As of February 16, 2018, 46,914,466August 27, 2021, 51,587,330 shares of Common Stock, par value $0.01 per share, were outstanding.

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Unless the context otherwise indicates, references in these Notes to the accompanying condensed consolidated financial statements to “we,” “us,” “our”, and “the Company” refer to Barnes & Noble Education or "BNED", Inc., a Delaware corporation. References to “Barnes & Noble College” or "BNC" 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, a Delaware corporation.LLC.

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 29, 2017,May 1, 2021, which includes consolidated financial statements for the Company for each of the three fiscal years ended April 29, 2017, April 30, 2016 andMay 1, 2021, May 2, 20152020 and April 27, 2019 (Fiscal 2017,2021, Fiscal 20162020 and Fiscal 2015,2019, respectively) and the unaudited condensed consolidated financial statements in our Form 10-Q for the 13 weeks ended July 29, 2017 and the unaudited condensed consolidated financial statements in our Form 10-Q for the 26 weeks ended October 28, 2017..

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for higher educationcollege and university campuses and K-12 institutions across the United States,States. We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education services. Through its Barnes & Noble College (“BNC”)solutions. We operate 1,429 physical, virtual, and MBS Textbook Exchange (“MBS”) subsidiaries, Barnes & Noble Education operates 1,480 physical and virtualcustom bookstores and servesserve more than 6 million students, delivering essential educational content and tools within a dynamic omnichannel retail environment. We have two reportable segments: BNC and MBS.

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 merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. (“FLC”) (collectively referred to herein as the “FLC 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 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.

Our condensed consolidated financial statements reflect our condensed consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. These condensed consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by GAAP.

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the 13 and 39 weeks ended January 28, 2017 excludetiming of the financialstart 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 of MBS and Student Brands.

In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Merchandise inventories, 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.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 BNCRetail segment and last-in first out, or “LIFO”, method for our MBSWholesale segment. Our textbook inventories, for BNCRetail and MBS,Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

For our BNC segment,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.

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 rent both physical and digital textbooks. 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.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.period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price.price which is determined at the time of the buyout. In these instances, we would accelerate any remaining deferred rental revenue at the point of sale.

We provide direct-to-studentdo 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 is primarily derived from DSS segment subscription-based writing services. Subscriptionservice 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 period.transfers to the customer. The majority of subscriptions sold are one month in duration.

Sales taxes collected fromPartnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers are excluded from reported revenues. Allcustomers. 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 our sales areeach distinct performance obligation to the total value of the contract. The revenue is recognized as revenueeach 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 “net” basis, including sales in connectionstated period of time or the number of impressions delivered for contracts with any periodic promotions offereda fixed number of impressions.

Our cost of sales primarily includeincludes 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 stock-basedlong-term incentive plan compensation expense and general office expenses, such as executive oversight, merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business. Shared-service costs such as human resources, benefits, training, legal, andtreasury, information technology, as well asand various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

Contract assets represent the periodsale of ownershipgoods 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 July 31, 2021, August 1, 2020 and May 1, 2021 on our condensed consolidated balance sheets.

Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue). Deferred revenue consists of the acquired business. Identified intangible assets includefollowing:

Corporate Services represents unallocated shared-service costs which include the financial results of MBScorporate level expenses and all material intercompany accountsother governance functions, including executive functions, such as accounting, legal, treasury, information technology, and transactions have been eliminated in consolidation. human resources.

The eliminations are primarily related to the following intercompany activities:

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 3913 weeks ended January 27, 2018,July 31, 2021, we did not repurchase shares of our common stock. AsCommon Stock under the program and as of January 27, 2018,July 31, 2021, approximately $26,669 remains available under the stock repurchase program.

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. During the 13 and 39 weeks ended January 27, 2018,July 31, 2021 and August 2, 2020, average shares of 2,8443,665,606 and 2,4772,665,779 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively. During the 13 and 39 weeks ended January 28, 2017, average shares of 339 and 395 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

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

On August 3, 2015, we and certain of our subsidiaries, entered intoWe 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-year5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400,000 (the “Credit Facility”). The Company has 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.

During the 3913 weeks ended January 27, 2018,July 31, 2021, we borrowed $481,600$71,720 and repaid $528,200$45,620 under the Credit Agreement. The net totalAgreement, with $203,700 of outstanding borrowings of $113,000 as of January 27, 2018 isJuly 31, 2021, comprised of $153,700 and $50,000 under the Credit Facility and FILO Facility, respectively. During the 13 weeks ended August 1, 2020, we borrowed $186,700 and repaid $126,840 under the Credit Agreement, with $234,560 of outstanding borrowings as of August 1, 2020, comprised entirely of outstanding borrowings under the Credit Facility. As of January 27, 2018,both July 31, 2021 and August 1, 2020, we have issued $4,759 in letters of credit under the Credit Facility.