.4
million in corporate payroll, infrastructure costs, product development costs and digital operations costs.
Wholesale
For Wholesale, selling and administrative expenses decreased by $2.1 million, or 11.8%, to $16.1 million during the 52
weeks ended May 1, 2021 from $18.2 million during the 53 weeks ended May 2, 2020. The decrease in selling and
administrative expenses was primarily driven by lower payroll and operating costs.
DSS
For DSS, selling and administrative expenses increased by $2.9 million to $22.1 million during the 52 weeks ended May 1,
2021 from $19.2 million during the 53 weeks ended May 2, 2020. The increase in costs was primarily driven by an increase in
payroll costs, higher professional services and advertising costs.
Corporate Services
Corporate Services' selling and administrative expenses increased by $2.7 million, or 13.8%, to $22.1 million during the 52
weeks ended May 1, 2021 from $19.4 million during the 53 weeks ended May 2, 2020. The increase was primarily due to
higher compensation-related expenses and higher operating expenses.
Depreciation and Amortization Expense
Dollars in thousands
May 1,
2021
Depreciation and Amortization Expense . . . . . . . . . .
$
52,967
% of
Sales
3.7%
May 2,
2020
$
61,860
% of
Sales
3.3%
52 weeks ended
53 weeks ended
Depreciation and amortization expense decreased by $8.9 million, or 14.4%, to $53.0 million during the 52 weeks ended
May 1, 2021 from $61.9 million during the 53 weeks ended May 2, 2020. The decrease was primarily attributable to lower
depreciable assets and intangibles due to the store impairment loss recognized during the third quarter of Fiscal 2021. See
impairment loss discuss below.
Impairment loss (non-cash)
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of
Long-Lived Assets. For information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of
Significant Accounting Policies and Note 7. Fair Value Measurements.
40
During the 52 weeks ended May 1, 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 $27.6 million, $20.5
million after-tax, comprised of $5.1 million, $13.3 million, $6.3 million and $2.9 million of property and equipment, operating
lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively.
During the 53 weeks ended May 2, 2020, we recognized an impairment loss (non-cash) of $0.4 million in the Retail
segment related to net capitalized development costs for a project which are not recoverable.
Restructuring and other charges
During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling $10.0 million, comprised
primarily of $5.9 million for severance and other employee termination and benefit costs associated with elimination of various
positions as part of cost reduction objectives, $5.2 million for professional service costs related to restructuring, process
improvements, the financial advisor strategic review process, costs related to development and integration associated with
Fanatics and FLC partnership agreements and shareholder activist activities, and $0.5 million related to liabilities for a facility
closure, partially offset by a $1.6 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).
During the 53 weeks ended May 2, 2020, we recognized restructuring and other charges totaling $18.6 million comprised
primarily of $12.7 million for severance and other employee termination and benefit costs associated with several management
changes, the elimination of various positions as part of cost reduction objectives, and professional service costs for process
improvements, $2.8 million for professional service costs for shareholder activist activities, $2.7 million in an actuarial loss
related to a frozen retirement benefit plan (non-cash), and $0.6 million for a store level asset impairment charge, offset by $0.2
million related to reduction of liabilities for a facility closure.
Operating Loss
Dollars in thousands
Operating Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
53 weeks ended
May 1,
2021
% of
Sales
May 2,
2020
% of
Sales
$
(176,176)
(12.3)%
$
(42,783)
(2.3)%
Our operating loss was $(176.2) million during the 53 weeks ended May 1, 2021 compared to operating loss of
$(42.8) million during the 53 weeks ended May 2, 2020. This operating loss increase was due to the matters discussed above.
For the 52 weeks ended May 1, 2021, excluding the $15.0 million of merchandise inventory loss and write-off, $10.0
million of restructuring and other charges and the $27.6 million impairment loss (non-cash), all discussed above, operating loss
was $(123.6) million (or (8.6)% of sales).
For the 53 weeks ended May 2, 2020, excluding the $18.6 million of restructuring and other charges and the $0.4 million
impairment loss, all discussed above, operating loss was $(23.8) million (or (1.3)% of sales).
Interest Expense, Net
Dollars in thousands
Interest Expense, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
$
8,087 $
7,445
Net interest expense increased by $0.6 million to $8.1 million during the 52 weeks ended May 1, 2021 from $7.4 million
during the 53 weeks ended May 2, 2020 primarily due to higher average borrowings.
Income Tax Benefit
Dollars in thousands
52 weeks ended
53 weeks ended
May 1,
2021
Effective Rate
28.5%
May 2,
2020
$
(11,978)
Effective Rate
23.8%
Income Tax Benefit . . . . . . . . . . . . . . . . . . . . . . . .
$
(52,476)
We recorded an income tax benefit of $(52.5) million on a pre-tax loss of $(184.3) million during the 52 weeks ended
May 1, 2021, which represented an effective income tax rate of 28.5% and an income tax benefit of $(12.0) million on a pre-tax
loss of $(50.2) million during the 53 weeks ended May 2, 2020, which represented an effective income tax rate of 23.8%.
The effective tax rate for the 52 weeks ended May 1, 2021 is higher as compared to the comparable prior year period due to
various permanent differences and the impact of the CARES Act.
41
Impact of U.S. Tax Reform
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate
income tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign
subsidiaries that were previously tax deferred, among other provisions. In accordance with SAB 118, “Income Tax Accounting
Implications of the Tax Cuts and Jobs Act” (SAB 118), we completed our accounting for the tax effects of the enactment of the
Act within the provisional period as of April 27, 2019. We recorded measurement period adjustments during Fiscal 2019 to
reduce our net deferred tax liability by $3.9 million, which primarily relates to the acceleration of certain deductions as
permitted by the U.S. tax code. The most significant impact of the legislation for the Company was a $20.4 million reduction of
the value of our net deferred (which represents future tax liabilities) and long-term tax liabilities as a result of lowering the U.S.
corporate income tax rate from 35% to 21%, which was recorded in Fiscal 2018. We also recorded a liability associated with
the one-time transition tax. This amount is not material.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”) was enacted. We have
analyzed the provisions, which provide for a technical correction to allow for full expensing of qualified leasehold
improvements, modifications to charitable contribution and net operating loss limitations (“NOLs”), modifications to the
deductibility of business interest expense, as well as Alternative Minimum Tax (“AMT”) credit acceleration. The most
significant impact of the legislation for the Company was an income tax benefit of $7.2 million for the carryback of NOLs to
higher tax rate years, recorded in Fiscal 2021. As of May 1, 2021, we recognized a current income tax receivable for NOL
carrybacks of $30.5 million in prepaid and other current assets on the consolidated balance sheet.
Net Loss
Dollars in thousands
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
$
(131,787) $
(38,250)
As a result of the factors discussed above, we reported a net loss of $(131.8) million during the 52 weeks ended May 1,
2021, compared with a net loss of $(38.3) million during the 53 weeks ended May 2, 2020. Adjusted Earnings (non-GAAP) is
$(89.0) million during the 52 weeks ended May 1, 2021, compared with $(21.1) million during the 53 weeks ended May 2,
2020. See Adjusted Earnings (non-GAAP) discussion below.
Non-GAAP Measures - Adjusted Earnings, Adjusted EBITDA and Free Cash Flow
To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the
measure of Adjusted Earnings, Adjusted EBITDA, and Free Cash Flow, which are non-GAAP financial measures under
Securities and Exchange Commission (the “SEC”) regulations. We define Adjusted Earnings as net income adjusted for certain
reconciling items that are subtracted from or added to net income. We define Adjusted EBITDA as net income plus
(1) depreciation and amortization; (2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or
added to net income. We define Free Cash Flow as Adjusted EBITDA less capital expenditures, cash interest and cash taxes.
To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements
included elsewhere in this Form 10-K, the reconciliation of Adjusted Earnings to net income and the reconciliation of Adjusted
EBITDA to net income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the
tables below. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management
does not consider in assessing our on-going operating performance.
These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures
of financial performance prepared in accordance with GAAP. In addition, our use of these non-GAAP financial measures may
be different from similarly named measures used by other companies, limiting their usefulness for comparison purposes.
We review these non-GAAP financial measures as internal measures to evaluate our performance and manage our
operations. We believe that these measures are useful performance measures which are used by us to facilitate a comparison of
our on-going operating performance on a consistent basis from period-to-period. We believe that these non-GAAP financial
measures provide for a more complete understanding of factors and trends affecting our business than measures under GAAP
can provide alone, as they exclude certain items that do not reflect the ordinary earnings of our operations. Our Board of
Directors and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall
expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure
for performance incentive plans. We believe that the inclusion of Adjusted Earnings and Adjusted EBITDA results provides
investors useful and important information regarding our operating results. We believe that Free Cash Flow provides useful
additional information concerning cash flow available to meet future debt service obligations and working capital requirements
and assists investors in their understanding of our operating profitability and liquidity as we manage the business to maximize
margin and cash flow.
42
Adjusted Earnings (non-GAAP)
Dollars in thousands
Net loss (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
$
(131,787) $
(38,250) $
(24,374)
Reconciling items, after-tax (below) . . . . . . . . . . . . . . . . . . . . . . . . .
42,754
17,124
Adjusted Earnings (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(89,033) $
(21,126) $
49,786
25,412
Reconciling items, pre-tax
Impairment loss (non-cash) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchandise inventory loss and write-off (c) . . . . . . . . . . . . . . . .
Content amortization (non-cash) (d) . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges (e) . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reconciling items, pre-tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Pro forma income tax impact (g) . . . . . . . . . . . . . . . . . . . . . . . .
Reconciling items, after-tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
27,630 $
433 $
57,748
14,960
5,034
9,960
—
57,584
14,830
—
4,082
18,567
—
23,082
5,958
$
42,754 $
17,124 $
—
1,096
7,233
654
66,731
16,945
49,786
Adjusted EBITDA (non-GAAP)
Dollars in thousands
Net loss (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add:
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss (non-cash) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchandise inventory loss and write-off (c) . . . . . . . . . . . . . . . .
Content amortization (non-cash) (d) . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges (e) . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
$
(131,787) $
(38,250) $
(24,374)
52,967
8,087
(52,476)
27,630
14,960
5,034
9,960
—
(65,625) $
61,860
7,445
(11,978)
433
—
4,082
18,567
—
42,159 $
65,865
9,780
(13,060)
57,748
—
1,096
7,233
654
104,942
$
(a) In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.
The impact of which affects the comparability of our results of operations and cash flows.
(b) See Management Discussion and Analysis - Results of Operations - Impairment Loss discussion above.
(c) See Management Discussion and Analysis - Results of Operations - Cost of Sales and Margin discussion above.
(d) Earnings are adjusted for amortization expense (non-cash) related to content development costs which are included in cost of goods sold.
(e) See Management Discussion and Analysis - Restructuring and Other Charges discussion above.
(f) Transaction costs are costs incurred for business development and acquisitions.
(g) Represents the income tax effects of the non-GAAP items.
The following is Adjusted EBITDA by segment for Fiscal 2021, Fiscal 2020, and Fiscal 2019.
Adjusted EBITDA - by Segment
52 weeks ended May 1, 2021 (a)
Dollars in thousands
Sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (b) . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses .
Adjusted EBITDA (non-GAAP) . . . .
Retail
Wholesale
DSS
Corporate
Services
Eliminations
Total
Fiscal 2021
$ 1,330,470 $
165,825 $
27,374 $
— $
(89,779) $
1,433,890
(1,119,148)
(131,142)
211,322
278,149
34,683
16,085
(767)
26,607
22,116
—
—
22,079
89,822
(1,161,235)
43
(149)
272,655
338,280
$
(66,827) $
18,598 $
4,491 $
(22,079) $
192 $
(65,625)
43
Adjusted EBITDA - by Segment
53 weeks ended May 2, 2020 (a)
Dollars in thousands
Sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (c) . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses .
Adjusted EBITDA (non-GAAP) . . . .
Retail
Wholesale
DSS
Corporate
Services
Eliminations
Total
Fiscal 2020
$ 1,712,892 $
198,353 $
23,661 $
— $
(83,843) $
1,851,063
(1,328,796)
(158,548)
384,096
347,869
39,805
18,238
(1,080)
22,581
19,172
—
—
19,403
83,992
(1,404,432)
149
(210)
446,631
404,472
$
36,227 $
21,567 $
3,409 $
(19,403) $
359 $
42,159
Adjusted EBITDA - by Segment
52 weeks ended April 27, 2019
Dollars in thousands
Sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (d) . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses .
Adjusted EBITDA (non-GAAP) . . . .
Retail
Wholesale
DSS
Corporate
Services
Eliminations
Total
Fiscal 2019
$ 1,889,008 $
223,374 $
21,339 $
— $
(99,078) $
2,034,643
(1,436,684)
(167,033)
452,324
363,230
56,341
21,323
(666)
20,673
14,504
—
—
24,873
98,562
(1,505,821)
(516)
(50)
528,822
423,880
$
89,094 $
35,018 $
6,169 $
(24,873) $
(466) $
104,942
(a) In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.
The impact of which affects the comparability of our results of operations and cash flows.
(b) For the 52 weeks ended May 1, 2021, gross margin excludes $0.7 million and $4.3 million of amortization expense (non-cash) related to
content development costs in the Retail Segment and DSS Segment, respectively. For the 52 weeks ended May 1, 2021, gross margin
also excludes a merchandise inventory loss and write-off of $15.0 million in the Retail Segment. See Management Discussion and
Analysis - Results of Operations - Cost of Sales and Margin discussion above.
(c) For the 53 weeks ended May 2, 2020, gross margin excludes $0.8 million and $3.7 million of amortization expense (non-cash) related to
content development costs in the Retail Segment and DSS Segment, respectively.
(d) For the 52 weeks ended April 27, 2019, gross margin excludes $0.5 million and $0.6 million of amortization expense (non-cash) related
to content development costs in the Retail Segment and DSS Segment, respectively.
Free Cash Flow (non-GAAP)
Dollars in thousands
Adjusted EBITDA (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
$
(65,625) $
42,159 $
104,942
Less:
Capital expenditures (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,223
6,778
6,008
36,192
6,796
(4,141)
Free Cash Flow (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(115,634) $
3,312 $
46,420
8,589
10,277
39,656
(a) Purchases of property and equipment are also referred to as capital expenditures. Our investing activities consist principally of capital
expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives
and enhancements to internal systems and our website. The following table provides the components of total purchases of property and
equipment:
Capital Expenditures
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Dollars in thousands
Physical store capital expenditures . . . . . . . . . . . . . . . . . . . . . . .
Product and system development . . . . . . . . . . . . . . . . . . . . . . . .
Content development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
10,382 $
13,926 $
11,747
8,741
6,353
15,710
4,335
2,221
Total Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . .
$
37,223 $
36,192 $
44
19,362
13,581
11,509
1,968
46,420
Liquidity and Capital Resources
Our primary sources of cash are net cash flows from operating activities, funds available under a credit agreement and
short-term vendor financing. As of May 1, 2021, we had $177.6 million of borrowings outstanding under the Credit Agreement.
See Financing Arrangements discussion below.
We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-
term vendor financing will provide adequate resources to fund our operating and financing needs for the foreseeable future. Our
future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and
pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store
openings, and any potential acquisitions of other brands or companies including digital properties. To the extent that available
funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of
debt or equity. Our access to, and the availability of, financing in the future will be impacted by many factors, including the
liquidity of the overall capital markets and the current state of the economy. There can be no assurances that we will have
access to capital markets on acceptable terms.
COVID-19 Business Impact
Our Fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools adjusted
their learning model and on-campus activities in response to the pandemic. Fewer students returned to campus, as many schools
implemented a remote learning model and curtailed on-campus classes and activities. While many athletic conferences resumed
their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the
company’s general merchandise business. Additionally, sales were impacted by overall enrollment declines in higher education.
See Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies -
Other Long-Lived Assets related to the impairment loss (non-cash) recognized during Fiscal 2021.
To mitigate the impact of the business disruption, we have taken steps to significantly reduce costs, including periodically
furloughing the majority of our Retail workforce during non-rush seasonal sales periods. We have implemented a significant
cost reduction program designed to streamline our operations, maximize productivity and drive profitability. Certain elements
of this plan were implemented in late Fiscal 2020, while other actions occurred in Fiscal 2021. We have achieved meaningful
annualized cost savings from this program.
Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. We cannot
accurately predict the duration or extent of the impact of COVID-19 on enrollments, university budgets, athletics and other
areas that directly affect our business operations. Although most schools expect to return to a traditional on-campus
environment for learning in the upcoming Fall semester, as well as host traditional on campus sporting activities, there is still
uncertainty about the duration and extent of the impact of the COVID-19 pandemic. We will continue to assess our operations
and will continue to consider the guidance of local governments and our campus partners to determine when our operations can
begin returning to normal levels of business. 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.
Sale of Treasury Shares and Merchandise Inventory
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 $15.0 million, 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 $4.1 million and was recognized as a
contract liability ($0.2 million in accrued liabilities and $3.9 million in other long-term liabilities on our consolidated balance
sheet) which is expected to be earned over the term of the merchandising contracts for Fanatics and FLC.
On April 4, 2021, as contemplated by the merchandising partnership agreement, we closed on the sale of our logo and
emblematic general merchandise inventory to FLC and received proceeds of $41.8 million, and recognized a merchandise
inventory loss on the sale of $10.3 million in cost of goods sold during the 52 weeks ended May 1, 2021 in the statement of
operations for the Retail Segment. The final inventory purchase price will be determined during the first quarter of Fiscal 2022.
For additional information regarding the merchandising partnership, see Part II - Item 8. Financial Statements and
Supplementary Data - Note 1. Organization - Partnership with Fanatics and FLC, Note 2. Summary of Significant Accounting
Policies - Merchandise Inventories, and Note 6. Equity and Earnings Per Share - Sale of Treasury Shares.
45
Sources and Uses of Cash Flow
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. See "Overview" for more information. A
detailed year-over-year comparisons between Fiscal 2020 and Fiscal 2019 can be found in Part II Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for
the year ended May 2, 2020 filed with the SEC on July 14, 2020.
Dollars in thousands
Fiscal 2021
Fiscal 2020
Fiscal 2019
Cash, cash equivalents, and restricted cash at beginning of period . . . . . . . . . . . . .
$
9,008 $
14,768 $
16,869
Net cash flows provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . .
32,882
(8,676)
121,791
Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(36,875)
(37,019)
(55,620)
Net cash flows provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . .
11,799
39,935
(68,272)
Cash, cash equivalents, and restricted cash at end of period . . . . . . . . . . . . . . . . . .
$
16,814 $
9,008 $
14,768
Cash Flow from Operating Activities
Our business is highly seasonal. For our retail operations, cash flows from operating activities are typically a source of cash
in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the
upcoming semesters based on the typical academic semester. For our wholesale operations, cash flows from operating activities
are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter
selling season when textbooks and other course materials are sold for retail distribution. For both retail and wholesale, cash
flows from operating activities are typically a use of cash in the fourth fiscal quarter, when sales volumes are materially lower
than the other quarters. For our DSS segment, cash flows are not seasonal as cash flows from operating activities are typically
consistent throughout the year. Our quarterly cash flows 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.
Cash flows provided by operating activities during Fiscal 2021 were $32.9 million compared to cash flow used in operating
activities of $(8.7) million during Fiscal 2020. This increase in cash provided by operating activities of $41.6 million was
primarily due to proceeds from the sale of logo merchandise inventory to FLC of $41.8 million, partially offset by lower net
income, an increase in other long-term liabilities due to sale of treasury shares at a premium (discussed above), and changes in
working capital. As discussed above, our operations were highly impacted by the COVID-19 pandemic in Fiscal 2021.
Cash Flow from Investing Activities
Cash flows used in investing activities during Fiscal 2021 were $(36.9) million compared to $(37.0) million during Fiscal
2020. Cash used in investing activities is primarily for capital expenditures and contractual capital investments associated with
content development, digital initiatives, enhancements to internal systems and websites, renewing existing contracts and new
store construction and lower payments to acquire businesses and the change in other noncurrent assets for contractual
obligations. Capital expenditures totaled $37.2 million and $36.2 million during Fiscal 2021 and Fiscal 2020, respectively.
Cash Flow from Financing Activities
Cash flows provided by financing activities during Fiscal 2021 were $11.8 million compared to $39.9 million during Fiscal
2020. This net change of $28.1 million is primarily due to higher net borrowings under the credit agreement and the sale of
treasury shares of $10.9 million (discussed above), partially offset by the payment of deferred financing costs of $1.1 million.
Financing Arrangements
We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the
lenders committed to provide us with a five-year asset-backed revolving credit facility in an aggregate committed principal
amount of $400 million (the “Credit Facility”). We have the option to request an increase in commitments under the Credit
Facility of up to $100 million, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate
purposes, including seasonal working capital needs. The agreement includes an incremental first in, last out seasonal loan
facility (the “FILO Facility”) for a $100 million incremental facility maintaining the maximum availability under the Credit
Agreement at $500 million. On March 31, 2021, we were granted a waiver to the availability test condition to the current draw
under the FILO Facility.
During the 52 weeks ended May 1, 2021, we borrowed $719.7 million and repaid $722.6 million under the Credit
Agreement, with $177.6 million of outstanding borrowings as of May 1, 2021. During the 53 weeks ended May 2, 2020, we
46
borrowed $600.9 million and repaid $559.7 million under the Credit Agreement, with $174.7 million of outstanding borrowings
as of May 2, 2020. During 52 weeks ended April 27, 2019, we borrowed $521.2 million and repaid $584.1 million under the
Credit Agreement, and had outstanding borrowings of $33.5 million and $100.0 million under the Credit Facility and FILO
Facility, respectively, as of April 27, 2019. As of both May 1, 2021 and May 2, 2020, we have issued $4.8 million in letters of
credit under the Credit Facility.
During the 52 weeks ended May 1, 2021, we incurred debt issuance costs totaling $1.1 million related to the March 31,
2021 Credit Facility amendment. The debt issuance costs have been deferred and are presented as prepaid and other current
assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the
credit agreement.
The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers
under the Credit Facility. This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company
and a pledge of equity from subsidiaries, exclusive of real estate).
Interest under the Credit Facility accrues, at our election, at a LIBOR or alternate base rate, plus, in each case, an applicable
interest rate margin, which is determined by reference to the level of excess availability under the Credit Facility. Loans will
initially bear interest at LIBOR plus 2.00% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus
1.00% per annum, in the alternative, and thereafter the interest rate will fluctuate between LIBOR plus 2.00% per annum and
LIBOR plus 1.50% per annum (or between the alternate base rate plus 1.000% per annum and the alternate base rate plus 0.50%
per annum), based upon the excess availability under the Credit Facility at such time.
Loans under the FILO Facility will bear interest at a rate equal to the LIBOR rate, plus 3.750%. In connection with the
waiver, the applicable margin for credit extensions made under the FILO Facility after March 31, 2021 through the end of 2021
was increased by 0.50% (to 3.75% per annum for LIBO rate loans and 2.75% for base rate loans). The FILO Facility will be
available solely during the draw period each year, from April 1 through July 31. We are required to borrow 100% of the
aggregate commitments under the FILO Facility on April 1 of each year, and the loans must be repaid in full (including interest
and fees) on July 31 of each year. The commitments under the FILO Facility will decrease from $50.0 million to $25.0 million
on August 1, 2021. We will pay a commitment fee of 0.375% on the daily unused portion of the FILO Facility.
The Credit Facility contains customary negative covenants, which limit the Company’s ability to incur additional
indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets,
among other things. In addition, if excess availability under the Credit Facility were to fall below certain specified levels,
certain additional covenants (including fixed charge coverage ratio requirements and a minimum excess availability of the
greater of 10% of the Loan Cap and $25.0 million when the FILO is funded) would be triggered, and the lenders would have
the right to assume dominion and control over the Company's cash. The Credit Facility includes an anti-cash hoarding
provision, which limits maximum excess cash allowed to $50.0 million when the FILO is funded.
The Credit Facility contains customary events of default, including payment defaults, material breaches of representations
and warranties, covenant defaults, default on other material indebtedness, customary ERISA events of default, bankruptcy and
insolvency, material judgments, invalidity of liens on collateral, change of control or cessation of business. The Credit Facility
also contains customary affirmative covenants and representations and warranties. We are in compliance with all covenants,
representations and warranties under the Credit Facility as of May 1, 2021.
Income Tax Implications on Liquidity
As of May 1, 2021, other long-term liabilities includes $25.3 million 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 $0.7
million 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.
Share Repurchases
On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, 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 Fiscal 2021, Fiscal 2020, and Fiscal 2019, we did not purchase shares under the stock
repurchase program. As of May 1, 2021, approximately $26.7 million remains available under the stock repurchase program.
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During Fiscal 2021, Fiscal 2020, and Fiscal 2019, we also repurchased 414,174 shares, 374,733 shares, and 351,043 shares
of our common stock, respectively, in connection with employee tax withholding obligations for vested stock awards.
Contractual Obligations
The following table sets forth our contractual obligations as of May 1, 2021 (in millions):
Payments Due by Period
1-3
Years
Less Than
1 Year
3-5
Years
Total
More Than
5 Years
Credit Facility (a) . . . . . . . . . . . . . . . . . . . . . . . $
FILO Facility (a) . . . . . . . . . . . . . . . . . . . . . . .
Lease obligations (excluding imputed
interest) (b) . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations (c) . . . . . . . . . . . . . . . . . .
Other long-term liabilities reflected on the
balance sheet under GAAP (d) (e) . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127.6 $
127.6 $
— $
75.0
320.8
26.3
—
50.0
99.7
14.8
—
25.0
89.1
11.0
—
— $
—
61.8
0.5
—
$
549.7 $
292.1 $
125.1 $
62.3 $
—
—
70.2
—
—
70.2
(a) As of May 1, 2021, we had a total of $177.6 million of outstanding borrowings under the Credit Facility and FILO Facility.
See Financing Arrangements discussion above for information about future borrowings and payments under the FILO
Credit Facility.
(b) Our contracts for physical bookstores with colleges and universities are typically five years with renewal options, but can
range from one to 15 years, and are typically cancelable by either party without penalty with 90 to 120 days' notice. Annual
projections are based on current minimum guarantee amounts. In approximately 50% of our contracts with colleges and
universities that include minimum guarantees, the minimum guaranteed amounts adjust annually to equal less than the prior
year's commission earned. Excludes obligations under store leases for property insurance and real estate taxes, which
totaled approximately 2.7% of the minimum rent payments under those leases.
Includes information technology contracts.
(c)
(d) Other long-term liabilities excludes $25.3 million of tax liabilities related to the long-term tax payable associated with the
LIFO reserve for which we cannot make a reasonably reliable estimate of the amount and period of payment. See Income
Tax Implications on Liquidity discussed above.
(e) Other long-term liabilities excludes expected payments related to employee benefit plans. See Part II - Item 8. Financial
Statements and Supplementary Data — Note 12. Employee Benefit Plans.
Certain Relationships and Related Party Transactions
See Part II - Item 8. Financial Statements and Supplementary Data — Note 11. Related Party Transactions.
Critical Accounting Policies and Estimates
In preparing our consolidated financial statements in accordance with GAAP, we are required to use judgment in making
estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes. In
preparing these financial statements, management has made its best estimates and judgments with respect to certain amounts
included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that
materially different amounts would be reported related to the accounting policies described below. However, application of
these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.
Revenue Recognition and Deferred Revenue
Product sales and rentals
The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual
bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from
sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount
that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Part II -
Item 8. Financial Statements and Supplementary Data - Note 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
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.
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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.
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.
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. There were no LIFO
adjustments in Fiscal 2021, Fiscal 2020, and Fiscal 2019.
Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory. Reserve
calculations are sensitive to certain significant assumptions, including markdowns, sales below cost, inventory aging and
expected demand. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates
or assumptions used to calculate the non-returnable inventory reserve. However, if assumptions based on our history of
liquidating non-returnable inventory are incorrect, we may be exposed to losses or gains that could be material. A 10% change
in actual non-returnable inventory would have affected pre-tax earnings by approximately $6.0 million in Fiscal 2021.
For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of
inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by
changes in merchandise mix and changes in actual shortage trends. We do not believe there is a reasonable likelihood that there
will be a material change in the future estimates or assumptions used to calculate shortage rates. However, if our estimates
49
regarding shortage rates are incorrect, we may be exposed to losses or gains that could be material. A 10 basis point change in
actual shortage rates would have affected pre-tax earnings by approximately $0.2 million in Fiscal 2021.
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. We do not believe there is a reasonable likelihood that there will be a
material change in the future estimates or assumptions used to calculate rental cost of goods sold. However, if our estimates
regarding residual value are incorrect, we may be exposed to losses or gains that could be material. A 1% change in rental cost
of goods sold would have affected pre-tax earnings by approximately $0.4 million in Fiscal 2021.
Long-Term Incentive Compensation
The assumptions used in calculating the fair value of long-term incentive compensation payment awards represent
management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment.
See Part II - Item 8. Financial Statements and Supplementary Data — Note 13. Long-Term Incentive Compensation Expense
for a further discussion of our stock-based incentive plan.
We are required to estimate the expected forfeiture rate, and only recognize expense for those shares expected to vest. If
their actual forfeiture rate is materially different from their estimate, our long-term incentive compensation expense could be
significantly different from what we recorded in the current period. For stock options granted with an "at market" exercise
price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium"
exercise price, we determined the grant date fair value using the Monte Carlo simulation model. The fair value models for stock
options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of
the options.
Phantom shares will be settled in cash based on the fair market value of a share of common stock at each vesting date in an
amount not to exceed a specific price per share. The fair value of the phantom shares was determined using the closing stock
price on the date of the award less the fair value of the call option which was estimated using the Black-Scholes model. The 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.
We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or
assumptions used to determine long-term incentive compensation expense. If actual results are not consistent with the
assumptions used, the long-term incentive compensation expense reported in our financial statements may not be representative
of the actual economic cost of the long-term incentive compensation. A 10% change in our long-term incentive compensation
expense would have affected pre-tax earnings by approximately $0.9 million in Fiscal 2021.
Evaluation of Other Long-Lived Assets Impairment
As of May 1, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets,
amortizable intangibles, and other noncurrent assets of $89.2 million, $240.5 million, $150.9 million, and $29.1 million,
respectively, on our consolidated balance sheet.
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable and consider market participants in accordance with Accounting Standards
Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. We evaluate the long-lived
assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified.
When evaluating long-lived assets for potential impairment, we first compared the carrying amount of the asset group to the
estimated future undiscounted cash flows. The impairment loss calculation compares the carrying amount of the assets to the
fair value based on estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the
asset’s carrying value in excess of fair value.
Fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools adjusted their
learning models and on-campus activities. 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 athletic conferences
that have been either eliminated or severely restricted. These combined events impacted the Company’s course materials and
general merchandise business. During the third quarter of Fiscal 2021, we evaluated certain of our store-level long-lived assets
in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-
cash) of $27.6 million, $20.5 million after-tax, comprised of $5.1 million, $13.3 million, $6.3 million and $2.9 million of
property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively,
50
on the consolidated statement of operations. The fair value of the impaired long-lived assets were determined using an income
approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based
on historical experience, market conditions, current trends and performance expectations. For additional information, see Part II
- Item 8. Financial Statements and Supplementary Data - Note 7. Fair Value Measurements.
In the first quarter of Fiscal 2020, we recorded an impairment loss (non-cash) of $0.4 million in the Retail segment related
to net capitalized development costs for a project which are not recoverable. During the fourth quarter of Fiscal 2020, in
conjunction with COVID-19 related campus store closures, we evaluated certain of our long-lived assets associated with our
Retail and Wholesale segments for impairment. Based on the results of the tests, for the Retail segment, we recognized an
impairment loss of $0.6 million related to store-level assets in restructuring and other charges. These long-lived assets were not
recoverable and had a de minimis fair value, as determined using an income approach (Level 3 input), resulting in a non-cash
impairment charge for the full carrying value of those long-lived assets.
During the fourth quarter of Fiscal 2019, in conjunction with the change to reporting segments and the interim goodwill
impairment test noted below, as well as operational changes in certain long-lived asset groups, we evaluated certain of our long-
lived assets for impairment and recognized an impairment loss of $8.4 million, comprised of $8.1 million of intangible assets,
primarily acquired technology, and $0.3 million of property and equipment related to our LoudCloud and Promoversity
operations. These long-lived assets were not recoverable and had a de minimis fair value, as determined using the relief-from-
royalty and income approaches (Level 3 input), resulting in a non-cash impairment charge for the full carrying value of those
long-lived assets.
The impairment analysis process requires significant estimation to determine recoverability of each asset group and to
determine the fair value of asset groups that were not recoverable, as well as the fair values of certain operating right-of-use
assets included within the asset groups that were not recoverable. The significant assumptions used included annual revenue
growth rates, gross margin rates and the estimated relationship of selling and administrative costs to revenue used to estimate
the projected cash-flow directly related to the future operation of the stores as well as the weighted average cost of capital used
to calculate the fair value. Significant assumptions used to determine the fair values of certain operating right-of-use assets
included the current market rent and discount rate. These assumptions are subjective in nature and are affected by expectations
about future market or economic conditions (including the effects of the global pandemic).
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used
to calculate long-lived asset impairment losses. However, if actual results are not consistent with estimates and assumptions
used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material. A 10% decrease
in our estimated discounted cash flows would not have materially affected the results of our operations in Fiscal 2021.
Evaluation of Goodwill Impairment
The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance
sheets. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as
of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying
amount of the reporting unit exceeds its fair value. As of both May 1, 2021 and May 2, 2020, we had $0, $0 and $4,700 million
of goodwill on our consolidated balance sheets related to our Retail, Wholesale, and DSS reporting units, respectively.
During the third quarter of both Fiscal 2021 and Fiscal 2020, we completed our annual goodwill impairment test and
concluded that the fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit;
therefore, no goodwill impairment was recognized.
During the third quarter of Fiscal 2019, we completed our annual goodwill impairment test and concluded that the fair
value of the MBS and DSS reporting units, as they existed at that time, each exceeded their respective carrying values and no
goodwill impairment was recognized. In the fourth quarter of Fiscal 2019, due to the change in our reporting units identified as
a result of the change in our reportable segments, we recognized a total goodwill impairment (non-cash impairment loss) of
$49.3 million associated with the MBS reporting unit (as it existed at that date) and allocated $20.5 million of goodwill to the
Retail Segment and $28.7 million of goodwill to the Wholesale Segment.
Application of the goodwill impairment test requires judgment, including: the identification of reporting units; assignment
of assets and liabilities to reporting units; assignment of goodwill to reporting units; and the determination of the fair value of
each reporting unit. In performing the valuation, we used cash flows that reflected management’s forecasts and discount rates
that included risk adjustments consistent with the current market conditions.
We estimated the fair value of our reporting units using a weighting of fair values derived from the income approach and
the market approach for our annual impairment testing and using the income approach for our interim impairment test. Under
the income approach, we calculate the fair value of the reporting unit based on the present value of estimated future cash flows.
Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating
results, business plans, expected growth rates, cost of capital and tax rates. We also make certain forecasts about future
51
economic conditions, interest rates, market data, and other observable trends, such as comparable store sales trends, recent
changes in publisher relationships, and development of innovative digital products and services in the rapidly changing
education landscape. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk
associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected
cash flows. Under the market approach, we estimate the fair value based on market multiples of cash flows and earnings
derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit
and considering a reasonable control premium.
Many of the factors used in assessing fair value are outside the control of management, and these assumptions and
estimates may change in future periods. Changes in assumptions or estimates could materially affect the estimate of the fair
value, and therefore could affect the likelihood and amount of potential impairment. The following assumptions are significant
to our evaluation process:
Business Projections- We make assumptions about the level of revenues, gross profit, operating expenses, as well as capital
expenditures and net working capital requirements. These assumptions drive our planning assumptions and represent key inputs
for developing our cash flow projections. These projections are developed using our internal business plans over a five-year
planning period that are updated at least annually;
Long-term Growth Rates- We also utilize an assumed long-term growth rate representing the expected rate at which our
cash flow stream is projected to grow. These rates are used to calculate the terminal value and are added to the cash flows
projected during our five-year planning period; and
Discount Rates- The estimated future cash flows are then discounted at a rate that is consistent with a weighted-average
cost of capital that is likely to be expected by market participants. The weighted-average cost of capital is an estimate of the
overall after-tax rate of return required by equity and debt holders of a business enterprise.
Income Taxes
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and
liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or
recovered. FASB guidance on accounting for income taxes requires that deferred tax assets be evaluated for future realization
and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when
assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience and
expectations of future taxable income by taxing jurisdiction, the carryforward periods available to us for tax reporting purposes
and other relevant factors. The actual realization of deferred tax assets may differ significantly from the amounts we have
recorded.
During the ordinary course of business, there are many transactions and calculations for which the ultimate tax
determination is uncertain. Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain
tax positions. The first step is to evaluate the tax position for recognition by determining if available evidence indicates it is
more likely than not that the tax position will be fully sustained upon review by taxing authorities, including resolution of
related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount with a greater
than 50 percent likelihood of being realized upon ultimate settlement. For tax positions that are 50 percent or less likely of
being sustained upon audit, we do not recognize any portion of that benefit in the financial statements. We consider many
factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which
may not accurately anticipate actual outcomes. Our actual results could differ materially from our current estimates.
Recent Accounting Pronouncements
See Item 8. Financial Statements and Supplementary Data — Note 3. Recent Accounting Pronouncements for information
related to new accounting pronouncements.
52
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We generally limit our interest rate risk by investing certain of our excess cash balances in short-term, highly-liquid
instruments with an original maturity of one year or less. During Fiscal 2021, we did not have any invested cash balances. We
do not expect any material losses from our invested cash balances and we believe that our interest rate exposure is modest. As
of May 1, 2021, our cash and cash equivalents totaled approximately $8.0 million.
We may from time to time borrow money under the Credit Facility and FILO Facility at various interest rate options based
on LIBOR or alternate base rate (each term as defined therein) depending upon certain financial tests. Accordingly, we may be
exposed to interest rate risk on borrowings outstanding under the Credit Facility and FILO Facility. We had $177.6 million of
borrowings outstanding under Credit Facility and FILO Facility as of May 1, 2021. A 25 basis point increase in interest rates or
25 basis point decrease in interest rates would affect interest expense by approximately less than $0.1 million in Fiscal 2021.
Effective April 28, 2019, we adopted Accounting Standards Codification ("ASC") Topic 842, Leases, and recognized lease
assets and lease liabilities on the consolidated balance sheet for all operating lease arrangements based on the present value of
future lease payments. 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. A 25 basis point increase in the rate or 25 basis point decrease in the rate would not have materially affected
the present value of future lease payments.
Foreign Currency Risk
We do not have any material foreign currency exposure as nearly all of our business is transacted in United States currency.
53
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT INDEX
Page No.
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on the
consolidated financial statements of Barnes & Noble Education, Inc. for the years ended
May 1, 2021, May 2, 2020, and April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended May 1, 2021, May 2, 2020, and
April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of May 1, 2021 and May 2, 2020 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended May 1, 2021, May 2, 2020, and
April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for the years ended May 1, 2021, May 2, 2020, and April 27,
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements
Note 1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 2.
Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 3. Recent Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 4. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 5.
Note 6.
Equity and Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 7.
Note 8. Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 9.
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 10. Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 11. Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 12. Employees Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 13. Long-Term Incentive Compensation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 14.
Note 15. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 16. Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
57
58
59
60
61
62
70
70
72
75
76
77
78
79
80
80
80
84
86
87
88
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Barnes & Noble Education, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Barnes & Noble Education, Inc. and subsidiaries (the
Company) as of May 1, 2021 and May 2, 2020, the related consolidated statements of operations, equity and cash flows for
each of the three years in the period ended May 1, 2021 and the related notes and financial statement schedule listed in the
Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at May 1, 2021 and May 2,
2020, and the results of its operations and its cash flows for each of the three years in the period ended May 1, 2021, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of May 1, 2021, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated June 30, 2021 expressed an unqualified opinion thereon.
Adoption of Accounting Standards Update (ASU) No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for leases
in the fiscal year ended May 2, 2020 due to the adoption of ASU 2016-02, Leases and associated amendments (Topic 842),
using the modified retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements
that were communicated or required to be communicated to the audit committee of the Company’s board of directors and that:
(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Non-Returnable Inventory Reserve
Description
of the
Matter
As described in Note 2 to the consolidated financial statements, the Company reserves for non-returnable
inventory based on its history of liquidating non-returnable inventory.
Auditing management’s estimate of the reserves for non-returnable inventory involved especially subjective
auditor judgment as such estimates are based on various factors that are affected by current and future market
and economic conditions. In particular, the reserve calculations are sensitive to certain significant
assumptions, including markdowns, sales below cost, inventory aging and expected demand.
55
How We
Addressed
the Matter
in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over
the Company's inventory reserve process, including management’s review controls over the determination of
significant assumptions and the data underlying the calculations of the inventory reserves.
Our procedures included, among others, evaluating the significant assumptions, identified above, and testing
the accuracy and completeness of the underlying data used in management’s inventory reserve calculation.
We recalculated the reserve using management’s methodology and assumptions, and we evaluated the
methodology and the significant assumptions for reasonableness by comparing them to the related actual
historical activity and expected future market and economic conditions. We also analyzed the impact of
reasonable changes to the significant assumptions on the recorded inventory reserves.
Long-Lived Asset Impairment
Description
of the
Matter
As described in Note 2 to the consolidated financial statements, the Company tests its long-lived assets for
impairment if an event occurs or circumstances change that would indicate the carrying amount may not be
recoverable. If the carrying amount of a long-lived asset (group) exceeds its fair value, the asset (group) is
written down to its fair value and an impairment charge is recognized. During the fiscal year 2021, the
Company recognized an impairment charge of $27.6 million related to long-lived assets at certain of its
stores.
Auditing the Company's impairment of store long-lived assets was complex and highly judgmental due to the
significant estimation required to determine recoverability of each asset group and to determine the fair value
of asset groups that were not recoverable, as well as the fair values of certain operating right-of-use assets
included within the asset groups that were not recoverable. The significant assumptions used included annual
revenue growth rates, gross margin rates and the estimated relationship of selling and administrative costs to
revenue used to estimate the projected cash-flow directly related to the future operation of the stores as well
as the weighted average cost of capital used to calculate the fair value. Significant assumptions used to
determine the fair values of certain operating right-of-use assets included the current market rent and discount
rate. These assumptions are subjective in nature and are affected by expectations about future market or
economic conditions (including the effects of the global pandemic).
How We
Addressed
the Matter
in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over
the store long-lived assets impairment process, including controls over the determination of the undiscounted
projected cash flows of the stores with indicators of impairment, the fair values of the stores with carrying
values that were not recoverable and the fair values of operating right-of-use assets within those stores. We
also tested controls over management’s review of the significant assumptions described above.
Our testing of the Company's impairment analysis included, among other procedures, evaluating the
significant assumptions described above and the operating data used to calculate the estimated future cash
flows of the stores and to determine fair values. We tested the completeness and accuracy of the data used by
the Company in its analysis. We also compared the significant assumptions used to determine the projected
cash flows to historical operating results of the stores, management’s expectations related to recovery from
the pandemic and published third-party information regarding overall college and university enrollment
trends; and, we obtained an understanding of the business initiatives supporting the assumptions used to
estimate the future cash flows through inquiries of management and inspection of internal and external
communications. We involved our internal valuation specialists to assist in evaluating the calculation of the
fair values of certain operating lease right-of-use assets, which included assessing the reasonableness of the
methodology utilized to determine market rental rates and evaluating the applied discount rate.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2015.
Iselin, New Jersey
June 30, 2021
56
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
Sales:
Product sales and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,299,740 $
1,671,200 $
1,838,760
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales:
Product and other cost of sales . . . . . . . . . . . . . . . . . . . . . . .
Rental cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss (non-cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134,150
1,433,890
1,093,989
87,240
1,181,229
252,661
338,280
52,967
27,630
9,960
—
179,863
1,851,063
1,303,702
104,812
1,408,514
442,549
404,472
61,860
433
18,567
—
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(176,176)
(42,783)
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,087
(184,263)
(52,476)
7,445
(50,228)
(11,978)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(131,787) $
(38,250) $
Loss per share of Common Stock
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(2.65) $
(2.65) $
(0.80) $
(0.80) $
Weighted average shares of Common Stock outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,669
49,669
48,013
48,013
195,883
2,034,643
1,395,339
111,578
1,506,917
527,726
423,880
65,865
57,748
7,233
654
(27,654)
9,780
(37,434)
(13,060)
(24,374)
(0.52)
(0.52)
47,306
47,306
See accompanying notes to consolidated financial statements.
57
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)
As of
May 1, 2021
May 2, 2020
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,024 $
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchandise inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textbook rental inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121,072
281,112
28,692
61,933
500,833
89,172
240,456
150,904
4,700
23,248
29,105
8,242
90,851
428,939
40,710
16,177
584,919
97,739
250,837
175,125
4,700
7,805
35,307
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,038,418 $
1,156,432
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 and
52,140 shares, respectively; outstanding, 51,379 and 48,298 shares, respectively
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137,578 $
143,678
92,871
92,513
50,000
372,962
184,780
52,042
127,600
737,384
—
—
533
734,257
(414,614)
(19,142)
301,034
95,420
92,571
75,000
406,669
186,142
46,170
99,700
738,681
—
—
521
732,958
(282,827)
(32,901)
417,751
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,038,418 $
1,156,432
See accompanying notes to consolidated financial statements.
58
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(131,787) $
(38,250) $
(24,374)
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Adjustments to reconcile net loss to net cash flows from operating
activities:
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . .
Impairment loss (non-cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchandise inventory loss and write-off . . . . . . . . . . . . . . . . . . .
Content amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating lease right-of-use assets and liabilities . . . .
Changes in other long-term assets and liabilities and other, net . .
Changes in other operating assets and liabilities, net . . . . . . . . . .
Net cash flows provided by (used in) operating activities . .
Cash flows from investing activities:
52,967
27,630
14,960
5,034
1,112
(15,443)
5,095
(4,367)
9,238
68,443
32,882
61,860
433
—
4,082
1,095
(5,380)
6,638
18,399
947
(58,500)
(8,676)
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . .
(37,223)
(36,192)
Acquisition of business, net of cash and restricted cash acquired .
Changes in other noncurrent assets and other . . . . . . . . . . . . . . . .
—
348
—
(827)
65,865
57,748
—
1,096
1,550
(4,531)
9,017
—
(5,340)
20,760
121,791
(46,420)
(10,000)
800
Net cash flows used in investing activities . . . . . . . . . . . . . .
(36,875)
(37,019)
(55,620)
Cash flows from financing activities:
Proceeds from borrowings under Credit Agreement . . . . . . . . . . .
Repayments of borrowings under Credit Agreement . . . . . . . . . .
Payment of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . .
Sale of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flows provided by (used in) financing activities . .
Net increase (decrease) in cash, cash equivalents, and restricted cash . .
Cash, cash equivalents, and restricted cash at beginning of period . . . .
Cash, cash equivalents, and restricted cash at end of period . . . . . . . . . . $
Changes in other operating assets and liabilities, net:
722,600
600,900
521,200
(719,700)
(559,700)
(584,100)
(1,076)
10,869
(894)
11,799
7,806
9,008
—
—
(1,265)
39,935
(5,760)
14,768
16,814 $
9,008 $
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Merchandise inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textbook rental inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . .
(30,221) $
132,867
12,018
(37,492)
(8,729)
7,320 $
(8,617)
6,291
(4,399)
(59,095)
Changes in other operating assets and liabilities, net . . . . . . $
68,443 $
(58,500) $
(3,395)
—
(1,977)
(68,272)
(2,101)
16,869
14,768
1,814
23,237
778
69
(5,138)
20,760
Supplemental cash flow information:
Cash paid during the period for:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid (net of refunds) . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
6,778 $
6,008 $
6,796 $
(4,141) $
8,589
10,277
See accompanying notes to consolidated financial statements.
59
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Consolidated Statements of Equity
(In thousands)
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Deficit
Treasury Stock
Shares
Amount
Total
Equity
50,032 $
501 $
717,323 $
(220,203)
3,115 $
(29,658) $
467,963
998
9
9,017
(9)
51,030 $
510 $
726,331 $
(24,374)
(244,577)
352
(1,978)
3,467 $
(31,636) $
6,638
(11)
375
(1,265)
(38,250)
52,140 $
521 $
732,958 $
(282,827)
3,842 $
(32,901) $
417,751
1,187
12
5,095
(12)
(3,784)
53,327 $
533 $
734,257 $
(2,308)
14,653
(131,787)
(414,614)
414
(894)
1,948 $
(19,142) $
5,095
—
10,869
(894)
(131,787)
301,034
9,017
—
(1,978)
(24,374)
450,628
6,638
—
(1,265)
(38,250)
Balance at April 28, 2018
Stock-based compensation
expense . . . . . . . . . . . . . . .
Vested equity awards . . . . .
Shares repurchased for tax
withholdings for vested
stock awards . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . .
Balance at April 27, 2019 . .
Stock-based compensation
expense . . . . . . . . . . . . . . .
Shares repurchased for tax
withholdings for vested
stock awards . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . .
Balance at May 2, 2020 . . .
Stock-based compensation
expense . . . . . . . . . . . . . . .
Vested equity awards . . . . .
Sale of treasury shares . . . .
Shares repurchased for tax
withholdings for vested
stock awards . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . .
Balance at May 1, 2021 . . .
Vested equity awards . . . . .
1,110
11
See accompanying notes to consolidated financial statements.
60
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Thousands of dollars, except share and per share data)
Unless the context otherwise indicates, references in these Notes to the accompanying consolidated financial statements to
“we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc., 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.
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 1,417 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational
content and tools within a dynamic omni channel retail environment. Additionally, we offer direct-to-student products and
services to help students study more effectively and improve academic performance.
The strengths of our business include our ability to compete by developing new products and solutions to meet market
needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with
academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable
and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such
capabilities through our recent Fanatics Partnership, increase market share with new accounts, and expand our strategic
opportunities through acquisitions and partnerships. We expect 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 our partnership
with Fanatics Retail Group Fulfillment, LLC, Inc. and Fanatics Lids College, Inc. (collectively referred to herein as the “FLC
Partnership”). Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful
digital marketing tools to drive increased value for customers and accelerate growth of our logo and emblematic general
merchandise business.
We believe the Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS,
are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the
United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts
to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of
their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.
We have three reportable segments: Retail, Wholesale and DSS. 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 5. Segment Reporting.
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 receive unparalleled product assortment, e-
commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our
general merchandise business. Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded
product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with
FLC, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus
stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.
We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day
operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store
maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that
reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of
the emblematic merchandise and gift sections of our campus store websites. FLC manages in-store assortment planning and
merchandising of emblematic apparel, headwear, and gift products for our partner campus stores.
In December 2020, Fanatics, Inc. and Lids Holdings, Inc. jointly made a strategic equity investment in BNED. On April 4,
2021, as contemplated by the merchandising partnership agreement, we closed on the sale of our logo and emblematic general
merchandise inventory to FLC. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we
61
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
recognize commission revenue earned for these sales on a net basis. For additional information, see Part II - Item 8. Financial
Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Merchandise Inventories and Note
6. Equity and Earnings Per Share.
COVID-19 Business Impact
During Fiscal 2021 and the fourth quarter of Fiscal 2020, our business was significantly negatively impacted by the
COVID-19 pandemic, resulting in an unprecedented material decline in revenue. Despite the introduction of COVID-19
vaccines, the pandemic remains highly volatile and continues to evolve. We cannot accurately predict the duration or extent of
the impact of COVID-19 on enrollments, university budgets, athletics and other areas that directly affect our business
operations. Although most schools expect to return to a traditional on-campus environment for learning in the upcoming Fall
semester, as well as host traditional on campus sporting activities, there is still uncertainty about the duration and extent of the
impact of the COVID-19 pandemic. We will continue to assess our operations and will continue to consider the guidance of
local governments to determine when our operations can begin returning to normal levels of business. Please see our Part II -
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion. See
Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Other
Long-Lived Assets related to the impairment loss (non-cash) recognized during Fiscal 2021.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
Our consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s
management, the accompanying consolidated financial statements of the Company contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and
cash flows for the periods reported.
Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. The fiscal year
periods for each of the last three fiscal years consisted of the 52 weeks ended May 1, 2021 (“Fiscal 2021”), 53 weeks ended
May 2, 2020 (“Fiscal 2020”), and 52 weeks ended April 27, 2019 (“Fiscal 2019”).
Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various
schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our
results across periods. For certain of our retail operations, sales are generally highest in the second and third fiscal quarters,
when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and
fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as
MBS sells textbooks and other course materials for retail distribution. Our DSS segment sales and operating profit are realized
relatively consistently throughout the year.
As discussed in Part II - Item 8. Financial Statements and Supplementary Data - Note 1. Organization, our business
experienced an unprecedented and significant impact as a result of the COVID-19 pandemic. The impact of the COVID-19
pandemic on our operations affects the comparability of our results of operations and cash flows.
Consolidation
The results of operations reflected in our consolidated financial statements are presented on a consolidated basis. All
material intercompany accounts and transactions have been eliminated in consolidation.
Acquisition - PaperRater
On August 21, 2018, we acquired the assets of PaperRater in the DSS Segment. PaperRater is a leading website that offers
students a suite of writing services aimed at improving multiple facets of writing. PaperRater's services include plagiarism
detection, grammar feedback, and an AI-based writing score predictor, and are highly complementary to Student Brands'
existing writing service offerings. PaperRater adds millions of pieces of content, from essays and dissertations to personal
narratives and speeches, to our growing digital content library.
We completed the purchase for cash consideration of $10,000 and the transaction was funded from cash on-hand and
availability under our existing Credit Agreement. The final purchase price was allocated primarily as follows: $5,300 intangible
assets (primarily content with an estimated useful life of 5 years) and $4,700 goodwill. This acquisition is not material to our
62
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
consolidated financial statements and therefore, disclosure of pro forma financial information has not been presented. The
results of operations reflect the period of ownership of the acquired business.
Use of Estimates
In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect
the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
We consider all short-term, highly liquid instruments purchased with an original maturity of three months or less to be cash
equivalents.
Restricted Cash
As of May 1, 2021, we had restricted cash of $8,790, comprised of $7,893 in prepaid and other current assets in the
consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the
merchandising partnership agreement and $897 in other noncurrent assets in the consolidated balance sheet related to amounts
held in trust for future distributions related to employee benefit plans. For additional information, see Part II - Item 8. Financial
Statements and Supplementary Data - Note 1. Organization.
As of May 2, 2020, we had restricted cash of $766 included in other noncurrent assets in the consolidated balance sheet for
amounts held in trust for future distributions related to employee benefit plans.
Accounts Receivable
Receivables represent customer, private and public institutional and government billings (colleges, universities and other
financial aid providers), credit/debit card receivables, advances for book buybacks, advertising and other receivables due within
one year. Components of accounts receivables are as follows:
As of
May 1, 2021
May 2, 2020
Trade accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances for book buybacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit/debit card receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
99,583 $
2,901
4,433
14,155
121,072 $
75,702
766
2,177
12,206
90,851
Accounts receivable are presented on our consolidated balance sheets net of allowances. An allowance for doubtful
accounts is determined through an analysis of the aging of accounts receivable and assessments of collectability based on
historical trends, the financial condition of our customers and an evaluation of economic conditions. We write-off uncollectible
trade receivables once collection efforts have been exhausted and record bad debt expenses related to textbook rentals that are
not returned and we are unable to successfully charge the customer. Allowance for doubtful accounts were $3,594, and $1,986
as of May 1, 2021 and May 2, 2020, respectively.
Merchandise Inventories
Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our
inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally
the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based
on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns,
sales below cost, inventory aging and expected demand.
Cost is determined primarily by the retail inventory method for our Retail segment 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. There were no LIFO
adjustments in Fiscal 2021, Fiscal 2020 and Fiscal 2019.
63
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of
inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by
changes in merchandise mix and changes in actual shortage trends.
The Retail Segment fulfillment order is directed first to our wholesale business before other sources of inventory are
utilized. The products that we sell originate from a wide variety of domestic and international vendors. After internal sourcing,
the bookstore purchases textbooks from outside suppliers and publishers. The Retail Segments four largest suppliers, excluding
the supply sourced from our Wholesale Segment, accounted for approximately 35% of our merchandise purchased during the
52 weeks ended May 1, 2021. For our Wholesale Segment, the four largest suppliers, excluding textbooks purchased from
students at our Retail Segment's bookstores, accounted for approximately 32% of merchandise purchases during the 52 weeks
ended May 1, 2021.
On April 4, 2021, as contemplated by the merchandising partnership agreement, we closed on the sale of our logo and
emblematic general merchandise inventory to FLC and received proceeds of $41,773, and recognized a merchandise inventory
loss on the sale of $10,262 in cost of goods sold during the 52 weeks ended May 1, 2021 in the statement of operations for the
Retail Segment. The final inventory purchase price will be determined during the first quarter of Fiscal 2022. For additional
information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 1. Organization.
During the 52 weeks ended May 1, 2021, we also recognized a merchandise inventory write-off of $4,698 in cost of goods
sold in the statement of operations for the Retail Segment related to our initiative to exit certain product offerings and
streamline/rationalize our overall non-logo general merchandise product assortment resulting from the centralization of our
merchandising decision-making during the year.
Textbook Rental Inventories
Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is
consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of
the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included
in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and
recorded in merchandise inventories at its amortized cost.
Cloud Computing Arrangements
We adopted ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU
2018-15") effective April 28, 2019 (first day of Fiscal 2020) prospectively for all implementation costs incurred in a cloud
computing arrangement (or hosting arrangement) that is a service contract. The guidance requires implementation costs
incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract to be amortized to hosting
expense over the term of the arrangement, beginning when the module or component of the hosting arrangement is ready for its
intended use. Prior to adoption, we capitalized certain implementation costs, primarily related to digital and consumer data
platforms, to property and equipment on the consolidated balance sheets and depreciated these implementation costs to
depreciation and amortization expense in the consolidated statement of operations over the term of the service contract once the
asset was ready for its intended use. Subsequent to adoption, implementation costs which were previously capitalized and
depreciated as described above, are included in prepaid expenses and other assets in the consolidated balance sheets and
amortized to selling and administrative expense in the consolidated statement of operations. Implementation costs incurred in
cloud computing arrangements reflected in prepaid and other assets in the consolidated balance sheets were $10,516 and $4,262
as of May 1, 2021 and May 2, 2020, respectively. We had $283, $96, and $0 of amortization of implementation costs in selling
and administrative expense in the consolidated statement of operations, for the 52 weeks ended May 1, 2021, 53 weeks ended
May 2, 2020, and 52 weeks ended April 27, 2019, respectively.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization
is computed using the straight-line method over estimated useful lives. Maintenance and repairs are expensed as incurred,
however major maintenance and remodeling costs are capitalized if they extend the useful life of the asset. We had $35,024,
$42,550, and $44,550, of depreciation expense in the consolidated statement of operations for the 52 weeks ended May 1, 2021,
53 weeks ended May 2, 2020, and 52 weeks ended April 27, 2019, respectively.
64
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Content development costs are primarily related to bartleby.com textbook solutions which was launched in Fiscal 2019.
Content amortization is computed using the straight-line method over estimated useful lives. Amortization of content
development costs is recorded to cost of goods sold. We had $5,034, $4,082, and $1,096, of content amortization expense in the
consolidated statement of operations for the 52 weeks ended May 1, 2021, 53 weeks ended May 2, 2020, and 52 weeks ended
April 27, 2019, respectively.
Components of property and equipment are as follows:
Useful Life
May 1, 2021
May 2, 2020
As of
Property and equipment:
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery, equipment and display fixtures . . . . . . . . . . . . . . . . . . . .
Computer hardware and capitalized software costs . . . . . . . . . . . . . . .
Office furniture and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Content development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a)
3 - 5
(b)
2 - 7
3 - 5
Total property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . .
$
131,784 $
247,979
152,941
62,031
25,526
4,444
624,705
535,533
Total property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
89,172 $
141,602
246,447
145,764
62,209
16,729
3,878
616,629
518,890
97,739
(a) Leasehold improvements are capitalized and depreciated over the shorter of the lease term or the useful life of the
improvements, ranging from 1 - 15 years.
(b) System costs are capitalized and amortized over their estimated useful lives, from the date the systems become operational.
Purchased software is generally amortized over a period of between 2 - 5 years.
Intangible Assets
Amortizable intangible assets as of May 1, 2021 and May 2, 2020 are as follows:
Amortizable intangible assets
Customer relationships . . . . . . . . . . . . . . . . . . . . .
Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortizable intangible assets
Customer relationships . . . . . . . . . . . . . . . . . . . . .
Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining
Life
9 - 13
1 - 2
1
1 - 7
Remaining
Life
10 - 14
2 - 3
2
1 - 8
As of May 1, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Total
263,168 $
19,400
9,500
8,930
300,998 $
(122,565) $
(13,495)
(7,500)
(6,534)
(150,094) $
140,603
5,905
2,000
2,396
150,904
As of May 2, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Total
271,800 $
19,400
9,500
8,930
309,630 $
(113,280) $
(9,615)
(5,900)
(5,710)
(134,505) $
158,520
9,785
3,600
3,220
175,125
$
$
$
$
(a) Other consists of recognized intangibles for non-compete agreements, trade names, and favorable leasehold interests.
65
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
All amortizable intangible assets are being amortized over their useful life on a straight-line basis.
Aggregate Amortization Expense:
For the 52 weeks ended May 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
For the 53 weeks ended May 2, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
For the 52 weeks ended April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Estimated Amortization Expense: (Fiscal Year)
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
After 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17,943
19,310
21,314
16,808
13,429
11,567
11,210
11,207
86,683
For additional information about intangible assets, see Part II - Item 8. Financial Statements and Supplementary Data -
Note 2. Summary of Significant Accounting Policies.
Leases
Effective April 28, 2019, we adopted Accounting Standards Codification ("ASC") Topic 842, Leases, and recognized lease
assets and lease liabilities on the consolidated balance sheet for all operating lease arrangements based on the present value of
future lease payments. 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.
As a result of adopting ASC Topic 842, we recorded an initial operating lease right-of-use asset of $277,006 (inclusive of
prepaid assets and accrued liabilities related to existing leases) and an operating lease liability of $294,727 as of April 28, 2019
for all leases that were not completed and with lease terms in excess of twelve months at that date. For additional information,
see Part II - Item 8. Financial Statements and Supplementary Data - Note 9. Leases.
Impairment of Long-Lived Assets
As of May 1, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets,
amortizable intangibles, and other noncurrent assets of $89,172, $240,456, $150,904, and $29,105, respectively, on our
consolidated balance sheet. As of May 2, 2020, our other long-lived assets include property and equipment, operating lease
right-of-use assets, amortizable intangibles, and other noncurrent assets of $97,739, $250,837, $175,125, and $35,307,
respectively, on our consolidated balance sheet.
These amortizable intangible assets relate primarily to our customer and bookstore relationships with our colleges and
university clients, and technology acquired. For additional information related to amortizable intangibles, see Part II - Item 8.
Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Intangible Assets.
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable and consider market participants in accordance with Accounting Standards
Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. We evaluate the long-lived
assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified.
When evaluating long-lived assets for potential impairment, we first compared the carrying amount of the asset group to the
estimated future undiscounted cash flows. The impairment loss calculation compares the carrying amount of the assets to the
fair value based on estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the
asset’s carrying value in excess of fair value.
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 2020 semester continued into the Spring 2021 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
66
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
have been further curtailed, including many athletic conferences that have been either eliminated or severely restricted. These
combined events impacted the Company’s course materials and general merchandise business. During the third quarter of
Fiscal 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results
of the impairment tests, we recognized an impairment loss (non-cash) of $27,630, $20,506 after-tax, comprised of $5,085,
$13,328, $6,278 and $2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other
noncurrent assets, respectively, on the consolidated statement of operations. The fair value of the impaired long-lived assets
were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of
future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.
The significant assumptions used in the income approach included annual revenue growth rates, gross margin rates and the
estimated relationship of selling and administrative costs to revenue used to estimate the projected cash-flow directly related to
the future operation of the stores as well as the weighted average cost of capital used to calculate the fair value. Significant
assumptions used to determine the fair values of certain operating right-of-use assets included the current market rent and
discount rate. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 7. Fair
Value Measurements.
In the first quarter of Fiscal 2020, we recorded an impairment loss (non-cash) of $433 in the Retail segment related to net
capitalized development costs for a project which are not recoverable. During the fourth quarter of Fiscal 2020, in conjunction
with COVID-19 related campus store closures, we evaluated certain of our long-lived assets associated with our Retail and
Wholesale segments for impairment. Based on the results of the tests, for the Retail segment, we recognized an impairment loss
of $587 related to store-level assets in restructuring and other charges. These long-lived assets were not recoverable and had a
de minimis fair value, as determined using an income approach (Level 3 input), resulting in a non-cash impairment charge for
the full carrying value of those long-lived assets.
During the fourth quarter of Fiscal 2019, in conjunction with the change to reporting segments and the interim goodwill
impairment test noted below, as well as operational changes in certain long-lived asset groups, we evaluated certain of our long-
lived assets for impairment and recognized an impairment loss of $8,466, comprised of $8,138 of intangible assets, primarily
acquired technology, and $328 of property and equipment related to our LoudCloud and Promoversity operations. These long-
lived assets were not recoverable and had a de minimis fair value, as determined using the relief-from-royalty and income
approaches (Level 3 input), resulting in a non-cash impairment charge for the full carrying value of those long-lived assets. See
Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Significant Accounting Policies - Intangible Assets.
Goodwill
The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance
sheets. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as
of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying
amount of the reporting unit exceeds its fair value. As of both May 1, 2021 and May 2, 2020, we had $0, $0 and $4,700 of
goodwill on our consolidated balance sheets related to our Retail, Wholesale, and DSS reporting units, respectively.
During the third quarter of both Fiscal 2021 and Fiscal 2020, we completed our annual goodwill impairment test and
concluded that the fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit;
therefore, no goodwill impairment was recognized.
During the third quarter of Fiscal 2019, we completed our annual goodwill impairment test and concluded that the fair
value of the MBS and DSS reporting units, as they existed at that time, each exceeded their respective carrying values and no
goodwill impairment was recognized. In the fourth quarter of Fiscal 2019, due to the change in our reporting units identified as
a result of the change in our reportable segments, we recognized a total goodwill impairment (non-cash impairment loss) of
$49,282 associated with the MBS reporting unit (as it existed at that date) and allocated $20,538 of goodwill to the Retail
Segment and $28,744 of goodwill to the Wholesale Segment.
As of May 1, 2021, goodwill of approximately $67,015 was deductible for federal income tax purposes. This is higher than
the goodwill balance reflected on the consolidated balance sheet as of May 1, 2021 due to impairment losses recorded in Fiscal
2018 and Fiscal 2019.
Application of the goodwill impairment test requires judgment, including: the identification of reporting units; assignment
of assets and liabilities to reporting units; assignment of goodwill to reporting units; and the determination of the fair value of
each reporting unit. In performing the valuation, we used cash flows that reflected management’s forecasts and discount rates
that included risk adjustments consistent with the current market conditions.
We estimated the fair value of our reporting units using a weighting of fair values derived from the income approach.
67
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Under the income approach, we calculate the fair value of the reporting unit based on the present value of estimated future cash
flows. Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our
operating results, business plans, expected growth rates, cost of capital and tax rates. We also make certain forecasts about
future economic conditions, interest rates, market data, and other observable trends, such as comparable store sales trends,
recent changes in publisher relationships, and development of innovative digital products and services in the rapidly changing
education landscape. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk
associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected
cash flows.
Refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical
Accounting Policies and Estimates for a discussion of key assumptions used in our testing.
Revenue Recognition and Deferred Revenue
Product sales and rentals
The majority of our revenue is derived from the sales of products through our bookstore locations, including virtual
bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from
sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount
that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Part II -
Item 8. Financial Statements and Supplementary Data - Note 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
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.
Effective April 4, 2021, as per the FLC merchandising partnership agreement, logo and emblematic general merchandise sales
were fulfilled by FLC and we recognized commission revenue earned for these sales 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.
68
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
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 direct-to-student
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.
Long-Term Incentive Compensation
We have granted awards in accordance with the Barnes & Noble Education Inc. Equity Incentive Plan (the “Equity
Incentive Plan”). Types of equity awards that can be granted under the Equity Incentive Plan include options, restricted stock,
restricted stock units, performance shares, performance share units, and phantom share units. See Part II - Item 8. Financial
Statements and Supplementary Data - Note 13. Long-Term Incentive Compensation Expense for additional information
regarding expense recognition for each type of award.
Advertising Costs
The costs of advertising are expensed as incurred during the year pursuant to ASC No. 720-35, Advertising Costs.
Advertising costs charged to selling and administrative expenses were $12,916, $10,349, and $10,636 in the consolidated
statement of operations for the 52 weeks ended May 1, 2021, 53 weeks ended May 2, 2020, and 52 weeks ended April 27,
2019, respectively.
Income Taxes
The provision for income taxes includes federal, state and local income taxes currently payable and those deferred because
of temporary differences between the financial statement and tax basis of assets and liabilities. The deferred tax assets and
liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We
regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be necessary. For
additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 14. Income Taxes.
As of May 1, 2021, other long-term liabilities includes $25,335 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 $745 of the LIFO
reserve becoming currently payable. Given recent trends relating to the pricing and rental of textbooks, management believes
69
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
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 2016-13, Financial 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
guidance during the first quarter of Fiscal 2021 with no cumulative-effect adjustment to retained earnings.
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 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 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 5. Segment Reporting for a description of each segment's
product and service offerings.
See Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting
Pronouncements for additional information related to our revenue recognition policies and Part II - Item 8. Financial
Statements and Supplementary Data - Note 5. Segment Reporting for a description of each segments product and service
offerings.
70
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Disaggregation of Revenue
The following table disaggregates the revenue associated with our major product and service offerings.
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Retail
Product Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,157,115 $
1,493,044 $
1,645,357
Rental Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and Other Revenue (a) . . . . . . . . . . . . . . . . . . . . . . .
Retail Total Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
134,150
39,205
179,863
39,985
195,883
47,768
1,330,470 $
1,712,892 $
1,889,008
Wholesale Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
DSS Sales (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Eliminations (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
Total Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
165,825 $
27,374 $
(89,779) $
198,353 $
23,661 $
(83,843) $
223,374
21,339
(99,078)
1,433,890 $
1,851,063 $
2,034,643
(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.
Effective April 4, 2021, as per the FLC merchandising partnership agreement, logo and emblematic general merchandise
sales were fulfilled by FLC and we recognized commission revenue earned for these sales on a net basis.
Contract Assets and Contract Liabilities
Contract assets represent the sale of goods or services to a customer before we have the right to obtain consideration from
the customer. Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when
the rights become unconditional. Contract assets (unbilled receivables) were $0 as of both May 1, 2021 and May 2, 2020 on our
consolidated balance sheets.
Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received
consideration and consists of our deferred revenue liability (deferred revenue). Deferred revenue consists of the following:
• advanced payments from customers related to textbook rental and subscription-based performance obligations, which are
recognized ratably over the terms of the related rental or subscription periods;
• 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 Part II - Item 8.
Financial Statements and Supplementary Data - Note 1. Organization - Partnership with Fanatics and FLC and Note 6.
Equity and Earnings Per Share - Sale of Treasury Shares.
Deferred revenue of $13,469 and $4,670 is recorded within accrued liabilities and other long-term liabilities on our
consolidated balance sheet, respectively, as of May 1, 2021 and $13,373 is recorded within accrued liabilities on our
consolidated balance sheet as of May 2, 2020.
71
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
The following table presents changes in contract liabilities during the fiscal year ended May 1, 2021:
Deferred revenue as of April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Additions to deferred revenue during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions to deferred revenue for revenue recognized during the period . . . . . . . . . . . . . . . . . . . .
Deferred revenue balance as of May 2, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions to deferred revenue during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions to deferred revenue for revenue recognized during the period . . . . . . . . . . . . . . . . . . . .
Deferred revenue balance as of May 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
20,418
193,235
(200,280)
13,373
171,834
(167,068)
18,139
As of May 1, 2021 we expect to recognize $13,469 of the deferred revenue balance within in the next 12 months.
Note 5. 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 this segments operations, see Part I - Item 1.
Business.
Retail Segment
The Retail Segment operates 1,417 college, university, and K-12 school bookstores, comprised of 769 physical bookstores
and 648 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 independently or along
with our merchant partners, and which offer students access to affordable course materials and affinity products, including
emblematic apparel and gifts. The Retail Segment also offers inclusive access programs, in which course materials are offered
at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first
day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities,
including a variety of open educational resource-based courseware.
Wholesale Segment
The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in
the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,300
physical bookstores (including our Retail Segment's 769 physical bookstores) and sources and distributes new and used
textbooks to our 648 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 Segment
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
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.
72
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Eliminations
The eliminations are primarily related to the following intercompany activities:
• The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the
elimination of Retail commissions earned from Wholesale, and
• These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was
purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period
and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the
elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the
end of the current period.
Our international operations are not material and the majority of the revenue and total assets are within the United States.
As of
May 1, 2021
May 2, 2020
Total Assets
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
DSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
800,012 $
199,698
33,937
4,771
867,288
248,464
35,689
4,991
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,038,418 $
1,156,432
As of both May 1, 2021 and May 2, 2020, we had $0, $0 and $4,700 of goodwill on our consolidated balance sheets related
to our Retail, Wholesale, and DSS reporting units, respectively.
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Capital Expenditures
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DSS (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,208 $
28,546 $
5,905
9,662
448
2,126
5,425
95
Total Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
37,223 $
36,192 $
33,008
1,824
11,444
144
46,420
(a) Primarily comprised of content development costs for bartleby.com textbook solutions which was launched in Fiscal 2019.
73
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Summarized financial information for our reportable segments is reported below:
52 weeks ended
May 1, 2021 (a)
53 weeks ended
May 2, 2020 (a)
52 weeks ended
April 27, 2019
Sales:
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Profit
Retail (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . .
Operating Loss
Retail (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Operating Loss (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The following is a reconciliation of segment Operating Loss to
consolidated Income Before Income Taxes
Total Operating Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Loss Before Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
$
$
$
$
1,330,470 $
165,825
27,374
(89,779)
1,433,890 $
1,712,892 $
198,353
23,661
(83,843)
1,851,063 $
1,889,008
223,374
21,339
(99,078)
2,034,643
195,617 $
34,683
22,318
43
252,661 $
39,634 $
5,461
7,763
109
52,967 $
(154,592) $
14,732
(8,132)
(28,376)
192
(176,176) $
383,282 $
39,805
19,313
149
442,549 $
47,099 $
5,963
8,670
128
61,860 $
(24,445) $
12,909
(8,529)
(23,077)
359
(42,783) $
451,871
56,341
20,030
(516)
527,726
51,728
6,014
7,974
149
65,865
3,751
(2,131)
(3,345)
(25,463)
(466)
(27,654)
(176,176) $
(8,087)
(184,263) $
(42,783) $
(7,445)
(50,228) $
(27,654)
(9,780)
(37,434)
(a)
In Fiscal 2021 and Fiscal 2020, our business experienced an unprecedented and significant impact as a result of the
COVID-19 pandemic. The impact of which affects the comparability of our results of operations and cash flows.
(c)
(b) In Fiscal 2021, gross margin includes a merchandise inventory loss and write-off of $14,960 in the Retail Segment. See
Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies -
Merchandise Inventories.
In Fiscal 2021, we recognized an impairment loss (non-cash) of $27,630, $20,506 after-tax, in the Retail segment related
to certain of our store-level long-lived assets. In Fiscal 2020, we recorded an impairment loss (non-cash) of $433 in the
Retail segment related to net capitalized development costs for a project which were not recoverable. In Fiscal 2019, we
recorded an impairment loss (non-cash) of $57,748, comprised of $49,282 of goodwill ($20,538 and $28,744 in our Retail
and Wholesale Segments, respectively).and $8,466 of long-lived assets. See Part II - Item 8. Financial Statements and
Supplementary Data - Note 2. Summary of Significant Accounting Policies.
74
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Note 6. Equity and Earnings Per Share
Equity
Our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share. As of May 1, 2021, 51,378,913 shares of our common stock and 0 shares of
our preferred stock were issued and outstanding. Our common stock trades on the NYSE under the symbol “BNED”.
The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of
the stockholders. Holders of shares of our common stock do not have cumulative voting rights in the election of directors. The
holders of our common stock will be entitled to share ratably in our assets legally available for distribution to our stockholders,
subject to the prior distribution rights of preferred stock, if any, then outstanding. The holders of our common stock do not have
preemptive rights or preferential rights to subscribe for shares of our capital stock.
We have reserved 10,409,345 shares of common stock for future grants in accordance with the Barnes & Noble Education
Inc. Equity Incentive Plan. See Part II - Item 8. Financial Statements and Supplementary Data - Note 13. Long-Term Incentive
Compensation Expense.
Repurchase of Shares
On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50,000, in the aggregate,
of our outstanding common stock. The stock repurchase program is carried out at the direction of management (which may
include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended,
terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general
corporate purposes. During the Fiscal 2021, 2020, and Fiscal 2019, we did not purchase shares under the stock repurchase
program. As of May 1, 2021, approximately $26,669 remains available under the stock repurchase program.
During the Fiscal 2021, Fiscal 2020, and Fiscal 2019, we also repurchased 414,174, 374,733 shares, and 351,043 shares of
our common stock in connection with employee tax withholding obligations for vested stock awards, respectively.
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 consolidated balance sheet) which is expected
to be recognized over the term of the merchandising contracts for Fanatics and FLC, as discussed in Part II - Item 8. Financial
Statements and Supplementary Data - Note 1. Organization - Partnership with Fanatics and FLC.
Dividends
We paid no other dividends to common stockholders during Fiscal 2021, Fiscal 2020 and Fiscal 2019. We do not intend to
pay dividends on our common stock in the foreseeable future.
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 Fiscal 2021, Fiscal 2020 and Fiscal 2019, average shares of
3,387,185, 3,795,603, and 2,939,089, respectively, were excluded from the diluted earnings per share calculation using the two-
class method as their inclusion would have been antidilutive.
75
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
The following is a reconciliation of the basic and diluted earnings per share calculation:
(shares in thousands)
Numerator for basic and diluted earnings per share:
Net loss available to common shareholders . . . . . . . . . . . . . . . . $
Denominator for basic and diluted earnings per share:
Basic and diluted weighted average shares of Common Stock .
Loss per share of Common Stock:
Basic and diluted loss per share of Common Stock . . . . . . . . . . $
Note 7. Fair Values Measurements
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
(131,787) $
(38,250) $
(24,374)
49,669
48,013
47,306
(2.65) $
(0.80) $
(0.52)
In accordance with ASC No. 820, Fair Value Measurements and Disclosures, the fair value of an asset is considered to be
the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A
liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that
would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1—Observable inputs that reflect quoted prices in active markets
Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions
Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair
values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values
because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-
term debt approximates its carrying value.
Non-Financial Assets and Liabilities
Our non-financial assets include goodwill, property and equipment, operating lease right-of-use assets, and intangible
assets. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. We review our
long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets.
During the 52 weeks ended May 1, 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, on the consolidated statement of operations. The fair value of the impaired long-lived assets were determined using an
income approach (Level 3 input), using our best estimates of the amount and timing of future discounted cash flows, based on
historical experience, market conditions, current trends and performance expectations.
During the 53 weeks ended May 2, 2020, we recognized an impairment loss (non-cash) of $433 in the Retail segment
related to net capitalized development costs for a project which are not recoverable.
During the 52 weeks ended April 27, 2019, we recorded an impairment loss (non-cash) of $57,748, comprised of $49,282
of goodwill and $8,466 of long-lived assets, comprised of $8,138 of intangible assets, primarily acquired technology, and $328
of property and equipment related to our LoudCloud and Promoversity operations.
For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of
Significant Accounting Policies.
76
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
The following table shows the fair values of our non-financial assets and liabilities that were required to be remeasured at
fair value on a non-recurring basis and the total impairments recorded as a result of the remeasurement process:
52 weeks ended May 1, 2021
53 weeks ended May 2, 2020
Carrying Value
Prior to
Impairment
Fair Value
Impairment
Loss
(non-cash)
Carrying Value
Prior to
Impairment
Fair Value
Impairment
Loss
(non-cash)
Receivables, net . . . . . . . . . . . $
Property and equipment, net . .
Operating lease right-of-use
assets . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . .
Other noncurrent assets . . . . .
Accrued liabilities . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . $
— $
5,505
26,427
7,723
3,539
—
43,194 $
— $
420
13,099
1,445
600
—
15,564 $
— $
5,085
13,328
6,278
2,939
—
27,630 $
245 $
300
—
—
—
(112)
433 $
— $
—
—
—
—
—
— $
245
300
—
—
—
(112)
433
Non-Financial Liabilities
We granted phantom share units as long-term incentive awards which are settled in cash based on the fair market value of a
share of common stock of the Company at each vesting date. The fair value of the liability for the cash-settled phantom share
unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk-free rate and
volatility assumptions. As of May 1, 2021, we recorded a liability of $3,845 (Level 2 input) which is reflected in accrued
liabilities ($2,509) and other long-term liabilities ($1,336) on the consolidated balance sheet. For additional information, see
Part II - Item 8. Financial Statements and Supplementary Data - Note 13. Long-Term Incentive Compensation Expense.
Note 8. Credit Facility
We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the
lenders committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount
of $400,000 (the “Credit Facility”) effective from the date of the amendment. We have the option to request an increase in
commitments under the Credit Facility of up to $100,000, subject to certain restrictions. Proceeds from the Credit Facility are
used for general corporate purposes, including seasonal working capital needs. The agreement includes an incremental first in,
last out seasonal loan facility (the “FILO Facility”) for a $100,000 incremental facility maintaining the maximum availability
under the Credit Agreement at $500,000. On March 31, 2021, we were granted a waiver to the condition to the current draw
under the FILO Facility.
During the 52 weeks ended May 1, 2021, we borrowed $722,600 and repaid $719,700 under the Credit Agreement, and
had outstanding borrowings of $127,600 and $50,000 under the Credit Facility and FILO Facility, respectively, as of May 1,
2021. During the 53 weeks ended May 2, 2020, we borrowed $600,900 and repaid $559,700 under the Credit Agreement, and
had outstanding borrowings of $99,700 and $75,000 under the Credit Facility and FILO Facility, respectively, as of May 2,
2020. During 52 weeks ended April 27, 2019, we borrowed $521,200 and repaid $584,100 under the Credit Agreement, and
had outstanding borrowings of $33,500 and $100,000 under the Credit Facility and FILO Facility, respectively, as of April 27,
2019. As of both May 1, 2021 and May 2, 2020, we issued $4,759 in letters of credit under the Credit Facility, respectively.
During 52 weeks ended May 1, 2021, we incurred debt issuance costs totaling $1,076 related to the March 31, 2021 Credit
Facility amendment. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other
noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.
The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers
under the Credit Facility. This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company
and a pledge of equity from subsidiaries, exclusive of real estate).
Interest under the Credit Facility accrues, at our election, at a LIBOR or alternate base rate, plus, in each case, an applicable
interest rate margin, which is determined by reference to the level of excess availability under the Credit Facility. Loans will
initially bear interest at LIBOR plus 2.00% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus
1.00% per annum, in the alternative, and thereafter the interest rate will fluctuate between LIBOR plus 2.00% per annum and
LIBOR plus 1.50% per annum (or between the alternate base rate plus 1.00% per annum and the alternate base rate plus
0.50% per annum), based upon the excess availability under the Credit Facility at such time.
77
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Loans under the FILO Facility will bear interest at a rate equal to the LIBOR rate, plus 3.750%. In connection with the
waiver, the applicable margin for credit extensions made under the FILO Facility after March 31, 2021 through the end of 2021
was increased by 0.50% (to 3.75% per annum for LIBO rate loans and 2.75% for base rate loans). The FILO Facility will be
available solely during the draw period each year, from April 1 through July 31. We are required to borrow 100% of the
aggregate commitments under the FILO Facility on April 1 of each year, and the loans must be repaid in full (including interest
and fees) on July 31 of each year. The commitments under the FILO Facility will decrease from $50,000 to $25,000 on August
1, 2021. We will pay a commitment fee of 0.375% on the daily unused portion of the FILO Facility.
The Credit Facility contains customary negative covenants, which limit the Company’s ability to incur additional
indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets,
among other things. In addition, if excess availability under the Credit Facility were to fall below certain specified levels,
certain additional covenants (including fixed charge coverage ratio requirements and a minimum excess availability of the
greater of 10% of the Loan Cap and $25,000 when the FILO is funded) would be triggered, and the lenders would have the
right to assume dominion and control over the Company's cash. The Credit Facility includes an anti-cash hoarding provision,
which limits maximum excess cash allowed to $50,000 when the FILO is funded.
The Credit Facility contains customary events of default, including payment defaults, material breaches of representations
and warranties, covenant defaults, default on other material indebtedness, customary ERISA events of default, bankruptcy and
insolvency, material judgments, invalidity of liens on collateral, change of control or cessation of business. The Credit Facility
also contains customary affirmative covenants and representations and warranties. We are in compliance with all covenants,
representations and warranties under the Credit Facility as of May 1, 2021.
We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-
term vendor financing will provide adequate resources to fund our operating and financing needs for the foreseeable future. Our
future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and
pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store
openings, and any potential acquisitions of other brands or companies including digital properties. To the extent that available
funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of
debt or equity. Our access to, and the availability of, financing in the future will be impacted by many factors, including the
liquidity of the overall capital markets and the current state of the economy. There can be no assurances that we will have
access to capital markets on acceptable terms.
Note 9. Leases
Effective the first quarter of Fiscal 2020 (April 28, 2019), we adopted FASB ASC 842, Leases (Topic 842), which required
us to recognize lease assets and lease liabilities on the consolidated balance sheets for substantially all lease arrangements. Our
portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-
campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We
do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).
We recognize a right of use (“ROU”) asset and lease liability in our consolidated balance sheets for leases with a term
greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease
liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to
fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each
contract year based on the actual sales activity of the leased premises for the most recently completed contract year.
Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable
rates based on: i) a percentage of revenues or sales arising at the relevant premises (“variable commissions”), and/or ii)
operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments,
including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or
over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations
arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material
restrictions or covenants.
We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information
available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated
collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.
78
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
The following table summarizes lease expense:
Variable lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,511 $
108,282
Net lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
177,793 $
73,455
159,289
232,744
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 May 1, 2021:
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
As of
May 1, 2021
Fiscal 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities at period end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
99,657
48,621
40,506
34,748
27,045
70,234
320,811
(43,518)
277,293
Future lease payment obligations related to leases that were entered into, but did not commence as of May 1, 2021, were
not material.
The following summarizes additional information related to our operating leases:
Weighted average remaining lease term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5 years
4.9 %
5.2 years
4.6 %
Supplemental cash flow information:
Cash payments for lease liabilities within operating activities . . . . . . . . . . . . . . . . . .
ROU assets obtained in exchange for lease liabilities from initial recognition . . . . . .
$
$
111,167
123,556
$
$
140,670
131,175
As of
May 1, 2021
As of
May 2, 2020
Note 10. Supplementary Information
Impairment Loss (non-cash)
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of
Long-Lived Assets. For information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of
Significant Accounting Policies.
During the 52 weeks ended May 1, 2021, we recognized an impairment loss (non-cash) of $27,630, $20,506 after-tax, in
the Retail segment comprised of $5,085, $13,328, $6,278 and $2,939 of property and equipment, operating lease right-of-use
assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations.
During the 53 weeks ended May 2, 2020, we recognized an impairment loss (non-cash) of $433 in the Retail segment
related to net capitalized development costs for a project which are not recoverable.
During the 52 weeks ended April 27, 2019, we recorded an impairment loss (non-cash) of $57,748, comprised of $49,282
of goodwill ($20,538 and $28,744 in our Retail and Wholesale Segments, respectively).and $8,466 of long-lived assets,
79
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
comprised of $8,138 of intangible assets, primarily acquired technology, and $328 of property and equipment related to our
LoudCloud and Promoversity operations.
Restructuring and Other Charges
During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling $9,960, comprised
primarily of $5,888 for severance and other employee termination and benefit costs associated with elimination of various
positions as part of cost reduction objectives ($3,246 is included in accrued liabilities in the consolidated balance sheet as of
May 1, 2021), $5,213 for professional service costs related to restructuring, process improvements, the financial advisor
strategic review process, costs related to development and integration associated with Fanatics and FLC partnership agreements
and shareholder activist activities, and $454 related to liabilities for a facility closure, partially offset by a $1,595 in an actuarial
gain related to a frozen retirement benefit plan (non-cash).
During the 53 weeks ended May 2, 2020, we recognized restructuring and other charges totaling $18,567 comprised of
$12,667 for severance and other employee termination and benefit costs associated with several management changes ($10,370
is included in accrued liabilities in the consolidated balance sheet as of May 2, 2020), the elimination of various positions as
part of cost reduction objectives, and professional service costs for process improvements, and $2,695 related to an actuarial
loss for a frozen retirement benefit plan (non-cash), $2,841 for professional service costs for shareholder activist activities, and
$587 related to a store-level asset impairment charge, offset by $223 related to reduction of liabilities for a facility closure.
During the 52 weeks ended April 27, 2019, we recognized restructuring and other charges totaling $7,233 comprised of
$4,554 for severance and transition payments related to senior management changes, other employee termination and benefit
costs, and other charges totaling $2,679, primarily comprised of $2,274 in an actuarial loss for a frozen retirement benefit plan
(non-cash), $281 related to additional liabilities for a facility closure, and a write-off of $118 of existing unamortized debt
issuance costs.
Note 11. Related Party Transactions
MBS Textbook Exchange, LLC
Prior to the acquisition of MBS on February 27, 2017, MBS was considered a related-party as it was majority-owned by
Leonard Riggio, who is a principal owner holding substantial shares of our common stock, and other members of the Riggio
family. Subsequent to the acquisition, the consolidated financial statements include the accounts of MBS and all material
intercompany accounts and transactions have been eliminated in consolidation.
MBS leases its main warehouse and distribution facility located in Columbia, Missouri from MBS Realty Partners L.P.
which is majority-owned by Leonard Riggio, with the remaining ownership by other sellers of MBS. The lease was originally
entered into in 1991 and included a renewal option which extended the lease through September 1, 2023. Based upon a
valuation performed as of the acquisition date, the lease was determined to be favorable from a lessee perspective with below
market rent. Rent payments to MBS Realty Partners L.P. were approximately $1,380 in Fiscal 2021, Fiscal 2020 and Fiscal
2019.
Note 12. Employee Benefit Plans
We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS. MBS
maintains a profit sharing plan covering substantially all full-time employees of MBS. For all plans, we are responsible to fund
the employer contributions directly. Total employee benefit expense for these plans was $0, $5,015, and $6,702 during 52
weeks ended May 1, 2021, 53 weeks ended May 2, 2020, and 52 weeks ended April 27, 2019, respectively.
Effective April 2020, due to the significant impact as a result of COVID-19 related campus store closures, we have
temporarily suspended employer matching contributions into our 401(k) plans through the end of Fiscal 2021.
Note 13. Long-Term Incentive Compensation Expense
We have reserved 10,409,345 shares of our common stock for future grants in accordance with the Barnes & Noble
Education Inc. Equity Incentive Plan. Types of equity awards that can be granted under the Equity Incentive Plan include
options, restricted stock (“RS”), restricted stock units (“RSU”), performance shares (“PS”), performance share units (“PSU”),
and stock options.
80
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite
service period of the award, which is generally three years. We recognize compensation expense for these awards based on the
number of awards expected to vest, which includes an estimated average forfeiture rate. We calculate the fair value of these
awards based on the closing stock price on the date the award was granted. For those awards with market conditions, we have
determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably
over the requisite service period regardless of whether the market condition is satisfied.
Restricted Stock Awards
A RS award is an award of common stock that is subject to certain restrictions during a specified period. Restricted stock
awards are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot
transfer the shares before the restricted shares vest. Shares of unvested restricted stock have the same voting rights as common
stock, are entitled to receive dividends and other distributions thereon (although payment may be deferred until the shares have
vested) and are considered to be currently issued and outstanding. Restricted stock awards will have a minimum vesting period
of one year.
A RSU is a grant valued in terms of our common stock, but no stock is issued at the time of grant. Each restricted stock
unit may be redeemed for one share of our common stock once vested. Restricted stock units are generally subject to forfeiture
if employment terminates prior to the release of the restrictions. The grantee cannot transfer the units except in very limited
circumstances and with the consent of the compensation committee. Shares associated with unvested restricted stock units have
no voting rights but are entitled to receive dividends and other distributions thereon (although payment may be deferred until
the units have vested). Restricted stock units generally vest over a period of three years, but will have a minimum vesting
period of one year.
Performance Share Awards
PS awards and PSU awards were granted to employees. Each PS and PSU may be redeemed for one share of our common
stock once vested and are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The
grantee cannot transfer the PS or PSU awards except in very limited circumstances and with the consent of the compensation
committee. Shares of unvested PSU awards have no voting rights but are entitled to receive dividends and other distributions
thereon (although payment may be deferred until the shares or units, as the case may be, have vested). The PS and PSU awards
will only vest based upon the achievement of pre-established performance goals related to Adjusted EBITDA, segment revenue,
new business, and/or total shareholder return performance achieved over a period of time. The PS and PSU awards will vest
based on company performance and/or market conditions during the subsequent two year period with one additional year of
time-based vesting. The number of PS and PSU awards that will vest range from 0%-150% of the target award based on actual
performance.
Stock Options
For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes
model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte
Carlo simulation model. The fair value models for stock options use assumptions that include the risk-free interest rate,
expected volatility, expected dividend yield and expected term of the options. During Fiscal 2021, we granted 1,250,518 stock
options with an exercise price of $2.46 per stock option, which was the fair market value on the date of grant (Stock Option
Grant #1) and 1,250,518 stock options with an exercise price of $5.00 per stock option (Stock Option Grant #2) granted to
employees. The stock options are exercisable in four equal annual installments commencing one year after the date of grant and
have a ten year term. Holders are not entitled to receive dividends (if any) prior to vesting and exercise of the options.
81
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
The following summarizes the stock option fair value assumptions:
Stock Option Grant
#1
Stock Option Grant
#2
Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.46
$
5.00
Valuation method utilized . . . . . . . . . . . . . . . . . . . . . . . . .
Black-Scholes
Monte Carlo
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected option term . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.27 %
6.2 years
73 %
— %
0.68 %
10.0 years
73 %
— %
Grant date fair value per award . . . . . . . . . . . . . . . . . . . . . $
1.58
$
1.28
The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding
to the expected stock option term. For Stock Option Grant #1, we are permitted to use the simplified approach to estimate the
expected term of the stock options, which typically assumes exercise occurs at the mid-point between the end of the vesting
period and the expiration date. The simplified approach is not allowed for premium-priced options (Stock Option Grant #2),
which were estimated using a stock price multiple, as there is no option exercise history which to base an early exercise option.
The expected stock option term represents the weighted average period of time that stock options granted are expected to be
outstanding, based on vesting schedules and the contractual term of the stock options. Volatility is based on the historical
volatility of the Company’s common stock over a period of time corresponding to the expected stock option term.
Phantom Shares
During Fiscal 2021, we granted 2,397,953 phantom share units granted to employees. Each phantom share represents the
economic equivalent to one share of the Company's common stock and will be settled in cash based on the fair market value of
a share of common stock at each vesting date in an amount not to exceed three times the grant date stock price. The phantom
shares vest and will be settled in three equal installments commencing one year after the date of grant. The fair value of the
phantom shares was determined using the closing stock price on the date of the award less the fair value of the call option
which was estimated using the Black-Scholes model.
The average fair value on the date of grant was determined based on using risk-free rates and annual volatility rates for
each the three tranches within the respective grant as detailed in the table below based upon their vesting dates and remaining
time to maturity. 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 of the respective awards. The
following summarizes the phantom share fair value assumptions:
Phantom Share Grant
#1
Phantom Share Grant
#2
Grant Date Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Stock Price Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.46 $
7.38 $
7.63
22.89
Valuation method utilized . . . . . . . . . . . . . . . . . . . . . . . . .
Black-Scholes
Black-Scholes
Grant Date Risk Free Rate Range . . . . . . . . . . . . . . . . . . .
0.12% - 0.15%
0.07% - 0.31%
Grant Date Volatility Range . . . . . . . . . . . . . . . . . . . . . . . .
86% - 114%
90% - 110%
Average Grant date fair value per award . . . . . . . . . . . . . . $
1.88 $
5.79
As of May 1, 2021, we recorded a liability of $3,845 (Level 2 input) of which $2,509 and $1,336 is reflected in accrued
liabilities and other long-term liabilities on the consolidated balance sheet, respectively.
82
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Long-Term Incentive Compensation Activity
The following table presents a summary of awards activity related to our current Equity Incentive Plan:
Restricted Stock Awards
Restricted Stock Units
Performance Share Units
Balance, May 2, 2020 . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . .
Forfeited (a) . . . . . . . . . . . . . .
Number of
Shares
Weighted
Average
Grant Date
Fair Value
38,096 $
146,343 $
(38,096) $
— $
3.15
2.40
—
—
Number of
Shares
2,250,078 $
243,905 $
(1,210,566) $
(83,566) $
Balance, May 1, 2021 . . . . . . . . . .
146,343 $
2.40
1,199,851 $
Weighted
Average
Grant Date
Fair Value
Number of
Shares
Weighted
Average
Grant Date
Fair Value
4.21
2.40
4.48
4.18
3.56
1,323,767 $
— $
(138,060) $
(590,474) $
595,233 $
4.20
—
7.97
5.34
2.23
Stock Options
Phantom Shares
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Balance, May 2, 2020 . . . . . . . . . .
— $
Granted . . . . . . . . . . . . . . . . .
2,501,036 $
Exercised/Vested . . . . . . . . . .
— $
Forfeited . . . . . . . . . . . . . . . .
(310,046) $
Balance, May 1, 2021 . . . . . . . . . .
2,190,990 $
—
1.43
—
1.43
1.43
— $
2,397,953 $
— $
(193,090) $
2,204,863 $
—
1.97
—
1.88
1.97
(a) The PSUs forfeitures reflect a cumulative adjustment to reflect changes to the expected level of achievement of the
respective grants.
Total fair value of vested share awards since the inception of the Equity Incentive Plan is $42,125.
Long-Term Incentive Compensation Expense
We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as
follows:
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Stock-based awards
Restricted stock expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted stock units expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance shares expense (a) . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance share units expense (a) . . . . . . . . . . . . . . . . . . . . . .
Stock option expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226 $
3,919
120 $
6,253
—
283
667
12
253
—
Sub-total stock-based awards: $
5,095 $
6,638 $
Cash settled awards
Phantom share units expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total compensation expense for long-term incentive awards . . $
3,845 $
8,940 $
— $
6,638 $
110
7,846
87
974
—
9,017
—
9,017
(a) Long-term incentive compensation expense reflects cumulative adjustments to reflect changes to the expected level of
achievement of the respective grants.
Total unrecognized compensation cost related to unvested awards as of May 1, 2021 was $11,099 and is expected to be
recognized over a weighted-average period of 2.28 years.
83
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
Note 14. Income Taxes
For Fiscal 2021, Fiscal 2020, and Fiscal 2019, we had no material revenue or expense in jurisdictions outside the United
States.
Impact of U.S. Tax Reform
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate
income tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign
subsidiaries that were previously tax deferred, among other provisions. In accordance with SAB 118, “Income Tax Accounting
Implications of the Tax Cuts and Jobs Act” (SAB 118), we completed our accounting for the tax effects of the enactment of the
Act within the provisional period as of April 27, 2019. We recorded measurement period adjustments during Fiscal 2019 to
reduce our net deferred tax liability by $3,911, which primarily related to the acceleration of certain deductions as permitted by
the U.S. tax code. The most significant impact of the legislation for the Company was a $20,425 reduction of the value of our
net deferred (which represents future tax liabilities) and long-term tax liabilities as a result of lowering the U.S. corporate
income tax rate from 35% to 21%, which was recorded in Fiscal 2018. We also recorded a liability associated with the one-time
transition tax, however, such amount is not material.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”) was enacted. We have
analyzed the provisions, which provide for a technical correction to allow for full expensing of qualified leasehold
improvements, modifications to charitable contribution and net operating loss limitations (“NOLs”), modifications to the
deductibility of business interest expense, as well as Alternative Minimum Tax (“AMT”) credit acceleration. The most
significant impact of the legislation for the Company was an income tax benefit of $7,164 for the carryback of NOLs to higher
tax rate years, recorded in Fiscal 2021. As of May 1, 2021, we recognized a current income tax receivable for NOL carrybacks
of $30,492 in prepaid and other current assets on the consolidate balance sheet.
Income tax benefits for Fiscal 2021, Fiscal 2020 and Fiscal 2019 are as follows:
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(36,187) $
(846)
(37,033)
(6,100)
(9,343)
(15,443)
(52,476) $
(5,471) $
(1,127)
(6,598)
(4,086)
(1,294)
(5,380)
(11,978) $
(6,494)
(2,035)
(8,529)
(3,681)
(850)
(4,531)
(13,060)
Reconciliation between the effective income tax rate and the federal statutory income tax rate is as follows:
Federal statutory income tax rate (a) . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal income tax benefit . . . . . . . .
Permanent book / tax differences . . . . . . . . . . . . . . . . . . . . . . .
CARES Act NOL Carry-back . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisional remeasurement due to Tax Legislation . . . . . . . . .
Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 weeks ended
May 1, 2021
53 weeks ended
May 2, 2020
52 weeks ended
April 27, 2019
21.0 %
4.4
(0.9)
3.9
—
—
0.1
28.5 %
21.0 %
3.7
(2.9)
—
—
0.5
1.5
23.8 %
21.0 %
6.3
(3.9)
—
10.4
0.3
0.8
34.9 %
84
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
The effective tax rate for Fiscal 2021 is significantly lower as compared to the comparable prior year period due to various
permanent differences and the impact of the CARES Act recorded.
One percentage point on our Fiscal 2021 effective tax rate is approximately $1,843. The permanent book / tax differences
are principally comprised of non-deductible compensation, non-deductible meals and entertainment costs, and federal income
tax credits.
We account for income taxes using the asset and liability method. Deferred taxes are recorded based on differences
between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. The
significant components of our deferred taxes consisted of the following:
Deferred tax assets:
Estimated accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Intangible asset amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
As of
May 1, 2021
May 2, 2020
11,559 $
8,073
1,622
505
65,456
433
16,759
10,810
10,570
125,787
(1,202)
124,585
(33,547)
(61,896)
(5,894)
(101,337)
23,248 $
11,046
7,167
1,511
528
65,334
484
18,438
4,992
8,853
118,353
(1,231)
117,122
(37,864)
(64,695)
(6,758)
(109,317)
7,805
85
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
As of May 1, 2021, we had $0 of unrecognized tax benefits, all of which, if recognized, would affect our effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at April 28, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions for tax positions of the current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reductions for tax positions of prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions for tax positions of the current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reductions for tax positions of prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at May 2, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions for tax positions of the current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reductions for tax positions of prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at May 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
97
—
—
—
(6)
91
—
—
—
(39)
52
—
—
—
(52)
—
Our policy is to recognize interest and penalties related to income tax matters in income tax expense. As of May 1, 2021
and May 2, 2020, we had accrued $0 and $3, respectively, for net interest and penalties. The change in the amount accrued for
net interest and penalties includes $3 in reductions for net interest and penalties recognized in income tax expense in our Fiscal
2021 consolidated statement of operations.
In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some
or all of the deferred tax assets would be realized. In evaluating our ability to utilize our deferred tax assets, we considered all
available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis. We
have recorded a valuation allowance of $1,202 and $1,231 for May 1, 2021 and May 2, 2020, respectively.
As of May 1, 2021, and based on our tax year ended January 2021, we had state net operating loss carryforwards (“NOLs”)
of approximately $196,180 that are available to offset taxable income in our respective taxing jurisdiction beginning in the
current period and that expire beginning in 2030. We had net state tax credit carryforwards totaling $548, which expire
beginning in 2022.
As of May 2, 2021, we recorded $200 of foreign withholding tax related to repatriations of earnings from certain foreign
subsidiaries. If additional earnings in these foreign subsidiaries were repatriated in the future, additional income and
withholding tax expense would be incurred. Additional income and withholding tax expense on any future repatriated earnings
is estimated to be less than $100.
We are subject to U.S. federal income tax, as well as income tax in jurisdictions of each state having an income tax. The
tax years that remain subject to examination are primarily Fiscal 2015 and forward. Some earlier years remain open for a small
minority of states. We retain an income tax liability for periods prior to the Spin-Off from Barnes & Noble, Inc. only for returns
filed on a stand-alone basis.
Note 15. Legal Proceedings
We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary
course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits,
personal injuries and other matters. We record a liability when we believe that it is both probable that a loss has been incurred
and the amount of loss can be reasonably estimated. Based on our current knowledge, we do not believe that there is a
reasonable possibility that the final outcome of any pending or threatened legal proceedings to which we or any of our
subsidiaries are a party, either individually or in the aggregate, will have a material adverse effect on our future financial results.
However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond our
86
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(Thousands of dollars, except share and per share data)
control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect our
business, financial condition, results of operations or cash flows.
Between January 22, 2020 and June 15, 2020, thirteen purported class action complaints were filed in the United States
District Court for the District of Delaware, the United States District Court for the District of New Jersey, and the United States
District Court for the Northern District of Illinois against the Company, along with several publishers, another collegiate
bookstore retailer, and an industry association. The plaintiffs are retailers of collegiate course materials or current or former
college students. Although the specific allegations vary, the plaintiffs generally claim, on their own behalf and on behalf of the
purported classes, that the Company and the other defendants violated Section 1 of the Sherman Act (15 U.S.C. § 1), Section 2
of the Sherman Act (15 U.S.C. § 2), Section 13(a) of the Robinson-Patman Act (15 U.S.C. §13(a)), and various state antitrust
and unfair trade practices laws for alleged activities in connection with inclusive access and the sale of course materials to
universities and their students. The United States Judicial Panel on Multidistrict Litigation has consolidated these and other
related cases in a consolidated proceeding before the Hon. Denise L. Cote of the United States District Court for the Southern
District of New York. On October 16, 2020, three named student plaintiffs filed a Consolidated Amended Complaint, as did the
retailer plaintiffs. The student plaintiffs and retailer plaintiffs each filed a Second Consolidated Amended Complaint on
December 18, 2020, which all Defendants jointly moved to dismiss on January 22, 2021. On June 14, 2021, the Court ordered
both cases dismissed with prejudice. Should Plaintiffs pursue an appeal, we intend to vigorously defend this matter. We are
currently unable to estimate any potential losses.
Note 16. Commitments and Contingencies
We generally operate our physical bookstores pursuant to multi-year school management contracts under which a school
designates us to operate the official school physical bookstore on campus and we provide the school with regular payments that
represent a percentage of store sales and, in some cases, include a minimum fixed guaranteed payment. We account for these
service agreements for our physical bookstores under lease accounting. Prior to the adoption of FASB ASC 842, Leases (Topic
842) ("ASC 842") as discussed below, the excess of such minimum contract expense over actual contract payments (net of
school allowances) was reflected in other long-term liabilities and accrued liabilities in the consolidated balance sheets.
Effective the first quarter of Fiscal 2020 (April 28, 2019), we adopted ASC 842, which requires us to recognize lease assets
and lease liabilities on the consolidated balance sheets for substantially all fixed lease arrangements (excluding variable
obligations) with a term greater than twelve months. For additional information on lease expense and minimum fixed lease
obligations, excluding variable commissions, see Part II - Item 8. Financial Statements and Supplementary Data - Note 9.
Leases.
The expense related to our college and university contracts for physical bookstores, including rent expense, and other
facility costs in the consolidated statements of operations for periods prior to adoption of ASC 842 in Fiscal 2020 are as
follows:
52 weeks ended
April 27, 2019
Minimum contract expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Percentage contract expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
169,131
73,368
242,499
Purchase obligations, which includes information technology contracts and inventory purchase commitments, as of May 1,
2021 are as follows:
Less Than 1 Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1-3 Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3-5 Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14,756
10,994
538
26,288
87
Schedule II—Valuation and Qualifying Accounts
Receivables Valuation and Qualifying Accounts
(In thousands)
For the 52 weeks ended May 1, 2021, 53 weeks ended May 2, 2020, and 52 weeks ended April 27, 2019:
Allowance for Doubtful Accounts
May 1, 2021 . . . . . . . . . . . . . . . . . . . . .
May 2, 2020 . . . . . . . . . . . . . . . . . . . . .
April 27, 2019 . . . . . . . . . . . . . . . . . . .
Sales Returns Reserves
May 1, 2021 . . . . . . . . . . . . . . . . . . . . .
May 2, 2020 . . . . . . . . . . . . . . . . . . . . .
April 27, 2019 . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
Balance at
beginning
of period
Charge
(recovery) to
costs and
expenses
Write-offs
Balance at
end
of period
1,986 $
2,135 $
2,083 $
4,600 $
1,710 $
2,670 $
(2,992) $
(1,859) $
(2,618) $
3,594
1,986
2,135
Balance at
beginning
of period
Addition
Charged to
Costs
Deductions
Balance at
end
of period
5,063 $
5,282 $
5,229 $
145,595 $
186,305 $
197,799 $
(147,327) $
(186,524) $
(197,746) $
3,331
5,063
5,282
All other schedules are omitted because the conditions requiring their filing do not exist, or because the required
information is provided in the consolidated financial statements, including the notes thereto.
88
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with accountants on accounting and financial disclosure.
Item 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Management of the Company established and maintains disclosure controls and procedures that are designed to ensure that
material information relating to the Company and its subsidiaries required to be disclosed in the reports that are filed or
submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the
SEC’s rules and forms. Such information is accumulated and communicated to management, including the Company’s Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of the
end of the period covered by this report, the Company’s management conducted an evaluation (as required under Rules
13a-15(b) and 15d-15(b) under the Exchange Act), under the supervision and with the participation of the principal executive
officer and principal financial officer, of the Company’s “disclosure controls and procedures” (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act). A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material
information otherwise required to be set forth in the Company’s periodic reports. Based on management’s evaluation, and
considering the items noted below, the principal executive officer and principal financial officer concluded that, as of the end of
the period covered by this report, the Company’s disclosure controls and procedures are effective at the reasonable assurance
level.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined
in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of,
the principal executive and principal financial officer and effected by the board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and (iii) that receipts and expenditures of
the Company are being made only in accordance with authorizations of management and directors of the Company; and (iv)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial
Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting
based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO 2013 framework). Based upon the Company’s evaluation under this framework,
management concluded that the Company’s internal control over financial reporting was effective as of May 1, 2021.
The effectiveness of internal control over financial reporting was audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report included on page 91.
(c) Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the most recent quarter
ended May 1, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
89
MANAGEMENT’S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS
The management of Barnes & Noble Education, Inc. is responsible for the contents of the Consolidated Financial Statements,
which are prepared in conformity with accounting principles generally accepted in the United States of America. The
Consolidated Financial Statements necessarily include amounts based on judgments and estimates. Financial information
elsewhere in the Annual Report is consistent with that in the Consolidated Financial Statements.
The Company maintains a comprehensive accounting system, which includes controls designed to provide reasonable assurance
as to the integrity and reliability of the financial records and the protection of assets. An internal audit staff is employed to
regularly test and evaluate both internal accounting controls and operating procedures, including compliance with the
Company’s Code of Business Conduct and Ethics. The Audit Committee of the Board of Directors, composed of directors who
are not members of management, meets regularly with management, the independent registered public accountants and the
internal auditors to ensure that their respective responsibilities are properly discharged.
Ernst & Young LLP and the internal auditors have full and free independent access to the Audit Committee. The role of Ernst
& Young LLP, an independent registered public accounting firm, is to provide an objective examination of the Consolidated
Financial Statements and the underlying transactions in accordance with the standards of the Public Company Accounting
Oversight Board. The report of Ernst & Young LLP appears on page 91 of this report on Form 10-K for the year ended May 1,
2021.
OTHER INFORMATION
The Company has included the Section 302 certifications of the Chief Executive Officer and the Chief Financial Officer of the
Company as Exhibits 31.1 and 31.2 to its Annual Report on Form 10-K for Fiscal 2020 filed with the Securities and Exchange
Commission, and the Company will submit to the New York Stock Exchange a certificate of the Chief Executive Officer of the
Company certifying that he is not aware of any violation by the Company of New York Stock Exchange corporate governance
listing standards.
90
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Barnes & Noble Education, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Barnes & Noble Education, Inc. and subsidiaries’ internal control over financial reporting as of May 1,
2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Barnes & Noble Education,
Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of
May 1, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of May 1, 2021 and May 2, 2020, the related consolidated
statements of operations, equity and cash flows for each of the three years in the period ended May 1, 2021, and the related
notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated June 30, 2021 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Iselin, New Jersey
June 30, 2021
91
Item 9B. OTHER INFORMATION
None.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
Information regarding our executive officers is incorporated by reference herein from the discussion under Part I - Item 1.
Business - Executive Officers of this Annual Report on Form 10-K. The remaining information with respect to directors,
executive officers, the code of ethics and corporate governance of the Company is incorporated herein by reference to the
Company’s definitive Proxy Statement relating to the Company’s 2021 Annual Meeting of Stockholders to be filed with the
SEC within 120 days of the Company’s fiscal year ended May 1, 2021 (the “Proxy Statement”).
The information with respect to compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the
Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation is incorporated herein by reference to the Proxy Statement.
The information with respect to compensation of directors is incorporated herein by reference to the Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table sets forth equity compensation plan information as of May 1, 2021:
Number of
securities to be
issued upon
exercise
of outstanding
options, warrants
and rights
Weighted-average
exercise price of
outstanding
options,
warrants and
rights
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
in column (a))
(a)
(b)
(c)
Plan Category
Equity compensation plans
approved by security holders . . .
Equity compensation plans not
approved by security holders . . .
4,132,417 $
N/A
Total . . . . . . . . . . . . . . . . . . . . . . . .
4,132,417 $
2.20
N/A
2.20
702,461
N/A
702,461
The information with respect to security ownership of certain beneficial owners and management is incorporated herein by
reference to the Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information with respect to certain relationships and related transactions and director independence is incorporated
herein by reference to the Proxy Statement.
92
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information with respect to principal accountant fees and services is incorporated herein by reference to the Proxy
Statement.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report:
1. Consolidated Financial Statements of Barnes & Noble Education, Inc.:
Included in Part II of this Report:
Consolidated Statements of Operations for the years ended May 1, 2021, May 2, 2020, and April 27, 2019
Consolidated Balance Sheets as of May 1, 2021 and May 2, 2020
Consolidated Statements of Cash Flows for the years ended May 1, 2021, May 2, 2020, and April 27, 2019
Consolidated Statements of Equity for the years ended May 1, 2021, May 2, 2020, and April 27, 2019
Notes to Consolidated Financial Statements, for the years ended May 1, 2021, May 2, 2020, and April 27, 2019
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on the consolidated financial
statements of Barnes & Noble Education, Inc. for the years ended May 1, 2021, May 2, 2020, and April 27, 2019
2. Financial Statement Schedules of Barnes & Noble Education, Inc.:
Included in Part II of this report: Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not significant or not required, or because the required
information is included in the financial statement notes thereto.
3. Exhibits:
Exhibit
Number
EXHIBIT INDEX
Exhibit Description
Articles of Incorporation and By-Laws.
3.1 . . . . . . .
3.2 . . . . . . .
3.3 . . . . . . .
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Barnes & Noble
Education, Inc., filed as Exhibit 3.1 to Report on Form 8-K filed with the SEC on September 25, 2017, and
incorporated herein by reference.
Amended and Restated By-Laws, as Amended, Effective as of September 21, 2017, of Barnes & Noble
Education, Inc., filed as Exhibit 3.2 to Report on Form 8-K filed with the SEC on September 25, 2017, and
incorporated herein by reference.
Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock of Barnes
& Noble Education, Inc., dated as of March 25, 2020, filed as Exhibit 3.1 to Report on Form 8-K filed with
the SEC on March 26, 2020, and incorporated herein by reference.
Instruments Defining the Rights of Securities; Description of Registrant’s Securities.
4.1 . . . . . . .
Description of Capital Stock
Material contracts.
10.1 . . . . . .
Credit Agreement, dated as of August 3, 2015, by and among Barnes & Noble Education, Inc., as borrower,
the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents party thereto,
filed as Exhibit 10.5 to Report on Form 8-K filed with the SEC on August 3, 2015, and incorporated herein
by reference.
10.2 . . . . . .
First Amendment to Credit Agreement, dated as of February 27, 2017, by and among the Company, the
Lenders and the Agent, filed as Exhibit 10.1 to Report on Form 8-K filed with the SEC on February 28, 2017,
and incorporated herein by reference.
93
10.3 . . . . . .
10.4 . . . . . .
Second Amendment, Waiver and Consent to Credit Agreement, dated as of March 1, 2019, among Barnes &
Noble Education, Inc., as the lead borrower, the other borrowers party thereto, the lenders party thereto and
Bank of America, N.A., as administrative agent and collateral agent for the lenders, to the Credit Agreement,
dated as of August 3, 2015, filed as Exhibit 10.1 to Report on Form 8-K filed with the SEC on March 5,
2019, and incorporated herein by reference.
Third Amendment and Waiver to Credit Agreement and First Amendment to Security Agreement, dated as of
March 31, 2021, among Barnes & Noble Education, Inc., as the lead borrower, the other borrowers party
thereto, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent for
the lenders, to the Credit Agreement, dated as of August 3, 2015, filed as Exhibit 10.1 to Report on Form 8-K
filed with the SEC on April 5, 2021, and incorporated herein by reference.
10.5 . . . . . .
Trademark License Agreement, dated as of August 2, 2015, between Barnes & Noble Education, Inc. and
Barnes & Noble, Inc., filed as Exhibit 10.4 to Report on Form 8-K filed with the SEC on August 3, 2015, and
incorporated herein by reference.
10.6 . . . . . .
Barnes & Noble Education, Inc. Amended and Restated Equity Incentive Plan filed as Exhibit 10.1 to Report
on Form 10-Q filed with the SEC on December 4, 2018, and incorporated herein by reference.
10.7 . . . . . .
Barnes & Noble Education, Inc. Form of Performance Unit Award Agreement, filed as Exhibit 10.5 to
Report on Form S-1/A filed with the SEC on June 29, 2015, and incorporated herein by reference.
10.8 . . . . . .
Barnes & Noble Education, Inc. Form of Performance-Based Stock Unit Award Agreement, filed as Exhibit
10.6 to Report on Form S-1/A filed with the SEC on June 29, 2015, and incorporated herein by reference.
10.9 . . . . . .
Barnes & Noble Education, Inc. Form of Performance-Based Stock Unit Award Agreement, filed as Exhibit
10.2 to Report on Form 10-Q filed with the SEC on December 4, 2018, and incorporated herein by reference.
10.10 . . . . .
Barnes & Noble Education, Inc. Form of Performance Share Award Agreement, filed as Exhibit 10.1 to
Report on Form 10-Q filed with the SEC on September 8, 2016, and incorporated herein by reference.
10.11 . . . . .
Barnes & Noble Education, Inc. Form of Restricted Stock Unit Award Agreement, filed as Exhibit 10.7 to
Report on Form S-1/A filed with the SEC on June 29, 2015, and incorporated herein by reference.
10.12 . . . . .
Barnes & Noble Education, Inc. Form of Restricted Stock Unit Award Agreement, filed as Exhibit 10.3 to
Report on Form 10-Q filed with the SEC on December 4, 2018, and incorporated herein by reference.
10.13 . . . . .
Barnes & Noble Education, Inc. Form of Restricted Stock Award Agreement, filed as Exhibit 10.8 to Report
on Form S-1/A filed with the SEC on June 29, 2015, and incorporated herein by reference.
10.14 . . . . .
Barnes & Noble Education, Inc. Form of Restricted Stock Award Agreement, filed as Exhibit 10.4 to Report
on Form 10-Q filed with the SEC on December 4, 2018, and incorporated herein by reference.
10.15 . . . . .
Barnes & Noble Education, Inc. Form of Phantom Share Units Award Agreement.
10.16 . . . . .
Barnes & Noble Education, Inc. Form of Non-Qualified Stock Options Award Agreement.
10.17 . . . . .
Amended and Restated Employment Agreement, dated July 19, 2017, between Barnes & Noble Education,
Inc. and Michael P. Huseby filed as Exhibit 10.2 to Report on Form 8-K filed with the SEC on July 20, 2017,
and incorporated herein by reference.
10.18 . . . . .
Letter Agreement, dated as of April 1, 2020 between the Company and Michael P. Huseby, filed as Exhibit
10.1 to Report on Form 8-K filed with the SEC on April 2, 2020, and incorporated herein by reference.
10.19 . . . . .
Amendment to Employment Agreement, dated September 24, 2020, with Michael P. Huseby, filed as Exhibit
10.1 to Report on Form 8-K filed with the SEC on September 29, 2020, and incorporated herein by reference.
10.20 . . . . .
10.21 . . . . .
10.22 . . . . .
10.23 . . . . .
Amended and Restated Employment Letter, effective as of June 19, 2019, between Barnes & Noble
Education, Inc. and Kanuj Malhotra, filed as Exhibit 10.23 to Annual Report on Form 10-K filed with the
SEC on June 25, 2019, and incorporated herein by reference.
Resignation Letter, dated November 9, 2020, between Barnes & Noble Education, Inc. and Kanuj Malhotra,
filed as Exhibit 10.1 to Report on Form 8-K filed with the SEC on November 12, 2020, and incorporated
herein by reference.
Retention Letter, dated February 28, 2019, between Barnes & Noble Education, Inc. and Michael C. Miller,
filed as Exhibit 10.4 to Report on Form 10-Q filed with the SEC on March 5, 2019, and incorporated herein
by reference.
Amended and Restated Employment Letter, effective as of June 19, 2019, between Barnes & Noble
Education Inc., Barnes & Noble College Booksellers, LLC and Michael C. Miller, filed as Exhibit 10.24 to
Annual Report on Form 10-K filed with the SEC on June 25, 2019, and incorporated herein by reference.
94
10.24 . . . . .
Amended and Restated Employment Letter, effective as of June 19, 2019, between Barnes & Noble
Education, Inc. and Thomas D. Donohue, filed as Exhibit 10.26 to Annual Report on Form 10-K filed with
the SEC on June 25, 2019, and incorporated herein by reference.
10.25 . . . . .
Form of Director and/or Officer Indemnification Agreement, filed as Exhibit 10.14 to Report on Form S-1/A
filed with the SEC on June 29, 2015, and incorporated herein by reference.
10.26 . . . . .
Cooperation Agreement, dated July 20, 2020, by and among Barnes & Noble Education, Inc. and
Outerbridge Capital Management, LLC and certain of its affiliates signatory thereto, filed as Exhibit 10.1 to
Report on Form 8-K filed with the SEC on July 21, 2020, and incorporated herein by reference.
Other.
21.1 . . . . . .
List of subsidiaries of Barnes & Noble Education, Inc.
23.1 . . . . . .
Consent of Ernst & Young LLP
31.1 . . . . . .
Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 . . . . . .
Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 . . . . . .
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of
1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 . . . . . .
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of
1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS . . .
XBRL Instance Document
101.SCH . .
XBRL Taxonomy Extension Schema Document
101.CAL . .
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF . .
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB . .
XBRL Taxonomy Extension Label Linkbase Document
101.PRE . . .
XBRL Taxonomy Extension Presentation Linkbase Document
104 . . . . . . .
Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)
Item 16. FORM 10-K SUMMARY
None.
95
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Barnes & Noble Education,
Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
BARNES & NOBLE EDUCATION, INC.
(Registrant)
By:
Date: June 30, 2021
/s/ Michael P. Huseby
Michael P. Huseby
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Michael P. Huseby
Michael P. Huseby
/s/ Thomas D. Donohue
Thomas D. Donohue
/s/ Seema C. Paul
Seema C. Paul
/s/ Emily C. Chiu
Emily C. Chiu
/s/ Daniel A. DeMatteo
Daniel A. DeMatteo
/s/ David G. Golden
David G. Golden
/s/ Zachary D. Levenick
Zachary D. Levenick
/s/ Lowell W. Robinson
Lowell W. Robinson
/s/ John R. Ryan
John R. Ryan
/s/ Jerry Sue Thornton
Jerry Sue Thornton
/s/ David A. Wilson
David A. Wilson
Chairman and Chief Executive Officer and Director
(Principal Executive Officer)
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
June 30, 2021
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
96
CERTIFICATION BY THE
CHIEF EXECUTIVE OFFICER PURSUANT TO
17 CFR 240.13a-14(a)/15(d)-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Michael P. Huseby, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Barnes & Noble Education, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: June 30, 2021
By:
/s/ Michael P. Huseby
Michael P. Huseby
Chairman & Chief Executive Officer
Barnes & Noble Education, Inc.
CERTIFICATION BY THE
CHIEF FINANCIAL OFFICER PURSUANT TO
17 CFR 240.13a-14(a)/15(d)-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Thomas D. Donohue, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Barnes & Noble Education, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: June 30, 2021
By:
/s/ Thomas D. Donohue
Thomas D. Donohue
Executive Vice President, Chief Financial Officer
Barnes & Noble Education, Inc.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the annual report of Barnes & Noble Education, Inc. (the “Company”) on Form 10-K for the period
ended May 1, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P.
Huseby, Chairman & Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to Rule
13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Michael P. Huseby
Michael P. Huseby
Chairman & Chief Executive Officer
Barnes & Noble Education, Inc.
June 30, 2021
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or
otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by
Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the annual report of Barnes & Noble Education, Inc. (the “Company”) on Form 10-K for the period
ended May 1, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas D.
Donohue, Executive Vice President, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Thomas D. Donohue
Thomas D. Donohue
Executive Vice President, Chief Financial Officer
Barnes & Noble Education, Inc.
June 30, 2021
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or
otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by
Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
CORPORATE
INFORMATION
Barnes & Noble Education, Inc.
• LEADERSHIP TEAM •
Michael P. Huseby
Chairman and Chief Executive Officer
Thomas D. Donohue
Executive Vice President, Chief Financial Officer
David Henderson
Executive Vice President, Strategic Services
President, MBS Textbook Exchange, LLC
Michael C. Miller
Executive Vice President, Corporate Development
and Affairs, and Chief Legal Officer, Secretary
Jonathan Shar
Executive Vice President, Retail
Seema C. Paul
Senior Vice President, Chief Acc
ounting Officer
Barnes & Noble Education, Inc.
• BOARD OF DIRECTORS •
Michael P. Huseby
Chairman and Chief Executive Officer, BNED
John R. Ryan
Lead Independent Director, BNED
President and Chief Executive Officer,
Center for Creative Leadership
Emily C. Chiu
Managing Principal, Square, Inc.
Daniel A. DeMatteo
Former Executive Chairman, GameStop Corp.
David G. Golden
Managing Partner, Revolution Ventures
Zachary D. Levenick
Managing Partner and Board Member,
The Holdsworth Group, LLC
Lowell W. Robinson
Board Member, PhenixFIN Corporation
Jerry Sue Thornton
Chief Executive Officer,
DreamCatcher Educational Consulting
David A. Wilson
Former President and Chief Executive Officer,
Graduate Management Admission Council
STOCKHOLDER
INFORMATION
• STOCK PERFORMANCE •
The Stock Price Performance Chart below compares the cumulative
stockholder return of the Company with that of the S&P 500 Index
and the Dow Jones US Specialty Retailers Index. The comparison
assumes $100 was invested on April 30, 2016 in shares of our
common stock and in each of the indices show, and assumes that
all of the dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN *
Among Barnes & Noble Education, the S&P 500 Index
and the Dow Jones US Specialty Retailers Index
$300
$250
$200
$150
$100
$50
$0
4/16
4/17
4/18
4/19
4/20
4/21
Barnes & Noble Education
S&P 500
Dow Jones US Specialty Retailers
*$100 invested on 4/30/16 in stock or index, including reinvestment of dividends.
Fiscal year ending May 1, 2021.
Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved.
Copyright© 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
Corporate Headquarters
Barnes & Noble Education, Inc.
120 Mountain View Blvd., Basking Ridge, NJ 07920
Common Stock
New York Stock Exchange, Symbol: BNED
Stock Transfer & Registrar
Computershare Investor Services
P.O. BOX 505000
Louisville, KY 40233-5000
Stockholder Inquiries: 866-484-7158 (Non-US: 781-575-2758)
Independent Registered Public Accountants
Ernst & Young LLP
99 Wood Avenue South, Iselin, NJ 08830
Investor Relations
Investor Relations Department
Inquiries: investors@bned.com
Stockholder Services
General financial information, as well as copies of our
Annual Reports and Form 10-K and Form 10-Q documents,
can be obtained free of charge on the Company’s corporate
website: www.bned.com.
Annual Stockholder Meeting
Virtual Meeting
September 23, 2021 – 9:00 a.m. ET
Serving all who work to elevate
their lives through education
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