BARNES & NOBLE INC (Form: 10-K, Received: 06/23/2016 17:19:15)

Large Accelerated Filer x

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company ¨

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-12302

Barnes & Noble, Inc.

(Exact name of registrant as specified in its Charter)


Delaware		06-1196501
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

122 Fifth Avenue, New York, NY		10011
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 633-3300

Securities registered pursuant to Section 12(b) of the Act:


Title of Class		Name of Exchange on which registered
Common Stock, $0.001 par value per share		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 x No ¨

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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant was approximately $818,450,838 based upon the closing market price of $12.99 per share of Common Stock on the New York Stock Exchange as of October 31, 2015.

As of May 31, 2016, 73,866,102 shares of Common Stock, par value $0.001 per share, were outstanding, which number includes 64,414 shares of unvested restricted stock that have voting rights and are held by members of the Board of Directors and the Company’s employees.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2016 Annual Meeting of Shareholders are incorporated by reference into Part III.

Portions of the Registrant’s Annual Report to Shareholders for the fiscal year ended April 30, 2016 are incorporated by reference into Parts II and IV.

TABLE OF CONTENTS


		Page
	PART I

Item 1.	Business		4

Item 1A.	Risk Factors		18

Item 1B.	Unresolved Staff Comments		28

Item 2.	Properties		29

Item 3.	Legal Proceedings		29

	PART II

Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		32

Item 6.	Selected Financial Data		33

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		34

Item 8.	Financial Statements and Supplementary Data		34

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		34

Item 9A.	Controls and Procedures		34

Item 9B.	Other Information		35

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance		36

Item 11.	Executive Compensation		36

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		36

Item 13.	Certain Relationships and Related Transactions, and Director Independence		36

Item 14.	Principal Accounting Fees and Services		37

	PART IV

Item 15.	Exhibits and Financial Statement Schedules		37

	Signatures		47

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and similar expressions, as they relate to Barnes & Noble or the management of Barnes & Noble, identify forward-looking statements.

Such statements reflect the current views of Barnes & Noble with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for Barnes & Noble’s products, low growth or declining sales and net income due to various factors, including store closings, higher-than-anticipated or increasing costs, including with respect to store closings, relocation, occupancy (including in connection with lease renewals) and labor costs, the effects of competition, the risk of insufficient access to financing to implement future business initiatives, risks associated with data privacy and information security, risks associated with Barnes & Noble’s supply chain, including possible delays and disruptions and increases in shipping rates, various risks associated with the digital business, including the possible loss of customers, declines in digital content sales, risks and costs associated with ongoing efforts to rationalize the digital business and the digital business not being able to perform its obligations under the Samsung commercial agreement and the consequences thereof, the risk that financial and operational forecasts and projections are not achieved, the performance of Barnes & Noble’s online and other initiatives, effects on Barnes & Noble and its remaining businesses resulting from the separation of Barnes & Noble Education, unanticipated adverse litigation results or effects, potential infringement of Barnes & Noble’s intellectual property by third parties or by Barnes & Noble of the intellectual property of third parties, and other factors, including those factors discussed in detail in Item 1A, “Risk Factors,” and in Barnes & Noble’s other filings made hereafter from time to time with the Securities and Exchange Commission (SEC).

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 Barnes & Noble or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Barnes & Noble undertakes 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.

PART I

ITEM 1. BUSINESS

General

Barnes & Noble, Inc. (Barnes & Noble or the Company), one of the nation’s largest booksellers, ¹ is a leading content and commerce company providing customers easy and convenient access to trade books and other content across its multi-channel distribution platform. As of April 30, 2016, the Company operates 640 bookstores in 50 states, maintains an eCommerce site, develops digital reading products and operates one of the largest digital bookstores. Barnes & Noble is utilizing the strength of its retail footprint in combination with its online and digital businesses to provide an omni-channel experience for its customers, fulfilling its commitment to offer customers any book, anytime, anywhere and in any format.

Barnes & Noble Retail (B&N Retail) operates 640 retail bookstores, primarily under the Barnes & Noble Booksellers ^® trade name, and includes the Company’s eCommerce site. B&N Retail also includes Sterling Publishing Co., Inc. (Sterling or Sterling Publishing), a leader in general trade book publishing. The NOOK segment represents the Company’s digital business, offering digital books and magazines for sale and consumption online, NOOK ^® ² reading devices, co-branded NOOK ^® tablets and reading software for iOS, Android and Windows 8. The Company employed approximately 28,000 full- and part-time employees as of April 30, 2016. Including seasonal and temporary employees, the Company employed approximately 29,000 employees as of April 30, 2016.

The Company’s principal business is the sale of trade books (generally hardcover and paperback consumer titles), mass market paperbacks (such as mystery, romance, science fiction and other popular fiction), children’s books, eBooks and other digital content, NOOK ^® and related accessories, bargain books, magazines, gifts, café products and services, educational toys & games, music and movies direct to customers through its bookstores or on www.barnesandnoble.com. The Company also offers a textbook rental option to its customers through barnesandnoble.com. The Company offers its customers a full suite of textbook options—new, used, digital and rental.

In recent years, B&N Retail has experienced declining sales trends due to secular industry challenges, leading to lower comparable store sales, decreased online sales and store closures. The Company also experienced expense deleverage due to the declining sales trends. More recently, the Company has benefited from favorable book industry trends, including a plateauing of the growth of the digital book market. In addition, the Company implemented successful merchandising initiatives, which improved traffic and sales trends, especially in its non-book businesses. The Company has also increased the size and scope of its in-store events, which now include nationwide campaigns, such as Get Pop-Cultured and Maker Faire that increase traffic and sales and further reinforce Barnes & Noble as a community center. The Company is also improving the navigation and discovery of titles that takes place in its stores to make books easier to find amongst its vast selection, which it believes will improve performance. The Company launched a new eCommerce platform in June 2015 and expected certain challenges that generally accompany any new site launch. However, the challenges were greater than anticipated and reduced website traffic, as well as conversion. The Company has been and continues to implement website fixes to increase traffic and conversion on the site, as well as improve the overall user experience. BN.com is an important component of the Company’s omni-channel strategy, and it believes that in the long term the new platform will enable it to be more competitive in the marketplace.

¹	Based upon sales reported in trade publications and public filings.

²	Any references to NOOK ^® include the Company’s Samsung Galaxy Tab ^® S2 NOOK ^® , Samsung Galaxy Tab E NOOK ^® , Samsung Galaxy Tab ^® 4 NOOK ^® 7.0 device and NOOK GlowLight ^TM Plus, each of which includes the trademark symbol ( ^® or ™, as applicable) even if a trademark symbol is not included.

NOOK represents the Company’s digital business, which includes the Company’s eBookstore, digital newsstand and sales of NOOK ^® devices and accessories. The underlying strategy of the NOOK business is to offer customers any digital book, newspaper or magazine, anytime, on any device. The Company remains committed to delivering to customers the best digital bookstore experience, providing easy access to Barnes & Noble’s expansive digital collection of over four million eBooks, digital magazines and newspapers, while rationalizing its existing cost structure.

The Company believes that through its omni-channel offering it is well positioned to improve results and is focused on executing four key objectives to achieve success, including: significantly reducing NOOK losses; growing online and bookstore sales; reducing B&N Retail’s selling and administrative expenses; and growing its Membership program.

The Company has recently taken a number of actions that will help further reduce NOOK losses, including the exit of its Apps and video businesses, as well as the exit of the U.K. eBook market. The Company also entered into an agreement with Bahwan CyberTek (BCT) to outsource certain NOOK functions, including cloud management and development support for NOOK software, which enabled it to close its Santa Clara, CA and Taipei offices. Additionally, the Company entered into a revised partnership with Samsung to bring new co-branded devices to market.

To grow online and bookstore sales, the Company will utilize the strong Barnes & Noble brand and retail footprint to attract customers to its omni-channel offerings. The Company has also recently created individual bookstore social media accounts, which enable its booksellers to communicate directly with customers at the local level to inform them of all the great events and merchandise available at their local Barnes & Noble stores. The Company is also focused on increasing traffic through store events, and conversion through improved navigation and discovery throughout the store, including a customer friendly and more intuitive organization of books and improved signage for easier browsing within and across sections.

The Company is reviewing its organizational design and exploring process improvements to look for opportunities to reduce B&N Retail’s selling and administrative expenses.

The Company’s Membership program provides the Company with valuable data and insights into its customer base, enabling the Company to have deeper relationships and more meaningful communications with its Members. The Company plans to leverage its unique assets to increase the appeal of the program and the loyalty of its Members.

Separation of B&N Education, Inc.

On February 26, 2015, Barnes & Noble announced plans for the legal and structural separation of Barnes & Noble Education, Inc. (Barnes & Noble Education or B&N Education) (formerly known as NOOK Media Inc.) from Barnes & Noble into an independent public company (the Spin-Off).

On July 14, 2015, the Barnes & Noble board of directors (the Board) approved the final distribution ratio and declared a pro rata dividend of the outstanding shares of B&N Education common stock, which resulted in the complete legal and structural separation of the two companies. The distribution was subject to the satisfaction or waiver of certain conditions as set forth in B&N Education’s Registration Statement on Form S-1, which was filed with the SEC on February 26, 2015 and was amended on April 29, 2015, June 4, 2015, June 29, 2015, July 13, 2015, July 14, 2015 and July 15, 2015.

On August 2, 2015, Barnes & Noble completed the Spin-Off of Barnes & Noble Education and distributed, on a pro rata basis, all of the shares of B&N Education common stock to the Company’s

stockholders of record as of July 27, 2015. These Barnes & Noble stockholders of record as of July 27, 2015 received a distribution of 0.632 shares of B&N Education common stock for each share of Barnes & Noble common stock held as of the record date. Immediately following the completion of the Spin-Off, the Company’s stockholders owned 100% of the outstanding shares of common stock of B&N Education. Following the Spin-Off, B&N Education operates as an independent public company and as the parent of Barnes & Noble College, trading on New York Stock Exchange under the ticker symbol “BNED”.

In connection with the separation of B&N Education, the Company and B&N Education entered into a Separation and Distribution Agreement on July 14, 2015 and several other ancillary agreements on August 2, 2015. These agreements govern the relationship between the Company and B&N Education after the separation and allocate between the Company and B&N Education various assets, liabilities, rights and obligations following the separation, including employee benefits, intellectual property, information technology, insurance and tax-related assets and liabilities. The agreements also describe the Company’s future commitments to provide B&N Education with certain transition services.

This Spin-Off is expected to be a non-taxable event for Barnes & Noble and its shareholders, and Barnes & Noble’s U.S. shareholders (other than those subject to special rules) generally will not recognize gain or loss as a result of the distribution of B&N Education shares.

Discontinued Operations of B&N Education, Inc.

The Company has recognized the separation of B&N Education in accordance with Accounting Standards Codification (ASC) 205-20, Discontinued Operations . As such, the historical results of Barnes & Noble Education for fiscal 2015 have been adjusted to include pre-spin B&N Education results and separation-related costs and exclude corporate allocations with B&N Retail, and have been classified as discontinued operations. Additionally, discontinued operations for fiscal 2016 include investment banking fees (as they directly relate to the Spin-Off), as well as pre-spin B&N Education results and separation-related costs and exclude corporate allocation adjustments with B&N Retail.

Resignation Charge

On August 2, 2015, Michael P. Huseby resigned from the Company’s Board of Directors and as Chief Executive Officer of the Company, which was contingent upon the successful separation of B&N Education. In connection with his termination of employment, he received severance payments based on the terms of his employment agreement with the Company, effective as of January 7, 2014. Under the terms of his employment agreement, upon a resignation for “Good Reason”, Mr. Huseby was entitled to receive lump-sum severance equal to two times the sum of (a) annual base salary, (b) the average annual incentive compensation paid to the named executive officer with respect to the preceding two completed years and (c) the cost of benefits. In addition, Mr. Huseby was entitled to accelerated vesting of the equity-based awards granted pursuant to his employment agreement. As a result, Mr. Huseby received a severance payment equal to $7.7 million and additionally was entitled to 300,000 shares of the Company’s common stock pursuant to the accelerated vesting of the equity-based awards, which were settled for cash based on the closing price of the Company’s common stock on the record date of the Spin-Off in an amount equal to $8.0 million. The net cash payments related to Mr. Huseby’s resignation totaled $15.7 million during the second fiscal quarter ended October 31, 2015. Mr. Huseby’s 300,000 shares have been ratably expensed from the initial grant date, thereby reducing the total resignation charge to $10.5 million, which was recorded within selling and administrative expenses during the second fiscal quarter ended October 31, 2015.

History of B&N Education, Inc.

On September 30, 2009, Barnes & Noble acquired Barnes & Noble College Booksellers, LLC (B&N College) from Leonard and Louise Riggio. From that date until October 4, 2012, B&N College

was wholly owned by Barnes & Noble Booksellers, Inc. B&N Education was initially incorporated under the name NOOK Media Inc. in July 2012 to hold Barnes & Noble’s B&N College and NOOK digital businesses. On October 4, 2012, Microsoft Corporation (Microsoft) acquired a 17.6% non-controlling preferred membership interest in B&N Education’s subsidiary B&N Education, LLC (formerly NOOK Media LLC) (the LLC), and through B&N Education, Barnes & Noble maintained an 82.4% controlling interest of the B&N College and NOOK digital businesses.

On January 22, 2013, Pearson Education, Inc. (Pearson) acquired a 5% non-controlling preferred membership interest in the LLC, entered into a commercial agreement with the LLC relating to the B&N College business and received warrants to purchase an additional preferred membership interest in the LLC.

On December 4, 2014, B&N Education re-acquired Microsoft’s interest in the LLC in exchange for cash and common stock of Barnes & Noble and the Microsoft commercial agreement was terminated effective as of such date. On December 22, 2014, B&N Education also re-acquired Pearson’s interest in the LLC and certain related warrants previously issued to Pearson. In connection with these transactions, Barnes & Noble entered into contingent payment agreements with Microsoft and Pearson providing for additional payments upon the occurrence of certain events, including upon a sale of the NOOK digital business. As a result of these transactions, Barnes & Noble owned, prior to the Spin-Off, 100% of B&N Education.

On May 1, 2015, B&N Education distributed to Barnes & Noble all of the membership interests in B&N Education’s NOOK digital business. As a result, B&N Education ceased to own any interest in the NOOK digital business, which remains a wholly owned subsidiary of Barnes & Noble.

Samsung Commercial Agreement

On June 4, 2014, NOOK Digital, LLC (NOOK Digital) (formerly NOOK Media Sub and barnesandnoble.com llc), a wholly owned subsidiary of B&N Education as of such date and a subsidiary of Barnes & Noble, entered into a commercial agreement (Agreement) with Samsung Electronics America, Inc. (Samsung) relating to tablets.

Pursuant to the Agreement, NOOK Digital, after good faith consultations with Samsung and subject to Samsung’s agreement, selected Samsung tablet devices under development to be customized and co-branded by NOOK Digital. Such devices are produced by Samsung. The co-branded NOOK ^® tablet devices are sold by NOOK Digital through Barnes & Noble retail stores, www.barnesandnoble.com and www.nook.com.

Under the Agreement, NOOK Digital committed to purchase a minimum of 1,000,000 NOOK ^® -Samsung co-branded devices from Samsung within 12 months after the launch of the initial co-branded device, which occurred on August 20, 2014. The 12-month period was automatically extended by three months due to the quantity of sales of such co-branded devices through December 31, 2014, and the period was further extended until June 30, 2016 by an amendment executed by the parties on March 7, 2015.

NOOK Digital and Samsung have agreed to coordinate customer service for the co-branded NOOK ^® devices and have both agreed to a license of intellectual property to promote and market the devices. Additionally, Samsung has agreed to fund a marketing fund for the co-branded NOOK ^® devices at the initial launch and for the duration of the Agreement.

The Agreement had a two-year term, with certain termination rights, including termination (i) by NOOK Digital for a Samsung material default; (ii) by Samsung for a NOOK Digital material default; (iii) by NOOK Digital if Samsung fails to meet its shipping and delivery obligations in any material respect on a timely basis; and (iv) by either party upon insolvency or bankruptcy of the other party.

On May 17, 2016, NOOK Digital and Samsung amended the Agreement, pursuant to which NOOK Digital agreed to a minimum purchase commitment of devices with a total retail value equal to

$10.0 million during the first twelve months after launch of any co-branded NOOK tablet device. The amended minimum purchase commitment replaces all prior purchase commitments contained in the Agreement by NOOK Digital and Samsung.

Series J Preferred Stock

On August 18, 2011, the Company entered into an investment agreement between the Company and Liberty GIC, Inc. (Liberty), pursuant to which the Company issued and sold to Liberty, and Liberty purchased, 204,000 shares of the Company’s Series J Preferred Stock, par value $0.001 per share (Preferred Stock), for an aggregate purchase price of $204.0 million in a private placement exempt from the registration requirements of the 1933 Act. The shares of Preferred Stock were convertible, at the option of the holders, into shares of Common Stock representing 16.6% of the Common Stock outstanding as of August 29, 2011 (after giving pro forma effect to the issuance of the Preferred Stock) based on the initial conversion rate. The initial conversion rate reflected an initial conversion price of $17.00 and was subject to adjustment in certain circumstances. The initial dividend rate for the Preferred Stock was equal to 7.75% per annum of the initial liquidation preference of the Preferred Stock paid quarterly and subject to adjustment in certain circumstances.

On April 8, 2014, Liberty sold the majority of its shares to qualified institutional buyers in reliance on Rule 144A under the Securities Act and had retained an approximate 10% stake of its initial investment. As a result, Liberty no longer had the right to elect two preferred stock directors to the Company’s Board. Additionally, the consent rights and pre-emptive rights, to which Liberty was previously entitled, ceased to apply.

On June 5, 2015, the Company entered into conversion agreements with five beneficial owners (Series J Holders) of its Preferred Stock, pursuant to which each of the Series J Holders had agreed to convert (Conversion) shares of Preferred Stock it beneficially owned into shares of the Company’s common stock, par value $0.001 per share (Company Common Stock), and additionally received a cash payment from the Company in connection with the Conversion.

On July 9, 2015, the Company completed the Conversion. Pursuant to the terms of the Conversion Agreements, the Series J Holders converted an aggregate of 103,995 shares of Preferred Stock into 6,117,342 shares of Company Common Stock, and made an aggregate cash payment to the Series J Holders of $3.7 million plus cash in lieu of fractional shares in connection with the Conversion.

On July 10, 2015, the Company gave notice of its exercise of the right to force conversion of all outstanding shares of its Senior Convertible Redeemable Series J Preferred Stock into Company Common Stock pursuant to Section 9 of the Certificate of Designations, Preferences and Relative Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of Series J Preferred Stock, dated as of August 18, 2011 (the Forced Conversion). The effective date of the Forced Conversion was July 24, 2015. On the date of the Forced Conversion, each share of Series J Preferred Stock was automatically converted into 59.8727 shares of Company Common Stock, which included shares of Company Common Stock reflecting accrued and unpaid dividends on Series J Preferred Stock. Each holder of Series J Preferred Stock received whole shares of Company Common Stock and a cash amount in lieu of fractional shares of Company Common Stock.

As a result of the transactions described above, all shares of Series J Preferred Stock were retired by the Company and are no longer outstanding.

The Company was incorporated in Delaware in 1986.

Segments

The Company identifies its operating segments based on the way the business is managed (focusing on the financial information distributed) and the manner in which the chief operating decision maker interacts with other members of management. The Company’s two operating segments are B&N Retail and NOOK.

B&N Retail

This segment includes 640 bookstores as of April 30, 2016, primarily under the Barnes & Noble Booksellers trade name. These Barnes & Noble stores generally offer a comprehensive trade book title base, a café, and departments dedicated to Juvenile, Toys & Games, DVDs, Music & Vinyl, Gift, Magazine, Bargain products and a dedicated NOOK ^® area. The stores also offer a calendar of ongoing events, including author appearances and children’s activities. The B&N Retail segment also includes the Company’s eCommerce website, www.barnesandnoble.com, and its publishing operation, Sterling Publishing.

Barnes & Noble stores range in size from 3,000 to 60,000 square feet depending upon market size, with an overall average store size of 26,000 square feet. In fiscal 2016, the Company reduced the Barnes & Noble store base by approximately 229,000 square feet, bringing the total square footage to 16.9 million square feet, a net reduction of 1.3% from fiscal 2015. The Company did not open any new Barnes & Noble stores in fiscal 2016.

The Company believes that the key elements contributing to the success of B&N Retail are:

Proximity to Customers. The Company’s strategy has been to increase its share of the consumer book market, as well as to increase the size of the market through a market clustering strategy. As of April 30, 2016, Barnes & Noble had stores in 161 of the total 210 Designated Market Area markets. In 67 of the 161 markets, the Company has only one Barnes & Noble store. The Company believes its bookstores’ proximity to its customers strengthens its market position and increases the value of its brand. Most Barnes & Noble stores are located in high-traffic areas with convenient access to major commercial thoroughfares and ample parking. Most stores offer extended shopping hours seven days a week.

Extensive Title Selection. Each Barnes & Noble store features an authoritative selection of books, ranging from 22,000 to 160,000 titles. The comprehensive title selection is diverse and reflects local interests and regional titles and authors’ works. Bestsellers typically represent between approximately 4% and 6% of Barnes & Noble store sales. Complementing this extensive on-site selection, all Barnes & Noble stores provide customers with access to the millions of books available to online shoppers at www.barnesandnoble.com by offering an option to have the book sent to the store or shipped directly to the customer. Additionally, the website allows customers to purchase over four million eBooks, newspapers and magazines. The Company believes that its tremendous selection, including many otherwise hard-to-find titles, builds customer loyalty.

Store Design and Ambiance . Many of the Barnes & Noble stores create a comfortable atmosphere with ample public space, a café offering sandwiches, soups and bakery items, among other things, and public restrooms. The cafés, for which the Starbucks Corporation is the sole provider of coffee products, foster the image of the stores as a community meeting place. In addition, the Company continues to develop and introduce new product line extensions, such as proprietary gifts and B&N Educator Program, providing education tools for teachers, librarians and parents. These offerings and services have helped to make many of the stores neighborhood institutions.

NOOK ^® Boutique/Counter. The Company is utilizing its traditional retail bookstores to promote NOOK ^® via NOOK counters, NOOK Boutiques™, and NOOK Digital Shops™ within the bookstores. These dedicated areas provide customers the ability to see, feel, and experiment with NOOK ^® , speak to knowledgeable booksellers, and receive pre- and post-sales customer support. The Company offers NOOK ^® owners Always Free NOOK ^® Support in all of its retail bookstores, as well as free Wi-Fi connectivity to enjoy the Read In Store™ feature to read NOOK Books™ for free. These acclaimed

devices, which provide a fun, easy-to-use and immersive reading experience, include the Samsung Galaxy Tab ^® S2 NOOK ^® , Samsung Galaxy Tab ^® E NOOK ^® , Samsung Galaxy Tab ^® 4 NOOK ^® 7.0 device and NOOK GlowLight™ Plus. The NOOK ^® devices have also opened up an additional market for NOOK ^® -related accessories such as stands, covers, lights, and other items. Through our NOOK in Education program, the retail bookstores provide support and service to schools and educators who deploy NOOK ^® devices in their classrooms.

Educational Toys & Games Department. Barnes & Noble continues to expand in the educational toys and games category with a uniquely curated offering of best in class products from around the world. With its focus on education, customers can browse and engage in monthly hands-on learning events celebrating self-expression through arts and crafts, critical thinking skills through construction, even exploring scientific discoveries. The Educational Toys & Games Department at Barnes & Noble offers an experiential retail space where parents and gift-givers can shop in three distinct ways: by brand, by category and by age.

Specialty Games, Hobby & Collectibles . Barnes & Noble, in recognition of its customers’ interests, passions and pastimes, has expanded and will continue to explore the specialty, hobby, craft and collectibles category bringing a recognizable, authentic merchandising assortment together to complement its growing specialty games and puzzle area.

Music and Movies & TV Departments. Many of the Barnes & Noble stores have Music and Movies & TV departments, which offer CDs, Vinyl LPs, DVDs and Blu-ray discs. These departments range in size from approximately 300 to 8,000 square feet and typically stock approximately 12,000 titles. The Company’s DVD and Blu-ray selection focuses on current and classic movies, documentaries, fitness and instructional titles, British TV series and movies, and foreign films. The music selection is tailored to the tastes of the Company’s customers, centering on classical music, jazz, pop rock, and show tunes. The Company also offers a strong selection of Vinyl titles, available in all stores, along with turntables.

Discount Pricing. Barnes & Noble stores employ an aggressive nationwide discount pricing strategy and offer special promotions throughout the year, including Buy 2, Get the 3 ^rd Free promotions on kids’ books, Special Value Purchase promotions with purchases in kids’ books and toys & games, Buy 1, Get 1 50% Off on select B&N Collectible Editions and up to 50% off promotions on DVDs & Blu-ray discs. The Barnes & Noble Member Program offers members greater discounts and other benefits for products and services as well as exclusive offers and promotions via email or direct mail. The Company’s website, www.barnesandnoble.com, also utilizes a competitive model that includes everyday low pricing as well as various promotional offerings designed for members and non-members alike and enables the Company to offer better value to its customers. The Barnes & Noble Kids’ Club Program offers free rewards and special offers to participants and invites children to celebrate their birthday within the retail bookstores.

Community Business Development. The Company’s retail bookstores host a variety of national and local events, which feature the many products and services it offers. Each store plans its own community-based calendar of events, including author appearances, children’s storytimes, poetry readings and book discussion groups. In addition, the Company hosts a number of national campaigns around various themes or audiences such as Get Pop-Cultured with Barnes & Noble, Summer Reading, My Favorite Teacher Essay Contest, Educator Appreciation Days, the annual Holiday Book Drive, which provides books to at risk children in the communities the stores serve, and Maker Faire, all of which increase traffic and sales and further reinforce Barnes & Noble as a community center.

The Company also provides fund-raising opportunities through its Bookfair program for schools and local non-profit arts and literacy organizations, as well as a Holiday Gift Wrap program, which allows non-profit organizations to gain exposure and raise funds while wrapping gifts inside the stores. The Company believes its community business development programs encourage customer loyalty, drives sales and traffic into its stores and provides positive publicity and media coverage.

Merchandising and Marketing . The Company’s merchandising strategy for its Barnes & Noble stores is to be the authoritative community bookstore carrying an extensive selection of titles in all subjects, including an extensive selection of titles from small independent publishers and university presses. Each Barnes & Noble store features an extensive selection of books from 22,000 to 160,000 unique titles, of which approximately 28,000 titles are common to virtually all stores. Each store is tailored to reflect the lifestyles and interests of the area’s customers.

Product Master, the Company’s proprietary inventory database, has approximately 17.1 million titles. It includes approximately 7.3 million active titles and provides each store with comprehensive title selections. By enhancing the Company’s existing merchandise replenishment systems, Product Master allows the Company to achieve higher in-stock positions and better productivity at the bookstore level through efficiencies in receiving, cashiering and returns processing. Complementing this extensive on-site selection, all Barnes & Noble stores provide customers with access to the millions of books available to online shoppers at www.barnesandnoble.com by offering an option to have the book sent to the store or shipped directly to the customer.

The Company has a multi-channel eCommerce marketing strategy that deploys various merchandising programs and promotional activities to drive traffic to both its stores and website. At the center of this eCommerce program is the Company’s website, www.barnesandnoble.com. The website serves as both the Company’s direct-to-home delivery service and as an important broadcast channel and advertising medium for the Barnes & Noble brand. For example, the online store locator at www.barnesandnoble.com receives millions of customer visits each year providing store hours, directions, information about author events and other in-store activities. Similarly, in Barnes & Noble stores, NOOK ^® customers can access free Wi-Fi connectivity, enjoy the Read In Store™ feature to browse many complete eBooks for free.

The Company launched a new eCommerce platform in June 2015 and expected certain challenges that generally accompany any new site launch. However, the challenges were greater than anticipated and reduced traffic, as well as conversion. The Company has been and continues to implement website fixes to increase traffic and conversion on the site, as well as improve the overall user experience. BN.com is an important component of the Company’s omni-channel strategy and it believes that in the long term the new platform will enable it to be more competitive in the marketplace.

Another example of a multi-channel initiative is the Barnes & Noble MasterCard ^® , a co-brand credit card issued by Barclaycard. Card members earn 5% back on purchases at any Barnes & Noble stores or online at www.barnesandnoble.com. They also earn points for every dollar spent on purchases where MasterCard is accepted (excluding Barnes & Noble purchases); when they reach 2,500 points, they automatically earn a $25 Barnes & Noble gift card. Customers can apply in any B&N store or online at BN.com. Upon approval, they can use the new account to receive the 5% statement credit rebate on their B&N purchase, as well as a $25 Barnes & Noble Gift Card after first use of the account.

The Company believes that its website complements its bookstores in many ways. It not only serves as a marketing tool, it offers convenient shopping alternatives for its customers.

Store Locations and Properties. The Company’s experienced real estate personnel select sites for new Barnes & Noble stores after an extensive review of demographic data and other information relating to market potential, bookstore visibility and access, available parking, surrounding businesses, compatible nearby tenants, competition and the location of other Barnes & Noble stores. Most stores are located in high-visibility areas adjacent to main traffic corridors in strip shopping centers, freestanding buildings and regional shopping malls. The real estate personnel continue to focus on renegotiating leases as they expire.

The B&N Retail segment includes 640 bookstores as of April 30, 2016, primarily under the Barnes & Noble Booksellers trade name. The number of Barnes & Noble stores located in each state as of April 30, 2016 is listed below:


STATE	NUMBER OF STORES	STATE	NUMBER OF STORES
Alabama	7	Montana	4
Alaska	2	Nebraska	4
Arizona	15	Nevada	4
Arkansas	5	New Hampshire	4
California	71	New Jersey	24
Colorado	15	New Mexico	3
Connecticut	12	New York	39
Delaware	2	North Carolina	21
Florida	40	North Dakota	3
Georgia	19	Ohio	18
Hawaii	2	Oklahoma	5
Idaho	3	Oregon	7
Illinois	27	Pennsylvania	26
Indiana	12	Rhode Island	3
Iowa	7	South Carolina	10
Kansas	4	South Dakota	1
Kentucky	7	Tennessee	8
Louisiana	7	Texas	51
Maine	1	Utah	10
Maryland	13	Vermont	1
Massachusetts	17	Virginia	24
Michigan	19	Washington	18
Minnesota	17	West Virginia	1
Mississippi	3	Wisconsin	11
Missouri	12	Wyoming	1

Sterling Publishing

Sterling Publishing is a leading publisher of non-fiction trade titles. Founded in 1949, Sterling publishes a wide range of non-fiction and illustrated books and kits across a variety of imprints, in categories such as health & wellness, music & popular culture, food & wine, crafts & photography, puzzles & games, coloring books and history & current affairs, as well as a large children’s line. Sterling, with a solid backlist and robust value publishing program, has a title base of approximately 16,000 eBooks and print books. In addition, Sterling also distributes approximately 1,000 titles on behalf of client publishers.

Operations

The Company has seasoned management teams for its retail stores, including those for real estate, merchandising and store operations. Field management includes regional vice presidents and district managers supervising multiple store locations.

The Barnes & Noble management team is led by experienced management in both traditional product lines and in digital eCommerce. The Barnes & Noble management team employs highly skilled professionals with both media expertise and supply chain management skills. This combination ensures a positive customer experience regardless of a customer’s preference for a physical product or a digital one.

Each Barnes & Noble store generally employs a store manager, two assistant store managers, two merchandise managers, a café manager, a receiving manager and on average 30 full- and part-time booksellers. Many Barnes & Noble stores also employ a full-time community relations manager. The large employee base provides the Company with experienced booksellers to fill new positions in the Company’s Barnes & Noble stores. The Company anticipates that a significant percentage of the personnel required to manage its stores will continue to come from within its existing operations.

Field management for all of the Company’s bookstores, including regional vice presidents, district managers and store managers, participate in an incentive program tied to store productivity. The Company believes that the compensation of its field management is competitive with that offered by other specialty retailers of comparable size.

Barnes & Noble has in-store training programs providing specific information needed for success at each level, beginning with the entry-level positions of bookseller. District managers participate in annual training and merchandising conferences. Store managers are generally responsible for training other booksellers and employees in accordance with detailed procedures and guidelines prescribed by the Company utilizing a blended learning approach, including on-the-job training, eLearning, facilitator-led training and training aids available at each bookstore.

Purchasing

Barnes & Noble’s buyers negotiate costs on select items, marketing funds, promotional discounts, cooperative advertising and showroom allowances with publishers and other suppliers for www.barnesandnoble.com and all of the Company’s bookstores. The Company’s distribution centers enable it to maximize available discounts and enhance its ability to create marketing programs with many of its vendors. The Company has buyers who specialize in customizing inventory for bookselling in stores and online. Store inventories are further customized by store managers, who may respond to local demand by purchasing a limited amount of fast-selling titles through a nationwide wholesaling network, including the Company’s distribution centers.

The Company’s B&N Retail segment purchases physical books on a regular basis from over 500 publishers and nearly 50 wholesalers or distributors. Purchases from the top five suppliers (including publishers, wholesalers and distributors) accounted for approximately 66% of the B&N Retail’s book purchases during fiscal 2016, and no single supplier accounted for more than 30% of B&N Retail’s book purchases during this period. Consistent with industry practice, a substantial majority of the physical book purchases are returnable for full credit, a practice which substantially reduces the Company’s risk of inventory obsolescence.

Publishers periodically offer their excess inventory in the form of remainder books to book retailers and wholesalers through an auction process which generally favors booksellers such as the Company, who are able to buy substantial quantities. These books are generally purchased in large quantities at favorable prices and are then sold to consumers at significant discounts off publishers’ list prices.

Distribution

The Company has invested significant capital in its systems and technology by building new platforms, implementing new software applications and building and maintaining efficient distribution

centers. This investment has enabled the Company to source a majority of its inventory through its own distribution centers, resulting in direct buying from vendors rather than wholesalers. Using the Company’s own distribution centers rather than wholesalers lowers distribution costs per unit, increases inventory turns, and improves product margins. The Company’s distribution centers’ 3-prong strategy of (1) accelerating speed to market, (2) improving order quality (on-time, complete and damage free) and (3) reducing costs has improved just-in-time deliveries to stores as well as deliveries to the Company’s customers on orders placed via the Barnes & Noble website and through the Company’s in-store order network.

As of April 30, 2016, the Company has approximately 1,745,000 square feet of distribution center capacity. The Company has an approximately 1,145,000 square foot distribution center in Monroe Township, New Jersey, which ships merchandise to stores throughout the country and to online customers. The Company also has an approximately 600,000 square foot distribution center in Reno, Nevada, which is used to facilitate distribution to stores and online customers in the western United States.

Information Technologies

The Company has focused a majority of its information technology resources on strategically positioning and implementing systems to support store operations, online technology requirements, merchandising, distribution, marketing and finance.

BookMaster, the Company’s proprietary bookstore inventory management system, integrates point-of-sale features with a proprietary data warehouse-based replenishment system. BookMaster enhances communications and real-time access to the Company’s network of bookstores, distribution centers and wholesalers. The Company continues to implement systems to improve efficiencies in back office processing in the human resources, finance and merchandising areas.

The Company plans to continue to invest in technologies that will enable it to offer its customers the more convenient and user-friendly online shopping experience. B&N Retail has licensed existing commercial technology when available and has focused its internal development efforts on those proprietary systems necessary to provide the highest level of service to its customers. The overall mix of technologies and applications allows the Company to support a distributed, scalable and secure eCommerce environment.

The Company uses Intel ^® -based server technology in a fully redundant configuration to power its current website, which is hosted in two Company-owned locations. Each of these sites has sufficient capacity to independently support the volume of traffic directed toward the Company’s website during peak periods. Both hosting locations are configured with redundant power, Internet telecommunications capacity and cooling to significantly reduce its exposure to downtime and service outages. Additionally, the Company believes its technology investments are scalable to meet the future growth demands of the business.

Competition

The book business is highly competitive in every channel in which Barnes & Noble operates. B&N Retail stores compete primarily on the quality of the shopping and store experience and the price and availability of products. The importance of price varies depending on the competitor, with some of Barnes & Noble’s competitors engaging in significant discounting and other promotional activities. B&N

Retail competes with other bookstores, including Books-A-Million. It also faces competition from many online businesses, notably Amazon.com and Apple. Increases in consumer spending via the Internet may significantly affect its ability to generate sales in B&N Retail stores. B&N Retail also faces competition from mass merchandisers, such as Costco, Target and Wal-Mart. Some of the Company’s competitors have greater financial and other resources and different business strategies than B&N Retail does. B&N Retail stores also compete with specialty retail stores that offer books in particular subject areas, independent store operators, variety discounters, drug stores, warehouse clubs, mail-order clubs and other retailers offering books, music, toys, games, gifts and other products in its market segments.

The music and movie businesses are also highly competitive and the Company faces competition from mass merchants, discounters and electronic distribution. The store experience is geared towards the Company’s customer base, including a strong Blu-ray presence as well as a tailored, returnable product assortment.

Seasonality

The B&N Retail business, like that of many retailers, is seasonal, with the major portion of sales and operating profit realized during its third fiscal quarter, which includes the holiday selling season.

Employees

The Company cultivates a culture of outgoing, helpful and knowledgeable employees. As of April 30, 2016, the B&N Retail segment had approximately 28,000 full- and part-time booksellers. The B&N Retail segment’s employees are not represented by unions.

NOOK

This segment represents the Company’s digital business, which includes the Company’s eBookstore, digital newsstand and sales of NOOK ^® devices and accessories. The underlying strategy of the NOOK business is to offer customers any digital book, newspaper or magazine, anytime, on any device. The Company remains committed to delivering to customers the best digital bookstore experience, providing easy access to Barnes & Noble’s expansive digital collection of over four million eBooks, digital magazines and newspapers, while rationalizing its existing cost structure. As part of this commitment, the Company partners with Samsung to develop co-branded NOOK ^® tablets that feature the award-winning Barnes & Noble digital reading experience, while continuing to develop and offer its own black-and-white NOOK ^® eReaders.

Barnes & Noble’s NOOK digital bookstore and Reading Apps™ provide customers the ability to purchase and read their digital content and access their Lifetime Library on a wide range of digital platforms, including Windows 8 PCs and tablets, iPad™, iPhone ^® , Android™ smartphones and tablets, PC and Mac ^® . Barnes & Noble has implemented innovative features on its digital platform to ensure that customers can access their NOOK content from almost all of today’s most popular devices.

NOOK currently sells a number of different devices to satisfy customers’ digital needs, including the Samsung Galaxy Tab ^® S2 NOOK ^® , Samsung Galaxy Tab ^® E NOOK ^® , Samsung Galaxy Tab ^® 4 NOOK ^® 7.0 device and NOOK GlowLight™ Plus. These devices provide customers access to the millions of books and magazines in the NOOK Store, and through Google Play, Android apps and games, songs, movies and TV shows, plus popular Google services like the Chrome™ browser, Gmail™, YouTube™, Google Search™ and Google Maps™. NOOK GlowLight™ Plus provides customers a simple, easy to use, intuitive eReader on an E Ink display that replicates the experience of reading from physical paper and provides access to the Company’s digital content store. Always Free NOOK Support in any of the B&N Retail bookstores provides customers the ability to interact with a knowledgeable bookseller to receive pre- and post- customer sales support. The bookstores also provide free Wi-Fi

connectivity for NOOK ^® devices, Read In Store™ access, which allows owners to read NOOK Books™ for free. NOOK ^® devices also allow for digital lending of a wide selection of books through its LendMe ^® technology.

Operations

The digital products group has knowledgeable product development and operational management teams in the areas of reading software, digital content retailing and mobile device development. Digital product management oversees product concept, software development, engineering, and user experience. Operational management has historically overseen demand planning, strategic sourcing, manufacturing, return and refurbishment of hardware. The Company expects that digital product management’s role will continue to focus on eReading devices and reading platforms, while also shifting to the management of third-party partner relationships, such as NOOK’s partnership with Samsung proceeds.

On April 7, 2016, the Company entered into an agreement with Bahwan CyberTek (BCT), a global software products and services company, in which BCT will take over certain NOOK technology services, including cloud management and development support for NOOK software.

The Company’s development office employs experienced engineers in the Company’s digital product area. The NOOK digital products management team is currently focused on next generation digital reading products to enhance the reading experience and help consumers discover content in new and interesting ways. The Digital Services team, which includes the Cloud and Commerce group, is responsible for maintaining and developing the NOOK’s digital bookstore service.

Purchasing/Distribution

NOOK acquires the rights to distribute digital content from publishers and distributes the content on www.barnesandnoble.com, NOOK ^® devices and other eBookstore platforms. Certain digital content is distributed under an agency pricing model, in which the publishers set fixed prices for eBooks and NOOK receives a fixed commission on content sold through the eBookstore. The majority of the Company’s eBooks are sold under the agency model.

NOOK utilizes the Company’s purchasing power and its distribution centers to synergistically facilitate the purchasing and shipping of devices and accessories.

Competition

The eReader and tablet businesses are highly competitive. NOOK competes primarily on price, device functionality, consumer appeal and availability of digital content. The importance of price varies depending on the competitor, with some of NOOK’s competitors engaging in significant discounting and other promotional activities. NOOK competes with many online digital businesses, notably Amazon.com and Apple. Some of the Company’s competitors have substantially greater financial and other resources and may have different business strategies than NOOK does.

Seasonality

The NOOK business, like that of many technology companies, is impacted by the launch of new products and the promotional efforts to support those new products, as well as the traditional retail holiday selling seasonality.

Employees

As of April 30, 2016, NOOK had approximately 225 full- and part-time employees. NOOK employees are not represented by unions, and the Company believes that its relationship with its employees is generally excellent.

Trademarks and Service Marks

The trademarks and service marks owned by the Company and its subsidiaries include B&N ^® , Barnes & Noble ^® , Barnes & Noble.com ^® , barnesandnoble.com ^® , Barnes & Noble Booksellers ^® , Barnsie ^® , Espari ^® , NOOK ^® , NOOK Color ^® , NOOK Tablet ^® , Reader’s Tablet ^® , NOOK Simple Touch ^® , GlowLight ^® , NOOK GlowLight™, The Simple Touch Reader ^® , NOOK Press ^® , NOOK Books ^® , NOOK Book Enhanced ^® , NOOK Developer ^® , The NOOK Book Store ^® , NOOK Newsstand ^® , NOOK Newspaper ^® , NOOK Kids ^® , Read In Store ^® , NOOK Friends ^® , LendMe ^® , NOOK Boutique ^® , NOOK Study ^® , ArticleView ^® , Daily Shelf ^® , Read To Me ^® , Punctuate! ^® , Wobblio ^® , Pop-Cultured ^® , B-Fest™, B&N Readouts™, SparkNotes ^® , Borders ^® , Borders Books & Music ^® , some of which are registered or pending with the United States Patent and Trademark Office.

The Company regards its trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technology and similar intellectual property as important to its operations, and it relies on trademark, copyright and patent law, domain name regulations, trade secret protection and confidentiality or license agreements to protect its proprietary rights. The Company has registered, or applied for the registration of, a number of domain names, trademarks, service marks, patents, and copyrights by U.S. and foreign governmental authorities. Additionally, the Company has filed U.S. and international patent applications covering certain of its proprietary technology. The Company renews its registrations, which vary in duration, as it deems appropriate from time to time.

The Company has licensed in the past, and expects that it may license in the future, certain of its proprietary rights to third parties. Some of the Company’s products are designed to include intellectual property licensed or otherwise obtained from third parties. While it may be necessary in the future to seek or renew licenses relating to various aspects of the Company’s products and business methods, the Company believes, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee such licenses could be obtained at all.

Available Information

The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, proxy statements and other information with the SEC. Any materials filed by the Company with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the SEC’s Public Reference Room is available by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including the Company) file electronically with the SEC. The Internet address of the SEC’s website is http://www.sec.gov .

The Company makes available on its corporate website at www.barnesandnobleinc.com under “For Investors” - “SEC Documents,” free of charge, all its SEC filings as soon as reasonably practicable after the Company electronically files such material with or furnishes such materials to the SEC.

The Company has adopted Corporate Governance Guidelines, a Code of Business Conduct and Ethics and written charters for the Company’s Audit Committee, Compensation Committee and Corporate Governance & Nominating Committee. Each of the foregoing is available on the Company’s website at www.barnesandnobleinc.com under “For Investors” – “Corporate Governance” and in print to any stockholder who requests it, in writing to the Company’s Corporate Secretary, Barnes & Noble, Inc.,

122 Fifth Avenue, New York, New York 10011. In accordance with SEC rules, the Company intends to disclose any amendment (other than any technical, administrative, or other non-substantive amendment) to either of the above codes, or any waiver of any provision thereof with respect to any of the executive officers, on the Company’s website within four business days following such amendment or waiver.

ITEM 1A.

Risk Factors

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones faced by the Company. Additional risks and uncertainties not presently known or that are currently deemed immaterial also may impair the Company’s business operations. If any of the following risks occur, the Company’s business, financial condition, operating results and cash flows could be materially adversely affected.

Unless otherwise specified or the context otherwise requires, references below to (1) “the Company” refer to Barnes & Noble, Inc. and its subsidiaries, (2) “Retail business” refer to the Company’s business included in the Retail segment, and (3) “Digital business” refer to the Company’s business included in the Digital segment, including the sales of digital content, devices and accessories.

The Company’s businesses are dependent on the overall economic environment and consumer spending patterns.

A deterioration of the current economic environment could have a material adverse effect on the Company’s financial condition and operating results, as well as the Company’s ability to fund its growth or its strategic business initiatives.

The Retail and Digital businesses’ sales are primarily dependent upon discretionary consumer spending, which is affected by the overall economic environment, consumer confidence and other factors beyond its control. In addition, the Retail and Digital businesses’ sales are dependent in part on the strength of new release products, which are controlled by publishers and other suppliers.

Because of the Company’s existing penetration of attractive retail locations and the maturity of the market for traditional retail stores, the Company’s sales or net income may decline unless it successfully implements its business strategies.

The Company’s primary business is its operation of the Retail business’s stores across the United States, and it derived a majority of its sales from the Retail business’s stores in its most recent fiscal year. Management generally believes that the Retail business’s stores are located in attractive geographic markets. Management’s strategies are subject to the risks described herein and elsewhere, and may be subject to other risks that have not yet been identified, and management cannot make assurances that its business strategies will be successful.

The complexity of the Company’s businesses could place a significant strain on its management, operations, performance and resources.

The complexity of the Company’s businesses could place a significant strain on its management, operations, technical performance, financial resources, and internal financial control and reporting functions. The Company operates two different businesses: the Retail business and the Digital business.

There can be no assurance that the Company will be able to manage the complexity of its businesses effectively. The Company’s current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage its future operations, especially as it employs personnel in multiple geographic locations. The Company may not be able to hire, train, retain, motivate and manage the required personnel, which may limit its growth. If any of these were to occur, it could damage the Company’s reputation, limit growth, negatively affect operating results and harm its business.

The Company faces the risk of disruption of supplier relationships and/or supply chain and/or inventory surplus.

The products that the Company sells originate from a wide variety of domestic and international vendors. During fiscal 2016, the Retail business’s five largest suppliers accounted for approximately 66% of the dollar value of merchandise purchased. While the Company believes that its relationships with its suppliers are strong, suppliers may modify the terms of these relationships due to general economic conditions or otherwise. The Company does not have long-term arrangements with most of its suppliers to guarantee availability of merchandise, content, components or services, particular payment terms or the extension of credit limits. If the Company’s current suppliers were to stop selling merchandise, content, components or services to it on acceptable terms, including as a result of one or more supplier bankruptcies due to poor economic conditions, the Company may be unable to procure the same merchandise, content, components or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

In addition, certain of our merchandise, including electronic readers, are sourced, directly or indirectly, from outside the United States, including, without limitation, from suppliers in China. 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 and/or adversely affect our results of operations.

Furthermore, the Retail business is dependent on the continued supply of trade books. 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 could adversely impact the Company’s business. A significant unfavorable change in the Company’s relationships with key suppliers could materially adversely affect its sales and profits. In addition, any significant change in the payment terms that the Company has with its key suppliers, including payment terms, return policies, the discount or margin on products or changes to the distribution model could adversely affect its financial condition and liquidity. The Company has arrangements with third-party manufacturers with respect to digital devices. These manufacturers procure and assemble unfinished parts and components from third-party suppliers based on forecasts provided by the Company. Given production lead times, commitments may be made far in advance of finished product delivery.

The Company’s relationship with strategic partners could have adverse impacts on the Company and its business.

The Company relies on third parties to provide certain services for its business. The Company’s business may be adversely impacted if such third parties fail to meet their obligations or to provide high levels of service to the Company’s customers. Further, the Company could be subject to claims as a result of the activities, products or services provided by these third-party service providers even though the Company was not directly involved in the circumstances leading to those claims. These claims could include, among other things, claims by the Company’s customers and claims relating to data security. Even if these claims do not result in liability to the Company, defending and investigating these claims could be expensive and time-consuming, divert personnel and other resources from the Company’s business and result in adverse publicity that could harm the Company’s business.

The Company’s businesses rely on certain key personnel.

Management believes that the Company’s continued success will depend to a significant extent upon the efforts and abilities of certain key personnel of the Company. The loss of the services of any of these key personnel could have a material adverse effect on the Company. The Company does not maintain “key man” life insurance on any of its officers or other employees.

The Company’s businesses are seasonal.

For the Company’s Retail business, sales are generally highest in the third fiscal quarter and lowest in the second and fourth fiscal quarters. For fiscal 2016, 34.2% of sales and 135.3% of operating income of the Retail business were generated in its third fiscal quarter. Operating results in the Company’s businesses depend significantly upon the holiday selling season in the third fiscal quarter.

Less than satisfactory net sales during the Company’s peak fiscal quarter could have a material adverse effect on its financial condition or operating results for the year, and the Company’s results of operations from those quarters may not be sufficient to cover any losses, which may be incurred in the other fiscal quarters of the year.

The Company’s results of operations may fluctuate from quarter to quarter, which could affect the Company’s business, financial condition and results of operations.

The Company’s results of operations may fluctuate from quarter to quarter depending upon several factors, some of which are beyond its control. These factors include the timing of new product releases, weather, the level of success of the Company’s product releases, the timing of store openings and closings, shifts in the timing of certain promotions and the effect of impairments on the Company’s assets. These and other factors could affect the Company’s business, financial condition and results of operations, and this makes the prediction of the Company’s financial results on a quarterly basis difficult. The Company’s quarterly financial results have been and may in the future be below the expectations of public market analysts and investors.

The Company may not be able to adequately protect its intellectual property rights or may be accused of infringing upon intellectual property rights of third parties.

The Company regards its trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology and similar intellectual property as important to its success, and it relies on trademark, copyright and patent law, domain name regulations, trade secret protection and confidentiality or license agreements to protect its proprietary rights. Laws and regulations may not adequately protect its trademarks and similar proprietary rights. The Company may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or diminish the value of its trademarks and other proprietary rights.

The Company may not be able to discover or determine the extent of any unauthorized use of its proprietary rights. The protection of the Company’s intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps it takes to protect its intellectual property may not adequately protect its rights or prevent third parties from infringing or misappropriating its proprietary rights. The Company 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 the Company infringes their proprietary rights. Because of the changes in Internet commerce, the electronic reader and digital content business, current extensive patent

coverage, and the rapid rate of issuance of new patents, it is possible that certain components of our products and business methods may unknowingly infringe existing patents or intellectual property rights of others. Because the Company’s products include complex technology, much of which is acquired from suppliers through the purchase of components or licensing of software, the Company and its suppliers and customers are and have been involved in or have been impacted by assertions, including both requests for licenses and litigation, regarding patent and other intellectual property rights. The Company has been and is currently subject to, and expects to continue to be subject to, claims and legal proceedings regarding alleged infringement by it of the intellectual property rights of third parties. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against the Company prohibiting the Company from marketing or selling certain products or the payment of damages. The Company may need to obtain licenses from third parties who allege that it has infringed their rights, but such licenses may not be available on terms acceptable to the Company, or at all. In addition, the Company may not be able to obtain or utilize on terms that are favorable to it, or at all, licenses or other rights with respect to intellectual property it does not own in providing services to other businesses and individuals under commercial agreements. These risks have been amplified by the increase in third parties whose primary business appears to be to assert such claims. If any infringement or other intellectual property claim made against the Company by any third-party is successful, if the Company is required to indemnify a customer with respect to a claim against the customer, or if the Company is unable to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, the Company’s business, operating results, and financial condition could be materially and adversely affected.

The Company’s digital content offerings, including NOOK ^® , depend in part on effective digital rights management technology to control access to digital content. If the digital rights management technology that it uses is compromised or otherwise malfunctions, the Company could be subject to claims, and content providers may be unwilling to include their content in its service.

The Company faces data security risks with respect to personal information.

The Company’s business involves the receipt, storage, processing and transmission of personal information about customers and employees. Personal information about customers is obtained in connection with the Company’s membership programs, eCommerce operations, digital media businesses, as well as through retail transactions in stores operated by the Company. The Company’s online operations and the Digital business depend upon the secure transmission of confidential information over public networks, including information permitting cashless payments. We may share such information with vendors and third parties that assist with certain aspects of our business.

The Company’s handling and use of personal information is regulated at the international, federal and state levels. Privacy and information security laws, regulations, and standards, such as the Payment Card Industry Data Security Standard, 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 the Company fails to comply with these laws, regulations and standards, it could be subjected to legal risk. Also, hardware, software or applications developed or procured internally or from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. In addition, even if the Company fully complies with all laws, regulations, and standards and even though the Company has taken significant steps to protect personal information, the Company could experience a data security breach, and its reputation could be damaged, possibly resulting in lost future sales or decreased usage of credit and debit card products. 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, the Company may be unable to

anticipate these techniques or to implement adequate preventative measures. A party that is able to circumvent the Company’s security measures could misappropriate the Company’s or its users’ proprietary information and cause interruption in its operations. Any compromise of the Company’s 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, negative publicity, equipment acquisitions or disposal and added personnel, and a loss of confidence in its security measures, which could harm the business or investor confidence. Data security breaches may also result from non-technical means, for example, actions by an employee.

The Company has suffered data security breaches in the past, including the Company’s discovery in 2012 that PIN pads in certain of its stores had been tampered with to allow criminal access to card data and PIN numbers on credit and debit cards swiped through the terminals. This matter has given rise to putative class action litigation on behalf of customers, banks, or other card issuers, and inquiries from federal and state government agencies. It is possible that additional litigation arising out of this matter may be filed on behalf of customers, banks, payment card companies or stockholders seeking damages allegedly arising out of this incident and other related relief. In addition, payment card companies and associations may impose fines by reason of the tampering and federal and state enforcement authorities may impose penalties or other remedies against the Company. At this point the Company is unable to predict the developments in, outcome of, and economic and other consequences of pending or future litigation or government inquiries related to this matter.

The concentration of the Company’s capital stock ownership with certain executive officers, directors and their affiliates limits its stockholders’ ability to influence corporate matters and may involve other risks.

Leonard Riggio, the Company’s Founder and Chairman, is currently the beneficial owner of an aggregate of approximately 18.6% of the Company’s outstanding capital stock as of April 30, 2016.

This concentrated control may limit the ability of the Company’s other stockholders to influence corporate matters and, as a result, the Company may take certain actions, with which its other stockholders do not agree. In addition, there may be risks related to the relationships Leonard Riggio and other members of the Riggio family have with the various entities with which the Company has related party transactions.

The Company’s businesses could be impacted by changes in international, federal, state or local laws, rules or regulations.

Changes in international, federal, state or local laws, rules or regulations, including, but not limited to, laws, rules or regulations related to employment, wages, data privacy, information security, intellectual property, taxes, products, product safety, health and safety, and imports and exports, could increase the Company’s costs of doing business or otherwise impact the Company’s business.

Changes in sales and other tax collection regulations or inability of the Company to utilize tax credits or assets, could harm the Company’s businesses or financial performance.

The Retail business and the Digital business collected sales tax on the majority of the products and services that they sold in their respective prior fiscal years that were subject to sales tax, and they generally have continued the same policies for sales tax within the current fiscal year. While management believes that the financial statements included elsewhere herein reflect management’s best current

estimate of any potential additional sales tax liability based on current discussions with taxing authorities, there can be no assurance 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, the Company’s businesses may be subject to claims for not collecting sales tax on the products and services it currently sells for which sales tax is not collected. There is a risk that existing tax credits and tax assets may not be utilized or may expire.

The Company’s separation of Barnes & Noble Education, Inc. from Barnes & Noble into two separate public companies could have adverse impacts on the Company and its businesses.

There is the potential that the separation may result in various adverse impacts on the Company and its businesses including, without limitation, the risk that the separation does not achieve the expected benefits for the parties, the risk that the separation of Barnes & Noble Education has an adverse impact on the Company’s retail business, the risk of potential adverse tax consequences for the Company and its stockholders, risks, difficulties, and uncertainties that may result from the separation of businesses that were previously co-mingled including necessary ongoing relationships, and potential for adverse customer impacts.

The Spin-Off of Barnes & Noble Education could result in significant tax liability to the Company and its stockholders.

The Spin-Off was conditioned on the Company’s receipt of written opinions from Cravath, Swaine & Moore LLP and KPMG LLP to the effect that the Spin-Off would qualify for non-recognition of gain and loss to the Company and its stockholders, which were received. These opinions do not address any U.S. state or local or foreign tax consequences of the Spin-Off. These opinions assume that the Spin-Off will be completed according to the terms of the Separation Agreement and rely on the facts as stated in the Separation Agreement, the Tax Matters Agreement, the other ancillary agreements, the prospectus for the Spin-Off and a number of other documents. In addition, these opinions are based on certain representations as to factual matters from, and certain covenants by, the Company and Barnes & Noble Education. The opinions cannot be relied on if any of the assumptions, representations or covenants are incorrect, incomplete or inaccurate or are violated in any material respect. The opinions are not binding on the Internal Revenue Service (IRS) or the courts, and we cannot assure you that the IRS or a court will not take a contrary position. If the Spin-Off were determined not to qualify for non-recognition of gain and loss, U.S. holders could be subject to tax. In this case, each U.S. holder who receives the Barnes & Noble Education Common Stock in the Spin-Off would generally be treated as receiving a distribution in an amount equal to the fair market value of Barnes & Noble Education common stock received, which would generally result in (i) a taxable dividend to the U.S. holder to the extent of that U.S. holder’s pro rata share of the Company’s current and accumulated earnings and profits; (ii) a reduction in the U.S. holder’s basis (but not below zero) in the Company’s common stock to the extent the amount received exceeds the stockholder’s share of the Company’s earnings and profits; and (iii) a taxable gain from the exchange of the Company’s common stock to the extent the amount received exceeds the sum of the U.S. holder’s share of the Company’s earnings and profits and the U.S. holder’s basis in its common stock.

If the Spin-Off were determined not to qualify for non-recognition of gain and loss, then the Company would recognize gain in an amount up to the fair market value of the Barnes & Noble Education stock held by the Company immediately before the Spin-Off.

The Company’s classified Board of Directors and other anti-takeover defenses could deter acquisition proposals and make it difficult for a third-party to acquire control of the Company. This could have a negative effect on the price of the Company’s common stock.

The Company has a classified Board of Directors and other anti-takeover defenses in its certificate of incorporation and by-laws. These defenses could discourage potential acquisition proposals and could delay or prevent a change in control of the Company. These deterrents could adversely affect the price of the Company’s common stock and make it difficult to remove or replace members of the Board of Directors or management of the Company. The Company’s previous shareholder rights plan expired on November 17, 2012 and was not replaced. The Board may, subject to its fiduciary duties under applicable law, choose to implement a shareholder rights plan in the future.

The Company’s businesses could be impacted by changes in international, federal, state or local laws, rules or regulations.

Changes in international, federal, state or local laws, rules or regulations, including, but not limited to, laws, rules or regulations related to employment, wages, data privacy, information security, intellectual property, taxes, products, product safety, health and safety, imports and exports, anti-corruption, and anti-competition could increase the Company’s costs of doing business or otherwise impact the Company’s business.

Intense competition from traditional retail sources, the Internet and suppliers of digital content and hardware may adversely affect the Company’s businesses.

The book business is highly competitive in every channel in which the Company operates. The Retail business’s stores compete primarily on the quality of the shopping and store experience and the price and availability of products. The importance of price varies depending on the competitor, with some of the Retail business’s competitors engaging in significant discounting and other promotional activities. The Retail business competes with large bookstores including Books-A-Million and smaller format bookstores. The Retail business also faces competition from mass merchandisers, such as Costco, Target and Wal-Mart. The Retail business’s stores also compete with specialty retail stores that offer books in particular subject areas, independent store operators, variety discounters, drug stores, warehouse clubs, mail-order clubs and other retailers offering books, music, toys, games, gifts and other products in its market segments. NOOK ^® competes primarily with other tablets and eBook readers on functionality, consumer appeal, availability of digital content and price.

The Company faces competition from many online businesses, notably Amazon.com and Apple. Increases in consumer spending via the Internet may significantly affect its ability to generate sales in the Retail business’s stores. Some of the Company’s competitors may have greater financial and other resources and different business strategies than the Company does. The music and DVD businesses are also highly competitive, and the Company faces competition from mass merchants, discounters, the Internet and digital distribution. The Company faces competition from the expanding market for digital content and hardware, including without limitation digital books or “eBooks” and eBook readers. New and enhanced technologies, including new digital technologies and new web services technologies, may increase the Company’s competition. Competition may also intensify as the Company’s competitors enter into business combinations or alliances or established companies in other market segments expand into its market segments. Increased competition may reduce the Company’s sales and profits.

The Company faces additional operating risks through the operation of the Digital business.

The Company faces risks related to the operation of the Digital business. The Digital business’s content sales decreased during fiscal 2016 and may continue to decline in the future, which could affect the Company’s results of operations and liquidity. Also, the sales of digital devices and accessories declined during fiscal 2016, and there is no guarantee that the possible introduction of future NOOK ^®

digital devices (including NOOK ^® co-branded devices under the commercial agreement with Samsung) will increase future sales of digital devices or content or the earnings of the Digital business. The previously announced efforts to rationalize the costs associated with the Digital business also may not be successful, which may adversely impact the Company’s results of operations. The Digital business faces certain risks associated with its business, including protection of digital rights and uncertainties relating to the regulation of digital content.

If the Retail business is unable to renew or enter into new leases on favorable terms, or at all, its sales and earnings may decline.

Substantially all of the Retail business’s stores are located in leased premises. The Retail business’s profitability depends in part on its ability to continue to optimize its store lease portfolio as to the number of retail stores, store locations and lease terms and conditions. Its ability to do so depends on, among other things, general economic and business conditions and general real estate development conditions, which are beyond its control. The Retail business has 372 leases up for renewal by April 30, 2019. If the cost of leasing existing retail stores increases, the Retail business may not be able to maintain its existing store locations as leases expire. In addition, the Retail business may not be able to enter into new leases on acceptable terms, or at all, or it may not be able to locate suitable alternative sites or additional sites for new retail stores in a timely manner. The Retail business’s sales and earnings may decline if it fails to maintain existing store locations, enter into new leases, renew leases or relocate to alternative sites, in each case on attractive terms.

The Company is dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for its liquidity needs.

The Company must have sufficient sources of liquidity to fund its working capital requirements, indebtedness and Digital business. The Company believes that the combination of its cash and cash equivalents on hand, cash flow received from operations, funds available under the Company’s credit facility and short-term vendor financing will be sufficient to meet the Company’s normal working capital and debt service requirements for at least the next twelve months. If these sources of liquidity do not satisfy the Company’s requirements, the Company may need to seek additional financing. The future availability of financing will depend on a variety of factors, such as economic and market conditions, the availability of credit and the Company’s credit rating, as well as the Company’s reputation with potential lenders. These factors could materially adversely affect the Company’s costs of borrowing, and the Company’s financial position and results of operations would be adversely impacted.

The Company faces various risks as an Internet retailer.

Business risks related to its online business include risks associated with the need to keep pace with rapid technological change, risks associated with the adoption of new products or platforms. Internet security risks, risks of system failure or inadequacy, supply chain risks, government regulation and legal uncertainties with respect to the Internet, risks related to data privacy and collection of sales or other taxes by one or more states or foreign jurisdictions. If any of these risks materializes, it could have an adverse effect on the Company’s business.

The Company faces the risk of a shift in consumer spending patterns to Internet retailers and digital content.

The Company has entered parts of the online and digital markets in which it has limited experience and may in the future expand into additional areas. The offering of digital content may present

new and difficult challenges. Gross margin for digital content and products may be lower than for the Company’s traditional product lines. The gross margin for the Company’s online sales is generally lower than for sales in its retail stores. Although the Company has entered into the online and digital spaces, it may not be able to compete effectively in those spaces and any investments made in those spaces may not be successful. The Company also faces competition from companies engaged in the business of selling books, music and movies via electronic means, including the downloading of books, music and movie content. For example, historically the Retail business offered a selection of music products in its stores, but has dramatically decreased such selection because of the increased competition from the download of digital music.

The Company’s expansion into new products, services and technologies subjects it to additional business, legal, financial and competitive risks.

The Company may require additional capital in the future to sustain or grow the Company’s online business and the Digital business. The Company’s gross profits and margins in its newer activities may be lower than in its traditional activities, and it may not be successful enough in these newer activities to recoup its investments in them. In addition, the Company may have limited or no experience in its newer products and services, and its customers may not adopt its new product or service offerings, which include digital, web services and electronic devices, including but not limited to its NOOK ^® eBook readers and tablets, as well as new gift products and educational toys and games products. Some of these offerings may present new and difficult technological challenges, and the Company may be subject to claims or recalls if customers of these offerings experience service disruptions or failures or other quality issues. If any of these were to occur, it could damage the Company’s reputation, limit its growth and negatively affect its operating results.

The Company depends on component and product manufacturing provided by third parties, many of whom are located outside of the U.S.

NOOK ^® and other Company products are manufactured by a third-party manufacturer outside the United States, and the Company relies on components provided from a number of different manufacturers both within and outside the United States. Many of these manufacturers are concentrated in geographic areas outside the United States. While the Company’s arrangements with these manufacturers may lower costs, they also reduce its direct control over production. It is uncertain what effect such diminished control will have on the quality or quantity of products or services, or the Company’s flexibility to respond to changing conditions. Although arrangements with such manufacturers may contain provisions for warranty expense reimbursement, if reimbursement from such manufacturers is unenforceable or insufficient, the Company may remain responsible to the consumer for warranty service in the event of product defects. Any unanticipated product defect or warranty liability, whether pursuant to arrangements with contract manufacturers or otherwise, could materially adversely affect the Company’s reputation, financial condition and operating results. If manufacturing in these locations is disrupted for any reason, including natural disasters, information technology system failures, military actions or economic, business, labor, environmental, public health or political issues, the Company’s financial condition and operating results could be adversely affected.

The Company, including the Digital business, may be unable to obtain a sufficient supply of components and parts that are free of minerals mined from the Democratic Republic of Congo and adjoining countries (DRC), which could result in a shortage of such components and parts or reputational damages if the Company is unable to certify that its products are free of such minerals. The Dodd-Frank Wall Street Reform and Consumer Protection Act included disclosure requirements regarding the use of “conflict” minerals mined from the DRC and procedures regarding a manufacturer’s efforts to prevent the

sourcing of such “conflict” minerals. The Securities and Exchange Commission adopted the final rules related to “conflict” minerals in August 2012. These rules may limit the pool of suppliers who can provide the Company DRC Conflict Free components and parts, and the Company cannot make assurances that it will be able to obtain products or supplies in sufficient quantities that meet the DRC Conflict Free designation as proposed by the requirements. In addition, the Company may incur material costs in complying with the disclosure requirements and procedures, including costs related to the due diligence process of determining the source of certain minerals used in the Company’s products as well as costs of possible changes to products, processes, and suppliers as a result of implementing the procedures designed to prevent the sourcing of such “conflict” minerals. Also, because the Company’s supply chain is complex, the Company may face reputational challenges with its customers, stockholders and other stakeholders if it is unable to sufficiently verify the origins for the defined conflict metals used in its products as required by the rules on conflict minerals. The Company filed its Conflict Minerals Report for the calendar year 2015 with the SEC on May 31, 2016.

Government regulation is evolving and unfavorable changes could harm the Company’s business.

The Company is subject to general business regulations and laws relating to all aspects of its business, including regulations and laws relating to the Internet, online commerce, digital content and products as well as its other lines of business (including governmental investigations and litigation relating to the agency pricing model for digital content distribution). Existing and future laws and regulations and their application and/or enforcement may impede the growth of the Internet, digital content distribution or other online services and impact digital content pricing, including requiring modifications or elimination of related pricing models, including the agency pricing model. These regulations and laws may cover taxation, privacy, data protection, pricing, 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 the Company’s services, the design and operation of websites, the characteristics and quality of products and services and employee benefits (including the costs associated with complying with the Patient Protection and Affordable Care Act). Unfavorable regulatory and legal developments, including, among other things, the July 2013 U.S. federal court ruling that Apple Inc. violated antitrust laws by colluding to raise the price of digital books with certain U.S. publishers and the settlement between the U.S. Department of Justice and certain U.S. publishers for allegedly colluding to raise the price of digital books, could diminish the demand for the Company’s products and services, increase its cost of doing business, decrease its margins and materially adversely impact its results of operations or financial operations.

The Company relies on third-party digital content and applications, which may not be available to the Company on commercially reasonable terms or at all.

The Company contracts with certain third parties to offer their digital content, including on NOOK ^® and through its eBookstore. Its 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 the Company to license their content in the future. Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the total cost of, such content. If the Company is unable to offer a wide variety of content at reasonable prices with acceptable usage rules, its financial condition and operating results may be materially adversely affected.

The Company’s businesses could be adversely impacted if it is unsuccessful in making and integrating acquisitions it has made or may decide to pursue.

To enhance the Company’s efforts to grow and compete, from time to time it has engaged in acquisitions and entered into joint ventures, and it may engage in acquisitions or enter into joint ventures in the future. Any future acquisitions are subject to the Company’s ability to identify attractive opportunities and to negotiate favorable terms for them. Accordingly, the Company cannot make assurances that future acquisitions will be completed, or that if completed, they will be successful. These transactions may create risks such as: (1) disruption of the Company’s ongoing business, including loss of management focus on existing businesses; (2) the dilution of the equity interest of the Company’s stockholders; (3) problems retaining key personnel; (4) increased debt to finance any transaction and additional operating losses, debt and expenses of the businesses the Company acquires; (5) the difficulty of integrating a new company’s accounting, financial reporting, management, information, human resources and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented; (6) the difficulty of implementing at acquired companies the controls, procedures and policies appropriate for a larger public company; and (7) potential unknown liabilities associated with an acquired company. In addition, valuations supporting the Company’s acquisitions could change rapidly given the current global economic climate. The Company could determine that such valuations have experienced impairments or other-than-temporary declines in fair value, which could adversely impact its financial condition.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

All but one of the active Barnes & Noble stores are leased. The leases typically provide for an initial term of 10 or 15 years with one or more renewal options. Most stores are currently in renewal periods. The terms of the Barnes & Noble store leases for its 639 leased stores open as of April 30, 2016 expire as follows:


Lease Terms to Expire During (12 months ending on or about April 30)	Number of Stores (a)
2017		111
2018		123
2019		138
2020		115
2021		78
2022 and later		72

(a)	2 Barnes & Noble stores are under a month-to-month lease.

In addition to the bookstores, the Company leases two distribution centers for its B&N Retail operations: one in Monroe Township, New Jersey, under a lease expiring in 2020, and the other in Reno, Nevada, under a lease expiring in 2020. The Company’s B&N Retail distribution centers total 1,745,000 square feet.

The Company’s principal administrative facilities are situated in New York, New York, and are covered by two leases: 184,000 square feet under a lease expiring in 2023 and 9,500 square feet under a lease expiring in 2016.

The Company leases two additional locations in New York, New York for office space: approximately 40,000 square feet under a lease expiring in 2020, for eCommerce and NOOK administrative offices, and approximately 40,000 square feet under a lease expiring in 2020, for Sterling Publishing administrative offices.

The Company also leases approximately 79,000 square feet of office space in Westbury, New York under a lease expiring in 2022, approximately 56,000 square feet of office space in Santa Clara, California under a lease expiring in 2019 and approximately 8,000 square feet internationally under a lease expiring in July 2016.

ITEM 3.

LEGAL PROCEEDINGS

The Company is involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, securities, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others: (i) if the damages sought are indeterminate; (ii) if proceedings are in the early stages; (iii) if there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) if there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) if there are significant factual issues to be determined or resolved; (vi) if the proceedings involve a large number of parties; (vii) if relevant law is unsettled or novel or untested legal theories are presented; or (viii) if the proceedings are taking place in jurisdictions where the laws are complex or unclear. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.

Legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company’s control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect the Company’s business, financial condition, results of operations, or cash flows.

Except as otherwise described below with respect to the Adrea LLC (Adrea) matter, the Company has determined that a loss is reasonably possible with respect to the matters described below. Based on its current knowledge the Company has determined that the amount of loss or range of loss, that is reasonably possible (or in the case of Adrea, probable), including any reasonably possible (or, in the case of Adrea, probable) losses in excess of amounts already accrued, is not estimable.

The following is a discussion of the material legal matters involving the Company.

PIN Pad Litigation

As previously disclosed, the Company discovered that PIN pads in certain of its stores had been tampered with to allow criminal access to card data and PIN numbers on credit and debit cards swiped through the terminals. Following public disclosure of this matter on October 24, 2012, the Company was served with four putative class action complaints (three in federal district court in the Northern District of Illinois and one in the Northern District of California), each of which alleged on behalf of national and other classes of customers who swiped credit and debit cards in Barnes & Noble Retail stores common law claims such as negligence, breach of contract and invasion of privacy, as well as statutory claims such as violations of the Fair Credit Reporting Act, state data breach notification statutes, and state unfair and deceptive practices statutes. The actions sought various forms of relief including damages, injunctive or equitable relief, multiple or punitive damages, attorneys’ fees, costs, and interest. All four cases were transferred and/or assigned to a single judge in the United States District Court for the Northern District of Illinois, and a single consolidated amended complaint was filed. The Company filed a motion to dismiss the consolidated amended complaint in its entirety, and in September 2013, the Court granted the motion to dismiss without prejudice. The Plaintiffs then filed an amended complaint, and the Company filed a second motion to dismiss. That motion is pending.

Cassandra Carag individually and on behalf of others similarly situated v. Barnes & Noble, Inc., Barnes & Noble Booksellers, Inc. and DOES 1 through 100 inclusive

the alleged pay errors during employment. Via the complaint, Carag seeks to recover unpaid wages and statutory penalties for all hourly Barnes & Noble employees within California from November 27, 2009 to present. On February 13, 2014, the Company filed an Answer in the state court and concurrently requested removal of the action to federal court. On May 30, 2014, the federal court granted Plaintiff’s motion to remand the case to state court and denied Plaintiff’s motion to strike portions of the Answer to the Complaint (referring the latter motion to the lower court for future consideration).

Adrea LLC v. Barnes & Noble, Inc., barnesandnoble.com llc and NOOK Media LLC

With respect to the Adrea matter described herein, the Company has determined, based on its current knowledge, that a loss is probable.

On June 14, 2013, Adrea filed a complaint against Barnes & Noble, Inc., NOOK Digital, LLC (formerly barnesandnoble.com llc) and B&N Education, LLC (formerly NOOK Media LLC) (B&N) in the United States District Court for the Southern District of New York alleging that various B&N NOOK products and related online services infringe U.S. Patent Nos. 7,298,851 (‘851 patent), 7,299,501 (‘501 patent) and 7,620,703 (‘703 patent). B&N filed its Answer on August 9, 2013, denying infringement and asserting several affirmative defenses. At the same time, B&N filed counterclaims seeking declaratory judgments of non-infringement and invalidity with respect to each of the patents-in-suit. On July 1, 2014, the Court issued a decision granting partial summary judgment in B&N’s favor, and in particular granting B&N’s motion to dismiss one of Adrea’s infringement claims, and granting B&N’s motion to limit any damages award with respect to another of Adrea’s infringement claims.

Beginning October 7, 2014, through and including October 22, 2014, the case was tried to a jury in the Southern District of New York. The jury returned its verdict on October 27, 2014. The jury found no infringement with respect to the ‘851 patent, and infringement with respect to the ‘501 and ‘703 patents. It awarded damages in the amount of $1,330,000. The jury further found no willful infringement with respect to any patent.

On July 24, 2015, the Court granted B&N’s post-trial application to invalidate one of the two patents (the ‘501 Patent) the jury found to have been infringed. On September 28, 2015, the Court heard post-trial motions on the jury’s infringement and validity determinations, and on February 24, 2016, it issued a decision upholding the jury’s determination of infringement and validity with respect to the ‘703 patent. Accordingly, the Court has now ordered a new trial on damages with respect to ‘703 patent, since the original damages award was a total award for both patents. The trial commenced June 23, 2016 and is expected to be completed by June 24, 2016.

PART II

ITE M 5.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

The Company’s common stock is traded on the New York Stock Exchange (NYSE) under the symbol “BKS”. The following table sets forth, for the quarterly periods indicated, the high and low sales prices of the common stock on the NYSE Composite Tape:


	Fiscal 2016				Fiscal 2015
	High		Low		High		Low
First Quarter	$	29.00	$	21.85	$	23.56	$	15.45
Second Quarter		18.17		11.45		24.62		17.90
Third Quarter		13.68		7.62		24.95		19.05
Fourth Quarter		12.67		7.25		26.22		21.74

Approximate Number of Holders of Common Equity


Title of Class	Approximate Number of Record Holders as of May 31, 2016
Common stock, $0.001 par value		1,745

Dividends

The Company paid dividends to preferred shareholders in the amount of $3.9 million and $16.0 million during fiscal 2016 and fiscal 2015, respectively.

The Company paid dividends to common stockholders in the amount of $46.1 million during fiscal 2016 and paid no dividends to common stockholders during fiscal 2015.

The following table provides information with respect to purchases by the Company of shares of its common stock during the fourth quarter of fiscal 2016:


Period	Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
January 31, 2016 – February 27, 2016		547,729	$	8.47		389,980	$	30,177,604
February 28, 2016 – April 2, 2016		339,382	$	11.82		318,400	$	26,409,910
April 3, 2016 – April 30, 2016		256,874	$	12.23		255,800	$	23,282,289

Total		1,143,985	$	10.31		964,180

(a)

The shares on this table above include 964,180 shares repurchased under the Company’s stock repurchase program, as well as 179,805 shares relinquished by employees in exchange for the Company’s agreement to pay federal and state withholding obligations resulting from the vesting of the Company’s restricted stock and restricted stock units, which are not drawn against the Company’s stock repurchase program. All of the restricted stock and restricted stock units vested during these periods were originally granted pursuant to the Company’s 2009 Incentive Plan and 2009 Amended and Restated Incentive Plan. These Incentive Plans provide for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock or restricted stock units.

On October 20, 2015, the Company’s Board of Directors authorized a new stock repurchase program for the purchase of up to $50.0 million of its common shares. Stock repurchases under this program may be made through open market and privately negotiated transactions from time to time and in such amounts as management deems appropriate. The repurchase program has no expiration date and may be suspended or discontinued at any time. The Company’s repurchase plan is intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company had remaining capacity of approximately $23.3 million under this program as of April 30, 2016. As of April 30, 2016, the Company has repurchased 37,941,321 shares at a cost of approximately $1.08 billion since the inception of the Company’s stock repurchase programs. The repurchased shares are held in treasury.

ITEM 6.

SELECTED FINANCIAL DATA

The information included in the Company’s Annual Report to Shareholders for the fiscal year ended April 30, 2016 included as Exhibit 13.1 to this Annual Report on Form 10-K (the Annual Report) under the section entitled “Selected Consolidated Financial Data” is incorporated herein by reference.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information included in the Annual Report under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is incorporated herein by reference.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company limits its interest rate risks by investing certain of its excess cash balances in short-term, highly-liquid instruments with an original maturity of one year or less. The Company does not expect any material losses from its invested cash balances and the Company believes that its interest rate exposure is modest. As of April 30, 2016, the Company’s cash and cash equivalents totaled approximately $13.8 million. A 50 basis point increase in annual interest rates would have increased the Company’s interest income by $0.1 million in fiscal 2016. Conversely, a 50 basis point decrease in annual interest rates would have reduced interest income by $0.0 million in fiscal 2016.

Additionally, the Company may from time to time borrow money under its credit facility at various interest rate options based on the Base Rate or LIBO Rate (each term as defined in the amended and restated credit agreement described in the Annual Report under the section titled “Notes to Consolidated Financial Statements”) depending upon certain financial tests. Accordingly, the Company may be exposed to interest rate risk on borrowings under its credit facility. The Company had $47.2 million in borrowings under its new credit facility at April 30, 2016 and no borrowings under its previous credit facility at May 2, 2015. A 50 basis point increase in annual interest rates would have increased the Company’s interest expense by $0.3 million in fiscal 2016. Conversely, a 50 basis point decrease in annual interest rates would have reduced interest expense by $0.3 million in fiscal 2016.

The Company does not have any material foreign currency exposure as nearly all of its business is transacted in United States currency.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information included in the Annual Report under the sections entitled: “Consolidated Statements of Operations,” “Consolidated Statements of Comprehensive Income (Loss),” “Consolidated Balance Sheets,” “Consolidated Statements of Changes in Shareholders’ Equity,” “Consolidated Statements of Cash Flows” and “Notes to Consolidated Financial Statements” are incorporated herein by reference.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The 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, and that 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 disclosures. 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, 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 officers, 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 that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) 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 (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 April 30, 2016.

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 elsewhere herein.

(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 April 30, 2016 that have materially affected, or are reasonably likely to affect, internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The 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 2016 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the Company’s fiscal year ended April 30, 2016 (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 April 30, 2016:


Plan Category	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)
Equity compensation plans approved by security holders		324,035		11.29		7,251,953
Equity compensation plans not approved by security holders		—		—		—

Total		324,035		11.29		7,251,953

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.

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 AND FINANCIAL STATEMENT SCHEDULES

(a)	1. Consolidated Financial Statements:

(i)

“The Report of Independent Registered Public Accountants” included in the Annual Report is incorporated herein by reference.

(ii)

The information included in the Annual Report under the sections entitled “Consolidated Statements of Operations,” “Consolidated Statements of Comprehensive Income (Loss),” “Consolidated Balance Sheets,” “Consolidated Statements of Changes in Shareholders’ Equity,” “Consolidated Statements of Cash Flows” and “Notes to Consolidated Financial Statements” are incorporated herein by reference.

Schedule:

Valuation and Qualifying Accounts.

For the 52 week period ended April 30, 2016, 52 week period ended May 2, 2015 and the 53 week period ended May 3, 2014 (in thousands):


	Balance at beginning of period		Charge (recovery) to costs and expenses		Write-offs			Balance at end of period
Allowance for Doubtful Accounts
April 30, 2016	$	5,484	$	1,377	$	(527	)	$	6,334
May 2, 2015	$	8,141	$	1,508	$	(4,165	)	$	5,484
May 3, 2014	$	5,379	$	3,346	$	(584	)	$	8,141

	Balance at beginning of period		Addition Charged to Costs		Deductions			Balance at end of period
Sales Returns Reserves
April 30, 2016	$	4,623	$	17,380	$	(16,063	)	$	5,940
May 2, 2015	$	6,533	$	24,484	$	(26,394	)	$	4,623
May 3, 2014	$	8,811	$	38,001	$	(40,279	)	$	6,533

(b)	The following are filed as Exhibits to this form:


Exhibit No.		Description

2.1		Stock Purchase Agreement dated as of August 7, 2009 among the Company, Leonard Riggio and Louise Riggio. (15)

2.2		Separation and Distribution Agreement, dated as of July 14, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (incorporated herein by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated July 14, 2015). (52)

3.1		Amended and Restated Certificate of Incorporation of the Company, as amended. (1)

3.2		Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, dated June 17, 1998 and filed July 17, 1998. (2)

3.3		Amended and Restated By-laws of the Company. (9)

3.4		Amendment to Amended and Restated By-laws of the Company. (16)

3.5		Form of Certificate of Designation, dated as of November 17, 2009. (17)

4.1		Specimen Common Stock certificate. (1)

4.2		Issuance and sale of Series J Preferred Stock of the Company to Liberty GIC, Inc. as of August 18, 2011. (28)

10.1		Employment Agreement between the Company and Mitchell S. Klipper, dated as of February 18, 2002. (3)

10.2		The Company’s Amended and Restated 1996 Incentive Plan. (4)

10.3		Employment Agreement between the Company and Stephen Riggio, dated as of February 18, 2002. (5)

10.4		The Company’s 2004 Executive Performance Plan. (6)

10.5		The Company’s 2004 Incentive Plan. (6)

10.6		Form of Option Award Agreement of the Company. (7)

10.7		Form of Restricted Stock Award Agreement of the Company. (7)

10.8		Amendment to the Company’s 2004 Incentive Plan. (8)

10.9		Amendment to the Company’s Amended and Restated 1996 Incentive Plan. (8)

10.10		Letter Agreement (including General Release and Waiver) entered into on October 8, 2008, between barnesandnoble.com llc and Marie J. Toulantis. (10)


Exhibit No.		Description

10.11		First Amendment to the Company’s 2004 Executive Performance Plan. (11)

10.12		Second Amendment to the Company’s 2004 Incentive Plan. (11)

10.13		The Company’s Amended and Restated Deferred Compensation Plan. (11)

10.14		Amendment to Employment Agreement between the Company and Stephen Riggio, dated December 18, 2008. (11)

10.15		Amendment to Employment Agreement between the Company and Mitchell S. Klipper, dated as of December 18, 2008. (11)

10.16		Employment Agreement between the Company and William J. Lynch, Jr., dated January 6, 2009. (12)

10.17		The Company’s 2009 Executive Performance Plan. (14)

10.18		The Company’s 2009 Incentive Plan. (14)

10.19		Letter Agreement between Barnes & Noble.com, llc and Ravi Gopalakrishnan, dated as of March 5, 2009. (30)

10.20		Letter Agreement between Barnes & Noble.com, llc and Jamie Iannone, dated as of March 29, 2009. (30)

10.21		Letter Agreement between Barnes & Noble College Booksellers, LLC and Max J. Roberts, dated as of September 30, 2009. (30)

10.22		Junior Subordinated Seller Note, dated September 30, 2009, issued by the Company to Leonard Riggio and Louise Riggio. (16)

10.23		Employment Agreement between the Company and Joseph J. Lombardi, dated March 17, 2010. (18)

10.24		Employment Agreement between the Company and William J. Lynch, Jr., dated March 17, 2010. (18)

10.25		Employment Agreement between the Company and Mitchell S. Klipper, dated March 17, 2010. (18)

10.26		Letter Agreement between Barnes & Noble.com, llc and Daniel A. Gilbert, dated as of March 22, 2010. (30)

10.27		Barnes & Noble.com Digital Products Device Development Incentive Bonus Plan, dated as of May 2, 2010. (30)

10.28		Form of Barnes & Noble.com Digital Products Device Development Incentive Bonus Plan Participation Agreement. (30)

10.29		Employment Agreement between the Company and Leonard Riggio, dated May 12, 2010. (19)


Exhibit No.		Description

10.30		Employment Agreement between the Company and Stephen Riggio, dated May 12, 2010. (19)

10.31		Indemnification Agreement between the Company and David G. Golden, dated August 19, 2010. (20)

10.32		Indemnification Agreement between the Company and David A. Wilson, dated August 19, 2010. (20)

10.33		Form of Performance Unit Award Agreement pursuant to the Company’s 2009 Incentive Plan. (21)

10.34		Employment Agreement between the Company and Eugene V. DeFelice, dated September 27, 2010. (22)

10.35		Form of Indemnification Agreement between the Company and Company’s directors and officers, dated January 5, 2011. (23)

10.36		Credit Agreement, dated April 29, 2011, among the Company, Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and other lenders (Credit Agreement). (24)

10.37		Investment Agreement between the Company and Liberty GIC, Inc., dated August 18, 2011. (25)

10.38		Transitional Employment Agreement between the Company and Joseph J. Lombardi, dated October 21, 2011. (26)

10.39		Employment Agreement between the Company and Michael P. Huseby, dated March 9, 2012. (27)

10.40		First Amendment to the Amended and Restated Credit Agreement, dated as of April 27, 2012, among Bank of America, N.A., as administrative agent, collateral agent, and other lenders. (28)

10.41		Investment Agreement between the Company, Morrison Investment Holdings, Inc. and Microsoft Corporation, dated April 27, 2012. (28)

10.42		The Company’s Amended and Restated 2009 Incentive Plan. (29)

10.43		Commercial Agreement dated as of April 27, 2012, between Barnes & Noble, Inc. and Microsoft Corporation. (32)

10.44		Confidential Settlement and Patent License Agreement dated as of April 27, 2012, among Barnes & Noble, Inc., barnesandnoble.com llc, Microsoft Corporation and Microsoft Licensing GP. (32)

10.45		Form of Option Award Agreement pursuant to the Company’s Amended and Restated 2009 Incentive Plan. (31)

10.46		Form of Restricted Stock Award Agreement pursuant to the Company’s Amended and Restated 2009 Incentive Plan. (31)


Exhibit No.		Description

10.47		Form of Restricted Stock Unit Award Agreement pursuant to the Company’s Amended and Restated 2009 Incentive Plan. (31)

10.48		Second Amendment to Amended and Restated Credit Agreement, dated as of October 4, 2012. (34)

10.49		Third Amendment to Amended and Restated Credit Agreement, dated as of December 21, 2012. (35)

10.50		General Release and Waiver and Consulting Agreement between the Company and Dan Gilbert, dated as of February 1, 2013. (35)

10.51		Amended Employment Agreement between the Company and William J. Lynch, Jr., dated March 7, 2013. (36)

10.52		Letter Agreement to the Amended and Restated Credit Agreement, dated as of April 26, 2013, among Bank of America, N.A., as administrative agent, collateral agent, and other lenders. (37)

10.53		Fourth Amendment to Amended and Restated Credit Agreement, dated as of June 24, 2013. (38)

10.54		Letter Agreement with respect to Amended and Restated Credit Agreement, dated as of July 25, 2013. (39)

10.55		Employment Agreement dated December 23, 2013 between Barnes & Noble, Inc. and Allen W. Lindstrom. (40)

10.56		Amended and Restated Employment Agreement, dated January 7, 2014, between Barnes & Noble, Inc. and Michael P. Huseby. (41)

10.57		Amendment No. 1 to the Commercial Agreement, dated as of October 4, 2012, between Barnes & Noble, Inc. and Microsoft Corporation. (42)

10.58		Amendment No. 2 to the Commercial Agreement, dated as of March 10, 2014, between Barnes & Noble, Inc. and Microsoft Corporation. (42)

10.59		Commercial Agreement, dated June 4, 2014, between Samsung Electronics America, Inc. and barnesandnoble.com llc. (43)

10.60		Assignment of lease agreement, dated June 5, 2014, between barnesandnoble.com llc and Google, Inc. (43)

10.61		Employment Agreement between the Company and Max Roberts, dated June 24, 2014. (44)

10.62		Commercial Agreement Amendment and Termination Agreement and Patent Agreement Amendment, dated December 4, 2014, between Microsoft Corporation and Barnes & Noble, Inc. (45)


Exhibit No.		Description

10.63		Retirement Agreement between the Company and Mitchell S. Klipper, dated January 20, 2015. (46)

10.64		The First Amendment to the Commercial Agreement Amendment and Termination Agreement and Patent Agreement Amendment with Microsoft Corporation, dated February 17, 2015, is made by and between the Securities and Exchange Commission. (47)

10.65		This First Amendment to the Commercial Agreement, dated March 7, 2015, is made by and between NOOK DIGITAL, LLC f/k/a barnesandnoble.com llc, and SAMSUNG ELECTRONICS AMERICA, INC. (48)

10.66		Conversion Agreement, dated June 5, 2015, between Series J Holders of Preferred Stock and Barnes & Noble, Inc. (49)

10.67		Employment Agreement, dated July 1, 2015, between Barnes & Noble, Inc. and Ronald D. Boire. (50)

10.68		Employment Agreement, dated July 1, 2015, between Barnes & Noble, Inc. and Jaime Carey. (50)

10.69		Completion of Conversion Agreement, dated June 5, 2015, on July 9, 2015 between Series J Holders of Preferred Stock and Barnes & Noble, Inc. (51)

10.70		Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans notice given to directors and executive officers, dated July 23, 2015. (53)

10.71		Transition Services Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (54)

10.72		Tax Matters Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (54)

10.73		Employee Matters Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (54)

10.74		Trademark License Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (54)

10.75		Credit Agreement, dated as of August 3, 2015, by and among Barnes & Noble, Inc., as borrower, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents party thereto. (54)

10.76		Completion of Spin-Off of Barnes & Noble Education, dated August 6, 2015. (55)

10.77		Stock repurchase program dated December 7, 2015. (56)

10.78		Agreement with Bahwan CyberTek, dated April 7, 2016. (57)

10.79		This Second Amendment to the Commercial Agreement, dated May 18, 2016, is made by and between NOOK DIGITAL, LLC f/k/a barnesandnoble.com llc, and SAMSUNG ELECTRONICS AMERICA, INC. (58)

10.80		Restricted Stock Unit Award Agreement pursuant to the Company’s Amended and Restated 2009 Incentive Plan. (59)

10.81		Performance-Based Stock Unit Award Agreement pursuant to the Company’s 2009 Incentive Plan. (59)

10.82		Form of Restricted Stock Unit Award Certificate. (59)

10.83		Form of Performance-Based Stock Unit Award Certificate. (59)

10.84		Letter to David Deason regarding terms and conditions of employment, dated February 11, 2014. (59)

10.85		Retention Bonus Agreement, dated March 4, 2014, between the Company and David Deason. (59)

10.86		Offer of Employment to Frederic Argir, dated June 12, 2015. (59)

10.87		Agreement Regarding Certain Terms and Conditions of Employment, dated June 25, 2015, between the Company and Frederic Argir. (59)


Exhibit No.		Description

13.1		The sections of the Company’s Annual Report entitled: “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Consolidated Statements of Operations,” “Consolidated Statements of Comprehensive Income (Loss),” “Consolidated Balance Sheets,” “Consolidated Statements of Changes in Shareholders’ Equity,” “Consolidated Statements of Cash Flows,” “Notes to Consolidated Financial Statements” and “The Report of Independent Registered Public Accounting Firm.” (59)

14.1		Code of Business Conduct and Ethics. (13)

16.1		Letter re change in certifying accountant. (33)

21.1		List of Significant Subsidiaries. (59)

23.1		Consent of Ernst & Young, LLP. (59)

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. (59)

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. (59)

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. (59)

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. (59)

101.INS		XBRL Instance Document. (59)

101.SCH		XBRL Taxonomy Extension Schema Document. (59)

101.CAL		XBRL Taxonomy Calculation Linkbase Document. (59)

101.DEF		XBRL Taxonomy Definition Linkbase Document. (59)

101.LAB		XBRL Taxonomy Label Linkbase Document. (59)

101.PRE		XBRL Taxonomy Presentation Linkbase Document. (59)

(1)		Previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (Commission File No. 33-59778) filed with the SEC on March 22, 1993.

(2)		Previously filed as an exhibit to the Company’s Form 10-Q for the fiscal quarter ended August 1, 1998.


Exhibit No.		Description

(3)		Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended February 2, 2002.

(4)		Previously filed as an exhibit to the Company’s Registration Statement on Form S-8 (Commission File No. 333-90538) filed with the SEC on June 14, 2002.

(5)		Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended February 1, 2003.

(6)		Previously filed as an exhibit to the Company’s Form 10-Q for the fiscal quarter ended May 1, 2004.

(7)		Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended January 29, 2005.

(8)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on December 21, 2006.

(9)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on April 14, 2008.

(10)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on October 10, 2008.

(11)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on December 19, 2008.

(12)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on January 8, 2009.

(13)		Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended January 31, 2009.

(14)		Previously filed as an exhibit to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 16, 2009.

(15)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on August 10, 2009.

(16)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on October 1, 2009.

(17)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on November 18, 2009.

(18)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on March 19, 2010.

(19)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 13, 2010.

(20)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on August 23, 2010.


Exhibit No.		Description

(21)		Previously filed as an exhibit to the Company’s Form 10-Q for the fiscal quarter ended July 31, 2010.

(22)		Previously filed as an exhibit to the Company’s Form 10-Q for the fiscal quarter ended October 30, 2010.

(23)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on January 10, 2011.

(24)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 2, 2011.

(25)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on August 18, 2011.

(26)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on October 21, 2011.

(27)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on March 12, 2012.

(28)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on April 30, 2012.

(29)		Previously filed as an exhibit to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on July 23, 2012.

(30)		Previously filed as an exhibit to the Company’s Form 10-Q for the fiscal quarter ended July 28, 2012.

(31)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on September 12, 2012.

(32)		Previously filed as an exhibit to the Company’s Form 8-K/A filed with the SEC on October 2, 2012.

(33)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on October 19, 2012.

(34)		Previously filed as an exhibit to the Company’s Form 10-Q for the fiscal quarter ended October 27, 2012.

(35)		Previously filed as an exhibit to the Company’s Form 10-Q for the fiscal quarter ended January 26, 2013.

(36)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on March 8, 2013.

(37)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on April 26, 2013.


Exhibit No.		Description

(38)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on June 26, 2013.

(39)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on July 26, 2013.

(40)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on December 24, 2013.

(41)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on January 8, 2014.

(42)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on March 13, 2014.

(43)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on June 5, 2014.

(44)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on June 27, 2014.

(45)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on December 4, 2014.

(46)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on January 20, 2015.

(47)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on February 17, 2015.

(48)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on March 7, 2015.

(49)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on June 5, 2015.

(50)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on July 2, 2015.

(51)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on July 10, 2015.

(52)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on July 14, 2015.

(53)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on July 27, 2015.

(54)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on August 3, 2015.

(55)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on August 6, 2015.

(56)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on December 7, 2015.

(57)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on April 7, 2016.

(58)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 18, 2016.

(59)		Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


BARNES & NOBLE, INC.
(Registrant)

By:		/s/ Ronald D. Boire
		Ronald D. Boire
		Chief Executive Officer
		June 23, 2016

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/ Leonard Riggio Leonard Riggio	Chairman of the Board	June 23, 2016

/s/ Ronald D. Boire Ronald D. Boire	Chief Executive Officer (principal executive officer)	June 23, 2016

/s/ Allen W. Lindstrom Allen W. Lindstrom	Chief Financial Officer (principal financial officer)	June 23, 2016

/s/ Peter M. Herpich Peter M. Herpich	Vice President and Corporate Controller (principal accounting officer)	June 23, 2016

/s/ Ann Marie Campbell Ann Marie Campbell	Director	June 23, 2016

/s/ George Campbell Jr. George Campbell Jr.	Director	June 23, 2016

/s/ Mark D. Carleton Mark D. Carleton	Director	June 23, 2016

/s/ Scott S. Cowen Scott S. Cowen	Director	June 23, 2016

/s/ William Dillard II William Dillard II	Director	June 23, 2016

/s/ Paul Guenther Paul Guenther	Director	June 23, 2016

/s/ Patricia L. Higgins Patricia L. Higgins	Director	June 23, 2016

Exhibit 10.80

LOGO

RESTRICTED STOCK UNIT AWARD AGREEMENT

Issued Pursuant to the

Amended and Restated Barnes & Noble, Inc. 2009 Incentive Plan

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”), effective as of the grant date (“Grant Date”) set forth in the attached Restricted Stock Unit Award Certificate (the “Certificate”), represents the grant of such number of restricted stock units (“RSUs”) set forth in the Certificate by Barnes & Noble, Inc. (the “Company”), to the person named in the Certificate (the “Participant”), subject to the terms and conditions set forth below and the provisions of the Amended and Restated Barnes & Noble, Inc. 2009 Incentive Plan adopted by the Company’s Board of Directors on July 16, 2012 and approved by the Company’s stockholders on September 11, 2012 (the “Plan”).

All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The parties hereto agree as follows:

1. Grant of RSUs. The Company hereby grants to the Participant the number of RSUs set forth in the Certificate, subject to the terms and conditions of the Plan and this Agreement. Subject to Section 2 below, each RSU constitutes an unfunded and unsecured promise of the Company to deliver to the Participant a Share (or the equivalent value thereof, as provided in Section 2(b) hereof).

2. Vesting Period and Settlement. (a) In General. Except as set forth in Section 6 below, if the Participant’s employment terminates before the last vesting date set forth in the Certificate, all RSUs granted hereunder that are unvested as of the date of termination of employment shall be forfeited. Subject to the terms of this Agreement and the Plan, RSUs granted hereunder shall vest as indicated in the Certificate. For the specified vesting to occur on any vesting date set forth therein, the Participant must be continuously employed by the Company or any of its Affiliates from the Grant Date through such vesting date.

(a) Vesting. Except as set forth in Section 12 hereof, in no event shall a Participant have any rights to the Shares underlying these RSUs granted hereunder: (i) prior to the date such RSUs vest pursuant to the vesting schedule set forth in the Certificate and the RSUs are settled; or (ii) with respect to any partial RSU.

(b) Settlement. On each vesting date, the Company shall deliver to the Participant one Share, or the equivalent value in cash, other property or any combination thereof, as determined in the sole discretion of the Committee at the time of such payment, for each RSU that is scheduled to vest on such date in accordance with the terms of this Agreement.

3. No Voting Rights. No RSUs granted hereunder, whether vested or unvested, shall have any voting rights accorded to the underlying Shares.

4. Dividend Equivalent Rights. (a) Cash Dividends. The Participant shall be entitled to receive an amount in cash equal to any cash dividends paid with respect to the number of Shares underlying these RSUs granted hereunder. Any such cash dividends shall not be distributed to the Participant unless, until and except to the extent that these RSUs vest.

(b) Non-Cash Dividends. Any stock dividends or other distributions or dividends of property other than cash with respect to the Shares underlying these RSUs granted hereunder shall be subject to the same forfeiture restrictions and restrictions on transferability as apply to the RSUs with respect to which such property was paid.

5. Nontransferability. (a) In General. Except as may be provided in Section 5(b) below, these RSUs granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, except as provided in the Plan. No assignment or transfer of any RSUs in violation of this Section 5, whether voluntary or involuntary, by operation of law or otherwise, except by will or the laws of descent and distribution or as otherwise required by applicable law, shall vest in the assignee or transferee any interest whatsoever.

(b) Transfers With The Consent of the Committee. With the consent of the Committee, a Participant may assign or transfer unvested RSUs to the Participant’s spouse, domestic partner and/or children (and/or trusts and/or partnerships established for the benefit of the Participant’s spouse, domestic partner and/or children or in which the Participant is a beneficiary or partner) (each transferee thereof, a “Permitted Assignee”); provided , however , that such Permitted Assignee(s) shall be bound by and subject to all of the terms and conditions of the Plan and this Agreement relating to the transferred RSUs and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. Notwithstanding the foregoing, in no event shall the RSUs (or any rights and obligations thereunder) be transferred to a third party in exchange for value unless such transfer is specifically approved by the Company’s stockholders. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 5(b).

6. Termination. (a) Death. In the event a Participant dies while employed by the Company or any of its Affiliates, all restrictions set forth herein shall lapse and any unvested RSUs held by such Participant (or his or her Permitted Assignee) shall vest in the estate of such Participant or in any person who acquired such RSUs by bequest or inheritance, or by the Permitted Assignee. References in this Agreement to a Participant shall include any person who acquired RSUs from such Participant by bequest or inheritance.

(b) Disability. In the event a Participant ceases to perform services of any kind (whether as an employee or Director) for the Company or any of its Affiliates due to permanent and total disability, all restrictions set forth herein shall lapse and all unvested RSUs shall immediately vest in the Participant, or his guardian or legal representative, or a Permitted Assignee, as of the first date of permanent and total disability (as determined in the sole discretion of the Committee). For purposes of this Agreement, the term “permanent and total disability” means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Committee. Notwithstanding anything to the contrary set forth herein, the Committee shall determine, in its sole and absolute discretion, (1) whether a Participant has ceased to perform services of any kind due to a permanent and total disability and, if so, (2) the first date of such permanent and total disability.

7. Administration. (a) Generally. This Agreement and the rights of the Participant hereunder and under the Certificate are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan, this Agreement and the Certificate, all of which shall be binding upon the Participant and Permitted Assignees. Any inconsistency between this Agreement or the Certificate (on the one hand) and the Plan (on the other hand) shall be resolved in favor of the Plan.

(b) Conflicts. The order of precedence as between the Plan, this Agreement or the Certificate, and any written employment agreement between the Participant and the Company shall be as follows: If there is any inconsistency between (i) the terms of this Agreement or the Certificate (on the one hand) and the terms of the Plan (on the other hand); or (ii) any such written employment agreement (on the one hand) and the terms of the Plan (on the other hand), the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement, the Certificate or the written employment agreement (as the case may be). If there is any inconsistency between the terms of this Agreement or the Certificate (on the one hand) and the terms of Participant’s written employment agreement, if any (on the other hand), the terms of this Agreement or the Certificate (as the case may be) shall completely supersede and replace the conflicting terms of the written employment agreement unless such written employment agreement was approved by the Committee, in which event such written employment agreement shall completely supersede and replace the conflicting terms of this Agreement or the Certificate (as the case may be).

8. Adjustments. The number of RSUs granted hereunder shall be subject to adjustment in accordance with Sections 10.3 and 12.2 of the Plan.

9. Exclusion from Other Computations. By acceptance of these RSUs granted hereunder, the Participant hereby agrees that any income or gain realized upon the receipt or settlement of the RSUs, or upon disposition of any Shares received upon settlement, is special incentive compensation and shall not be taken into account, to the extent permissible under applicable law, as “wages”, “salary” or “compensation” in determining the amount of any payment under any pension, retirement, incentive, profit sharing, bonus or deferred compensation plan of the Company or any of its Affiliates.

10. Withholding Taxes. The Company shall have the right to withhold from wages or other amounts otherwise payable to the Participant (or a Permitted Assignee thereof), or otherwise require the Participant or Permitted Assignee to pay, any federal, state, local or foreign income taxes, withholding taxes, or employment taxes required to be withheld by law or regulations (“Withholding Taxes”) arising as a result of the grant or vesting of RSUs, the transfer of any RSUs or any other taxable event occurring pursuant to the Plan, this Agreement or the Certificate. If, notwithstanding the foregoing, the Participant (or Permitted Assignee) shall fail to actually or constructively make such tax payments as are required, the Company (or its Affiliates) shall, to the extent permitted by law, have the right to deduct any such Withholding Taxes from any payment of any kind otherwise due to such Participant or Permitted Assignee or to take such other action as may be necessary to satisfy such Withholding Taxes. In satisfaction of the requirement to pay Withholding Taxes, the Company, in its sole discretion, may elect to satisfy the obligation for Withholding Taxes by retaining a sufficient number of Shares that it would otherwise deliver on a particular vesting date equal to the amount of any Withholding Taxes due on such vesting date. Notwithstanding the foregoing discretion, the Company shall satisfy the obligation for Withholding Taxes by retaining a sufficient number of Shares that it would otherwise deliver on a particular vesting date equal to the amount of any Withholding Taxes due on such vesting date, unless the Participant has provided the Company with written notice at least 30 days (or such lesser period as may be permitted by the Company in its sole discretion) in advance of such vesting date that the Participant will pay the Withholding Taxes in cash. For purposes of the preceding two sentences, where the Company is to retain Shares to satisfy the obligation for Withholding Taxes, the net amount of Shares to be delivered to the Participant on a vesting date shall equal the total number of Shares otherwise deliverable to the Participant on such vesting date (pursuant to Section 2(c) hereof and the Certificate), less such number of Shares having an aggregate Fair Market Value equal to the amount of such Withholding Taxes (as determined in the Committee’s sole discretion).

11. Registration; Legend. The Company may postpone the issuance and delivery of any Shares upon settlement of these RSUs granted hereunder until (a) the admission of such Shares to listing on any stock exchange or exchanges on which Shares of the Company of the same class are then listed and (b) the completion of such registration or other qualification of such Shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or advisable. The Participant shall make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the then existence or non-existence with respect to such Shares of an effective Registration Statement under the Securities Act of 1933, as amended, to issue the Shares in compliance with the provisions of that or any comparable act.

The Company may cause the following or a similar legend to be set forth on each certificate representing Shares issuable upon settlement of these RSUs granted hereunder unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO FORFEITURE AND OTHER LIMITATIONS AND RESTRICTIONS AS SET FORTH IN A RESTRICTED STOCK UNIT AWARD AGREEMENT ON FILE WITH THE COMPANY. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS ESTABLISHED BY AN OPINION FROM COUNSEL TO THE COMPANY.

12. Change of Control. (a) In the event of the occurrence of a Change of Control of the Company, the Committee, in its sole discretion, may cause any unvested RSUs granted hereunder to vest.

(b) Notwithstanding the foregoing, in the event of a termination of the Participant’s employment by the successor company following such Change of Control, these RSUs granted hereunder or any award substituted therefor held by such Participant at the time of the Change of Control shall vest as of the day preceding the date of termination unless the termination was made by the successor company for cause. For purposes of this Agreement, “cause” shall mean either (i) material failure by the Participant to perform his or her duties (other than as a result of incapacity due to physical or mental illness) during his or her employment with the Company after written notice of such breach or failure and the Participant failed to cure such breach or failure to the Company’s reasonable satisfaction within five days after receiving such written notice; or (ii) any act of fraud, misappropriation, misuse, embezzlement or any other material act of dishonesty in respect of the Company or its funds, properties, assets or other employees.

13. Miscellaneous.

(a) No Right to Employment. Neither this Agreement nor the Certificate shall confer upon the Participant any right to continuation of employment by the Company, nor shall this Agreement or the Certificate interfere in any way with the Company’s right to terminate the Participant’s employment at any time.

(b) Successors. All obligations of the Company under the Plan, this Agreement and the Certificate, with respect to these RSUs granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.

(c) Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

(d) Consent to Board or Committee Action. By accepting this grant of RSUs, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.

(e) Amendment. The Committee may, with the consent of the Participant, at any time or from time to time amend the terms and conditions of this grant of RSUs. In addition, the Committee may at any time or from time to time amend the terms and conditions of this grant of RSUs in accordance with the Plan.

(f) Governmental Approvals. This Agreement and the Certificate shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(g) Governing Law. To the extent not preempted by federal law, this Agreement and the Certificate shall be governed by, and construed in accordance with, the laws of the State of Delaware.

(h) Compliance with Code Section 409A. The settlement of these RSUs granted hereunder is intended to comply with Code Section 409A, and this Agreement shall be interpreted, operated and administered consistent with this intent. Notwithstanding the preceding, the Company makes no representations concerning the tax consequences of this Agreement under Code Section 409A or any other federal, state, local, foreign or other taxes. Tax consequences will depend, in part, upon the application of the relevant tax law to the relevant facts and circumstances. The Participant should consult a competent and independent tax advisor regarding the tax consequences of this Agreement.

(i) Waiver of Trial by Jury. The Participant, every person claiming under or through the Participant, and the Company hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with the Plan, this Agreement or the Certificate.

(j) Exculpation. These RSUs granted hereunder and all documents, agreements, understandings and arrangements relating hereto have been issued on behalf of the Company by officers acting on its behalf and not by any person individually. None of the Directors, officers or stockholders of the Company nor the Directors, officers or stockholders of any Affiliate of the Company shall have any personal liability hereunder or thereunder. The Participant shall look solely to the assets of the Company for satisfaction of any liability of the Company in respect of these RSUs granted hereunder and all documents, agreements, understandings and arrangements relating hereto and will not seek recourse or commence any action against any of the Directors, officers or stockholders of the Company or any of the Directors, officers or stockholders of any Affiliate, or any of their personal assets, for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to these RSUs granted hereunder.

(k) Captions. The captions in this Agreement are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.

(l) Notices. Any notice that either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid or overnight courier, addressed as follows: if to the Company, at its office at 122 Fifth Avenue, New York, NY 10011, Attn: Human Resources, or at such other address as the Company by notice to the Participant may designate in writing from time to time; and if to the Participant, at the address shown below his or her signature on the Certificate, or at such other address as the Participant by notice to the Company may designate in writing from time to time. Notices shall be effective upon receipt.

Exhibit 10.81

LOGO

PERFORMANCE-BASED STOCK UNIT AWARD AGREEMENT

Issued Pursuant to the

Amended and Restated Barnes & Noble, Inc. 2009 Incentive Plan

THIS PERFORMANCE-BASED STOCK UNIT AWARD AGREEMENT (“Agreement”), effective as of the grant date (“Grant Date”) set forth in the attached Performance-Based Stock Unit Award Certificate (the “Certificate”), represents the grant of such target number of performance-based stock units subject to performance-based vesting criteria (“PSUs”) set forth in the Certificate by Barnes & Noble, Inc. (the “Company”), to the person named in the Certificate (the “Participant”), subject to the terms and conditions set forth below, the Certificate, and the provisions of the Amended and Restated Barnes & Noble, Inc. 2009 Incentive Plan adopted by the Company’s Board of Directors on July 16, 2012 and approved by the Company’s stockholders on September 11, 2012 (the “Plan”).

All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The parties hereto agree as follows:

1. Grant of PSUs. The Company hereby grants to the Participant the target number of PSUs set forth in the Certificate. The portion of the PSUs that will vest based on the attainment of certain financial goals (the “Performance Metrics”) during a specific period of time (the “Performance Period”) under a specified vesting formula (including the maximum number of PSUs that are eligible to vest), each of which is set forth in the Certificate, shall be determined by the Committee. Following the end of the Performance Period, the Committee shall certify the level of attainment of the Performance Metrics and the PSUs vested as a result thereof.

2. Vesting Period and Settlement. (a) In General. Subject to the terms of this Agreement, the Certificate and the Plan, PSUs granted hereunder are eligible to vest as indicated in the Certificate at the end of the Performance Period. For such vesting to occur at the end of the Performance Period, the Participant must be continuously employed by the Company or any of its Affiliates from the Grant Date through the end of the Performance Period. Except as set forth in Section 6 or Section 12 below, if the Participant’s employment terminates before the end of the Settlement Date, all PSUs granted hereunder as of the date of termination of employment shall be forfeited.

(b) Vesting. Except as set forth in Section 6 or Section 12 below, in no event shall a Participant have any rights to the Shares underlying the PSUs granted hereunder prior to the date such PSUs vest pursuant to the vesting schedule set forth in the Certificate and the PSUs are settled.

(c) Settlement. Within 60 days after the end of the Performance Period, the Committee shall determine and certify in writing (1) whether and to what extent the Performance Metrics have been achieved and (2) based on the achievement of such Performance Metrics, the number of PSUs that have vested, in each case, in accordance with the Certificate. Not later than the 15th day of the third month following the end of the Performance Period (or such earlier date on which the PSUs vest in accordance with Section 6 or Section 12 below (such date, the “Settlement Date”)), the Company shall deliver to the Participant one Share, or the equivalent value in cash, other property or any combination thereof, as determined in the sole discretion of the Committee at the time of such payment, for each PSU that vested in accordance with the Certificate and the terms of this Agreement and the Plan, subject to Section 10 below relating to tax withholding.

3. No Voting Rights. No PSUs granted hereunder shall have any voting rights accorded to the underlying Shares. Each PSU constitutes an unfunded and unsecured promise of the Company to deliver to the Participant a Share (or the equivalent value thereof).

4. Dividend Equivalent Rights. (a) Cash Dividends. The Participant shall be entitled to receive an amount in cash equal to any cash dividends paid with respect to the number of Shares underlying these PSUs granted hereunder. Any such cash dividends shall not be distributed to the Participant unless, until and except to the extent that the Performance Metrics applicable to these PSUs are achieved or are otherwise deemed satisfied.

(b) Non-Cash Dividends. Any stock dividends or other distributions or dividends of property other than cash with respect to the Shares underlying these PSUs granted hereunder shall be subject to the same forfeiture restrictions and restrictions on transferability as apply to the PSUs with respect to which such property was paid.

5. Nontransferability. (a) In General. Except as may be provided in Section 5(b) below, these PSUs granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, except as provided in the Plan. No assignment or transfer of any PSUs in violation of this Section 5, whether voluntary or involuntary, by operation of law or otherwise, except by will or the laws of descent and distribution or as otherwise required by applicable law, shall vest in the assignee or transferee any interest whatsoever.

(b) Transfers With The Consent of the Committee. With the consent of the Committee, a Participant may assign or transfer unvested PSUs to the Participant’s spouse, domestic partner and/or children (and/or trusts and/or partnerships established for the benefit of the Participant’s spouse, domestic partner and/or children or in which the Participant is a beneficiary or partner) (each transferee thereof, a “Permitted Assignee”); provided , however , that such Permitted Assignee(s) shall be bound by and subject to all of the terms and conditions of the Plan, the Certificate and this Agreement relating to the transferred PSUs and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan, the Certificate and this Agreement. Notwithstanding the foregoing, in no event shall the PSUs (or any rights and obligations thereunder) be transferred to a third party in exchange for value unless such transfer is specifically approved by the Company’s stockholders. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 5(b).

6. Termination. (a) Death. In the event a Participant dies while employed by the Company or any of its Affiliates, a number of PSUs equal to the target number of PSUs awarded (as set forth in the Certificate) shall immediately vest in the estate of such Participant or in any person who acquired such PSUs by bequest or inheritance, or by the Permitted Assignee. References in this Agreement to a Participant shall include any person who acquired PSUs from such Participant by bequest or inheritance.

(b) Disability. In the event a Participant ceases to perform services of any kind for the Company or any of its Affiliates due to permanent and total disability, a number of PSUs equal to the target number of PSUs awarded (as set forth in the Certificate) shall immediately vest in the Participant, or his guardian or legal representative, or a Permitted Assignee, as of the first date of permanent and total disability (as determined in the sole discretion of the Committee). For purposes of this Agreement, the term “permanent and total disability” means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Committee. Notwithstanding anything to the contrary set forth herein, the Committee shall determine, in its sole and absolute discretion, (1) whether a Participant has ceased to perform services of any kind due to a permanent and total disability and, if so, (2) the first date of such permanent and total disability.

employment agreement, if any (on the other hand), the terms of this Agreement or the Certificate (as the case may be) shall completely supersede and replace the conflicting terms of the written employment agreement unless such written employment agreement was approved by the Committee, in which event such written employment agreement shall completely supersede and replace the conflicting terms of this Agreement or the Certificate (as the case may be).

8. Adjustments. The number of PSUs granted hereunder shall be subject to adjustment in accordance with Sections 10.3 and 12.2 of the Plan.

9. Exclusion from Other Computations. By acceptance of these PSUs granted hereunder, the Participant hereby agrees that any income or gain realized upon the receipt or settlement of the PSUs, or upon disposition of any Shares received upon settlement, is special incentive compensation and shall not be taken into account, to the extent permissible under applicable law, as “wages,” “salary” or “compensation” in determining the amount of any payment under any pension, retirement, incentive, profit sharing, bonus, severance or deferred compensation plan of the Company or any of its Affiliates.

10. Withholding Taxes. The Company shall have the right to withhold from wages or other amounts otherwise payable to the Participant (or a Permitted Assignee thereof), or otherwise require the Participant or Permitted Assignee to pay, any federal, state, local or foreign income taxes, withholding taxes, or employment taxes required to be withheld by law or regulations (“Withholding Taxes”) arising as a result of the grant or vesting of PSUs, the transfer of any PSUs or any other taxable event occurring pursuant to the Plan, this Agreement or the Certificate. If, notwithstanding the foregoing, the Participant (or Permitted Assignee) shall fail to actually or constructively make such tax payments as are required, the Company (or its Affiliates) shall, to the extent permitted by law, have the right to deduct any such Withholding Taxes from any payment of any kind otherwise due to such Participant or Permitted Assignee or to take such other action as may be necessary to satisfy such Withholding Taxes. In satisfaction of the requirement to pay Withholding Taxes, the Company, in its sole discretion, may elect to satisfy the obligation for Withholding Taxes by retaining a sufficient number of Shares that it would otherwise deliver on a particular Settlement Date equal to the amount of any Withholding Taxes due on such Settlement Date. Notwithstanding the foregoing discretion, the Company shall satisfy the obligation for Withholding Taxes by retaining a sufficient number of Shares that it would otherwise deliver on a particular Settlement Date equal to the amount of any Withholding Taxes due on such Settlement Date. For purposes of the preceding two sentences, where the Company is to retain Shares to satisfy the obligation for Withholding Taxes, the net amount of Shares to be delivered to the Participant on a Settlement Date shall equal the total number of Shares otherwise deliverable to the Participant on such Settlement Date (pursuant to Section 2(c) hereof and the Certificate), less such number of Shares having an aggregate Fair Market Value equal to the amount of such Withholding Taxes (as determined in the Committee’s sole discretion).

11. Registration; Legend. The Company may postpone the issuance and delivery of any Shares upon settlement of these PSUs granted hereunder until (a) the admission of such Shares to listing on any stock exchange or exchanges on which Shares of the Company of the same class are then listed and (b) the completion of such registration or other qualification of such Shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or advisable. The Participant shall make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the then existence or non-existence with respect to such Shares of an effective Registration Statement under the Securities Act of 1933, as amended, to issue the Shares in compliance with the provisions of that or any comparable act.

The Company may cause the following or a similar legend to be set forth on each certificate representing Shares issuable upon settlement of these PSUs granted hereunder unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO FORFEITURE AND OTHER LIMITATIONS AND RESTRICTIONS AS SET FORTH IN A PERFORMANCE-BASED STOCK UNIT AWARD AGREEMENT ON FILE WITH THE COMPANY. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE

SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS ESTABLISHED BY AN OPINION FROM COUNSEL TO THE COMPANY.

12. Change of Control. (a) In the event of a Change of Control of the Company, unless the Committee, in its sole discretion, determines otherwise, , the Performance Metrics set forth in the Certificate applicable to these PSUs granted hereunder shall cease to apply to these PSUs and be deemed achieved at the greater of the target level performance or the actual level of performance, as determined by the Committee, in its sole discretion, and the number of PSUs based on such performance level shall vest and be settled on the last day of the Performance Period, subject to the Participant’s continuous employment by the Company or any of its Affiliates from the date of the Change of Control through the end of the Performance Period.

(b) Notwithstanding the foregoing, in the event of a termination of the Participant’s employment by the successor company following such Change of Control, these PSUs granted hereunder or any award substituted therefor held by such Participant at the time of the Change of Control shall vest as of the day immediately preceding the date of termination unless the termination was made by the successor company for cause. For purposes of this Agreement, “cause” shall mean either (i) material failure by the Participant to perform his or her duties (other than as a result of incapacity due to physical or mental illness) during his or her employment with the Company after written notice of such breach or failure and the Participant failed to cure such breach or failure to the Company’s reasonable satisfaction within five days after receiving such written notice; or (ii) any act of fraud, misappropriation, misuse, embezzlement or any other material act of dishonesty in respect of the Company or its funds, properties, assets or other employees.

13. Miscellaneous.

(b) Successors. All obligations of the Company under the Plan, this Agreement and the Certificate, with respect to these PSUs granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.

(d) Consent to Board or Committee Action. By accepting this grant of PSUs, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.

(e) Amendment. The Committee may, with the consent of the Participant, at any time or from time to time amend the terms and conditions of this grant of PSUs. In addition, the Committee may at any time or from time to time amend the terms and conditions of this grant of PSUs in accordance with the Plan.

(g) Governing Law. To the extent not preempted by federal law, this Agreement and the Certificate shall be governed by, and construed in accordance with, the laws of the State of Delaware.

(h) Compliance with Code Section 409A. The settlement of these PSUs granted hereunder is intended to comply with Code Section 409A, and this Agreement shall be interpreted, operated and administered consistent with this intent. Notwithstanding the preceding, the Company makes no representations concerning the

tax consequences of this Agreement under Code Section 409A or any other federal, state, local, foreign or other taxes. Tax consequences will depend, in part, upon the application of the relevant tax law to the relevant facts and circumstances. The Participant should consult a competent and independent tax advisor regarding the tax consequences of this Agreement.

(i) Section 162(m). To the extent the Committee determines it is desirable with respect to the PSUs , all payments under this Agreement shall be intended to constitute “qualified performance-based compensation” within the meaning of Section 162(m) of the Code. This Award shall be construed and administered in a manner consistent with such intent.

(j) Waiver of Trial by Jury. The Participant, every person claiming under or through the Participant, and the Company hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with the Plan, this Agreement or the Certificate.

(k) Exculpation. These PSUs granted hereunder and all documents, agreements, understandings and arrangements relating hereto have been issued on behalf of the Company by officers acting on its behalf and not by any person individually. None of the Directors, officers or stockholders of the Company nor the Directors, officers or stockholders of any Affiliate of the Company shall have any personal liability hereunder or thereunder. The Participant shall look solely to the assets of the Company for satisfaction of any liability of the Company in respect of these PSUs granted hereunder and all documents, agreements, understandings and arrangements relating hereto and will not seek recourse or commence any action against any of the Directors, officers or stockholders of the Company or any of the Directors, officers or stockholders of any Affiliate, or any of their personal assets, for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to these PSUs granted hereunder.

(l) Captions. The captions in this Agreement are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.

(m) Notices. Any notice that either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid or overnight courier, addressed as follows: if to the Company, at its office at 122 Fifth Avenue, New York, NY 10011, Attn: Human Resources, or at such other address as the Company by notice to the Participant may designate in writing from time to time; and if to the Participant, at the address shown below his or her signature on the Certificate, or at such other address as the Participant by notice to the Company may designate in writing from time to time. Notices shall be effective upon receipt.

Exhibit 10.82

LOGO

Restricted Stock Unit Award Certificate


Granted To:		Name
		Street Address
		City, State Zip Code

You have been granted Restricted Stock Units (“RSUs”) of Barnes & Noble, Inc., as described below. Subject to the terms of the Restricted Stock Unit Award Agreement, and the Amended and Restated Barnes & Noble, Inc. 2009 Incentive Plan (the “Plan”) each RSU constitutes an unfunded and unsecured promise of the Company to deliver to you one share of common stock of Barnes & Noble, Inc., par value $0.001 per share.


Employee ID:	XXXXXXXXX

Grant Date:	July 15, 2015	Number of RSUs Granted:	XXXXX

Vesting Schedule:

By your signature below, you agree that these RSUs are awarded under and governed by the terms and conditions of the Plan, the Restricted Stock Unit Award Agreement and the Insider Trading Policy, all of which are attached and made a part of this document.


Signature:				Date:

NOTE: If there are any discrepancies in the name or address shown above, please make the appropriate correction on this form.

PLEASE RETURN TO:

Barnes & Noble, Inc.

1400 Old Country Road

Westbury, New York 11590

Attn: Cheryl Caponi, Human Resources

(516) 338-8471

Exhibit 10.83

LOGO

Performance-Based Stock Unit Award Certificate

PERSONAL & CONFIDENTIAL


Granted To:		Name
		Address
		City, State Zip

You have been awarded Performance-Based Stock Units (“PSUs”) of Barnes & Noble, Inc., as described below. Subject to the terms of the Performance-Based Stock Unit Award Agreement and the Amended and Restated Barnes & Noble, Inc. 2009 Incentive Plan (the “Plan”), each PSU constitutes an unfunded and unsecured promise of the Company to deliver to you one share of common stock of Barnes & Noble, Inc., par value $0.001 per share.

Performance Period: The Performance Period shall be three fiscal years commencing on May 3, 2015 and ending on April 28, 2018.

Performance Metrics: (i) earnings before interest, taxes, depreciation and amortization of the Company retail segment (“EBITDA”) and (ii) revenue of the Company retail segment (“Revenue”); provided , however , EBITDA and Revenue shall be adjusted to exclude (1) any costs and expenses relating to any effort to prepare for or implement, or resulting from, a partial or complete separation of one or more of the Company’s businesses; if the distribution by the Company of all of the outstanding shares of Barnes & Noble Education, Inc. (“BNED”) common stock owned by the Company occurs prior to the end of fiscal year 2016; (2) any costs and expenses relating to the Retail/NOOK integration; (3) non-routine litigation expenses, such as derivative actions; and (4) the termination of the Company’s Employees’ Retirement Plan, in each case, as determined in accordance with generally accepted accounting principles and identified in the Company’s financial statements, notes to the financial statements or management’s discussion and analysis with respect to the financial statements as filed with the U.S. Securities and Exchange Commission.

Performance Vesting: 50% of the Target Number of PSUs Awarded will vest based on the EBITDA level achieved during the Performance Period (the “EBITDA PSUs”) and 50% of the Target Number of PSUs Awarded will vest based on the Revenue level achieved during the Performance Period (the “Revenue PSUs”), as set forth below.


Performance Period EBITDA Level (in millions)		% of EBITDA PSUs Vested
		0%
		50% — < 100%
		100% — < 150%
		150%

LOGO

Performance-Based Stock Unit Award Certificate


Performance Period Revenue Levels (in millions)		% of Revenue PSUs Vested
		0%
		50% — < 100%
		100% — < 150%
		150%

For any amounts calculated under this Certificate that fall between two percentages set forth in the right columns above that are between 50% and 150%, the percentage of the number of applicable PSUs that vest shall be interpolated in a straight line between the two relevant percentages, rounded to the nearest whole percentage.

Time Vesting: Except as otherwise as set forth in the Performance-Based Stock Unit Award Agreement, you must be continuously employed by the Company or any of its Affiliates during the entire Performance Period in order to vest in any portion of the Target Number of PSUs Awarded.

By your signature below, you agree that these PSUs are awarded under and governed by the terms and conditions of the Plan, the Performance-Based Stock Unit Award Agreement and the Insider Trading Policy, all of which are attached and made a part of this document.


Signature:				Date:

NOTE: If there are any discrepancies in the name or address shown above, please make the appropriate correction on this form.

PLEASE RETURN TO:

Barnes & Noble, Inc.

1400 Old Country Road

Westbury, New York 11590

Attn: Cheryl Caponi, Human Resources

(516) 338-8471

Exhibit 10.84

February 11, 2014

David Deason

5212 Creekpoint Drive

Plano, TX 75093

Dear David,

As a valued employee in an important leadership role, we would like to extend an additional benefit to you which will provide financial security in the event your employment is terminated.

Effective immediately, the following terms and conditions will apply to your employment:

In the event that your employment is terminated by the Company without Cause, the Company shall pay you an amount equal to one times your then annual base salary. Payments will be made bi-weekly less all applicable withholding and other applicable taxes and deductions provided that you execute and deliver to the Company, and do not revoke, a release of all claims against the Company substantially in the form attached hereto as Exhibit A (“Release”).

For purposes of this letter, “Cause” means (A) your engaging in misconduct or gross negligence which is injurious to Company; (B) your indictment or conviction by a court of competent jurisdiction with respect to any felony or other crime or violation of law involving fraud or dishonesty (with the exception of misconduct based in good faith on the advice of professional consultants, such as attorneys and accountants), or your entry of a plea of nolo contendere with respect to any felony involving fraud or dishonesty (with the exception of misconduct based in good faith on the advice of professional consultants, such as attorneys and accountants); (C) any gross negligence, intentional acts or intentional omissions by you, as determined by the Company in connection with the performance of the duties and responsibilities of your employment hereunder; (D) engaging in any act of misconduct or moral turpitude, as determined by the Company; (E) abuse of or dependency on alcohol or drugs (illicit or otherwise) which adversely affects job performance; (F) failure or refusal by you to properly perform (as determined by the Company in its reasonable discretion and judgment) the duties, responsibilities or obligations of your employment for reasons other than Disability or authorized leave, or to properly perform or follow (as determined by the Company in its reasonable discretion and judgment) any lawful direction by the Company; or (G) breach of this Agreement or of any other duty to, written policy of, or agreement with the Company.

Please feel free to contact me if you have any questions.

Sincerely,

LOGO

Michelle Smith

Vice President, Human Resources

MS/kmm

Attachment

Exhibit 10.85

RETENTION BONUS AGREEMENT

February 7, 2014

David Deason

The Company has approved a one-time retention bonus to you in the amount of $755,550 (your “ Retention Bonus ”). Your Retention Bonus will vest with respect to 50% of the amount if you are continuously employed by the Company through February 7, 2016 (the “ Initial Vesting Date ”) and with respect to the remaining 50% of the amount if you are continuously employed by the Company through February 7, 2017 (the “ Final Vesting Date ”). In the event that you voluntarily terminate your employment or the Company terminates your employment for “Cause” (as defined below), you will not receive the then-unvested portion of your Retention Bonus. If vested, payment of the applicable portion of your Retention Bonus will be made by the Company in cash, less applicable taxes and other withholdings, within 30 days after the Initial or Final Vesting Date, as appropriate. Taxes on the award shall remain your sole responsibility.

In the event that the Company involuntarily terminates your employment without “Cause,” or if your employment terminates due to death or “Permanent and Total Disability” (as defined below), prior to the Initial Vesting Date, 50% of your Retention Bonus will vest pro rata based on the number of whole months employed since the date of this letter agreement divided by 24 months. In the event that the Company involuntarily terminates your employment without “Cause,” or if your employment terminates due to death or “Permanent and Total Disability,” following the Initial Vesting Date and prior to the Final Vesting Date, the remaining unvested 50% portion of your Retention Bonus will vest pro rata based on the number of whole months employed following the Initial Vesting Date and prior to the Final Vesting Date divided by 12 months. An amount of your Retention Bonus equal to 50% of the original amount will vest upon any sale by the Company of, or distribution to the holders of the stock of the Company (by pro rata distribution or dividend, exchange offer/“split-off” or any comparable means) of, all or substantially all of the operations of either (i) the Company’s Digital segment (and any business or assets selected by the Company’s Board of Directors to be part of such sale or distribution involving the Company’s Digital segment) or (ii) the Company’s Retail segment (and any business or assets selected by the Company’s Board of Directors to be part of such sale or distribution involving the Company’s Retail segment). Payment of the applicable portion of your Retention Bonus will be made by the Company, in cash, less applicable taxes and withholding, within 30 days following the termination of your employment without “Cause” or due to death or “Permanent and Total Disability” or the sale or distribution described in the immediately preceding sentence, as applicable.

For purposes of this agreement, “Cause” means (1) your conviction of, or plea of guilty or nolo contendere to, a felony; (2) your commission of intentional acts of gross misconduct (including, without limitation, theft, fraud, embezzlement or dishonesty) that significantly impair the business of the Company or cause significant damage to its property, reputation or business; (3) your willful refusal to perform, or willful failure to use good faith efforts to perform, material duties that remains uncured after 14 days reasonable written request from the Company for cure; and (4) your willful and material breach of any material provision of any material policy governing the conduct of its employees that remains uncured after 14 days reasonable written request from the Company for cure.

For purposes of this agreement, “Permanent and Total Disability” means you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, the permanence and degree of which is supported by medical evidence satisfactory to the Company.

Your Retention Bonus is not a guarantee of continued employment, which will remain “at will”, or a permanent or recurring element of your compensation, nor will it impact any other element of your compensation for which you may otherwise be eligible.

The terms of your Retention Bonus are to be kept strictly confidential, until such time as such terms are made public by the Company in its sole discretion.

This letter agreement will be subject to all applicable laws, rules and regulations, and will be construed and enforced in accordance with and governed by the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule. You, every person claiming under or through you and the Company hereby waive to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this letter agreement.

This letter agreement constitutes the entire agreement between you and the Company with respect to the terms of your Retention Bonus and supersedes all prior agreements, understandings and arrangements, oral or written, between you and the Company with respect to the subject matter hereof. The terms of this arrangement may not be amended or modified except by an instrument in writing signed by both parties hereto. Neither this letter agreement nor any rights or obligations that either party may have by reason of this letter agreement will be assignable by you without the prior written consent of the Company.

Thank you again for your contribution and we look forward to continuing the opportunity to work together for our mutual success.

Sincerely,


Barnes & Noble, Inc.

By:

	Name:	Michelle Smith
	Title:	VP, Human Resources


Accepted and Agreed to:



David Deason:

Date:		3/4/14

Exhibit 10.86

LOGO

June 12, 2015

Frederic Argir

339 East Shore Road

Greenwood Lake, NY 10925

Dear Fred,

It is my pleasure to confirm our offer of employment to join Barnes & Noble, Inc. The following represents the key elements of our offer:


Position:		Vice President, Chief Digital Officer

Reports to:		Jaime Carey — Chief Merchandising Officer

Start date:		July 27, 2015

Base salary:		$500,000 per annum

Incentive Compensation:		Eligible to participate in our Incentive Compensation Plan. The target level annual bonus payment for your position is 60% of your base salary. Payments under the plan are based upon achievement of measurable objectives as defined by the Company each fiscal year. The fiscal year period is defined as May 1 ^st to April 30 ^th . First year bonus guaranteed.

Equity:		On the first business day of the month following the month in which your employment with the Company commences, you shall be granted 50,000 Restricted Stock Units of the Company in accordance with the Company’s Amended and Restated 2009 Incentive Plan vesting over three years in three equal annual installments.

Special Payment:		You will be paid a one-time payment of $250,000 (less withholding) on the first payroll period following your start date if you voluntarily resign or are terminated for Cause (as defined below) within (12) months of your hire date, you agree to reimburse the Company this Special Payment.

401(k) Savings Plan:		Eligible to contribute and to receive company matching contributions after completing 1,000 hours in a year (i.e., after approximately six months of continuous full-time service).

Benefits:		Eligible to participate in the Barnes & Noble health and welfare programs offered after sixty (60) days of continuous employment. Plan details to follow, upon acceptance of offer of employment.

Vacation:		4 weeks annually

Deferred Compensation:		Eligible to participate in executive tax deferred savings plan immediately upon hire.

Temporary Housing:		The Company will provide temporary housing for two months.

Barnes & Nobles, Inc. 122 Fifth Avenue, New York NY 10011 212.633.3300


Severance Benefits:		Should your employment terminate for any reason other than your voluntary termination or for “Cause” as defined below, you will receive a severance package that will be equal to one (1) year of base salary, payable in bi-weekly installments, less applicable taxes and withholdings.

		You understand and agree that any severance benefits provided by the Company are contingent on your executing a General Release in exchange for severance benefits at the time the severance benefits are offered.

For purposes of this letter, “Cause” means (A) your engaging in misconduct or gross negligence which is injurious to Company; (B) your indictment or conviction by a court of competent jurisdiction with respect to any felony or other crime or violation of law involving fraud or dishonesty (with the exception of misconduct based in good faith on the advice of professional constants, such as attorneys and accountants), or your entry of a plea of nolo contendere with respect to any felony involving fraud or dishonesty (with the exception of misconduct based in good faith on the advice of professional consultants, such as attorneys and accountants); (C) any gross negligence, intentional acts or intentional omissions by you, as determined by the Company in connection with the performance of the duties and responsibilities of your employment hereunder; (D) engaging in any act of misconduct or moral turpitude, as determined by the Company; (E) abuse of or dependency on alcohol or drugs (illicit or otherwise) which adversely affects job performance; (F) failure or refusal by you to properly perform (as determined by the Company in its reasonable discretion and judgment) the duties, responsibilities or obligations of your employment for reasons other than Disability or authorized leave, or to properly perform or follow (as determined by the Company in its reasonable discretion and judgment) any lawful direction by the Company; or (G) breach of this Agreement or of any other duty to, written policy of, or agreement with the Company.

You have represented, and hereby confirm, that you are not subject to any currently effective employment contract, or any other contractual or other binding obligations pursuant to which your employment or employment activities with or on behalf of Barnes & Noble, Inc. may be subject to any restrictions, including without limitation, any agreements or other obligations or documents relating to non-competition, confidentiality, trade secrets, proprietary information or works for hire.

This offer is contingent upon verification of your identity and your ability to legally work for Barnes & Noble com in the United States. In addition, this offer is contingent upon satisfactory references and verification of your employment record, academic credentials and any certifications represented on your employment application and/or resume.

If you wish to accept this offer of employment as set forth above, please sign and return the enclosed confidentiality agreement along with an original signed copy of your offer letter. If you have any questions, please call me at your convenience at 212-633-3280.

Fred, we are delighted with your interest in the Company and eager to have you join B&N. The challenge, opportunity, and rewards that lie ahead for the Company are unique and incredibly exciting. I look forward to hearing from you after you have had a chance to review this offer.


Sincerely,


Michelle Smith
Vice President, Human Resources

MS/kmm

Agreed and Accepted:

				06.25.15

Frederic Argir				Date

Page Two

Exhibit 10.87

AGREEMENT REGARDING CERTAIN TERMS AND CONDITIONS OF EMPLOYMENT

This agreement is by and between Barnes & Noble, Inc. (“Company”) and Frederic Argir (“Employee”). In consideration of the Employee being hired by the Company, the Company providing Employee access to Trade Secret, Confidential Information, and other Company Property that is necessary to perform his/her work, the payment by the Company of Employee’s compensation and for other good and valuable consideration, the Company and Employee agree as follows:

1. At-Will Employment . Employee agrees that his/her employment is at-will, which means that both Employee and the Company shall have the right to terminate such employment at any time, for any reason, with or without cause. Employee further acknowledges and agrees that this Agreement is not intended to and does not constitute a contract or agreement between Employee and the Company providing a specified term of employment or limiting the right of either party to terminate Employee’s employment with the Company at any time, for any reason, with or without cause.

2. Duty of Loyalty . Employee acknowledges that he/she owes a duty of loyalty to the Company, which Employee acknowledges means, among other things, that while an employee of the Company, Employee must act in the best interests of the Company. Employee, therefore, agrees that, without limitation: (a) he/she shall devote his/her best efforts and undivided time, effort and loyalty to the business of the Company, (b) he/she shall discharge all of his/her duties and responsibilities that are or may be assigned to him/her by the Company conscientiously, in good faith and to the best of his/her ability, giving to the Company the full benefit of his/her knowledge, expertise, skill and judgment, (c) he/she shall not engage in any illegal or unethical conduct in the performance of his/her duties and responsibilities; and (d) he/she shall not engage in any conduct that creates an actual, potential or apparent conflict between Employee’s personal interests and the Company’s interests, or which otherwise may adversely affect Employee’s judgment or ability to act in the Company’s best interests. If Employee is uncertain whether any particular activity may violate his/her duty of loyalty, Employee agrees to notify the Company and not engage in any such conduct without the express, written consent of an authorized representative of the Company.

3. Trade Secrets, Confidential Information and Company Property . Employee acknowledges that his/her duties and responsibilities will put employee in a position of acquiring and creating Trade Secrets and Confidential Information (as those terms are defined below) concerning the Company. Employee further acknowledges that the Company is engaged in a highly competitive business. The Company’s involvement in this business has required and continues to require the expenditure of substantial amounts of money and the use of skills developed over a long period of time. As a result of these investments of money, skill, and time, the Company has developed and will continue to develop certain valuable Trade Secrets and Confidential Information that are particular to the Company’s business. Employee acknowledges and agrees that the disclosure of such information to competitors of the Company or others would cause the Company to suffer substantial and irreparable harm. Employee acknowledges, therefore, that it is in the Company’s legitimate business interest to restrict Employee’s disclosure or use of such Trade Secret and Confidential Information (and other Company Property). “Trade Secrets” means any information, formula, pattern, compilation, program, device, method, technique, process, design, procedure or improvement that has value and is not generally known to the public or others who can obtain value from its disclosure or use. To the fullest extent consistent with the foregoing, and as otherwise permitted by law, Trade Secrets shall include, without limitation, non-public financial information, supply and service information, marketing information, information regarding Company’s current and future products, and customer information. “Confidential Information” means any data or information and documentation, other than Trade Secrets, but including information which has ceased to be a Trade Secret, which has value and is not generally known to the public. “Company Property” shall mean all property and resources of the Company, including, without limitation, all Trade Secret and Confidential Information, the Company computer system and all software, e-mail and databases, telephone and facsimile services and all other administrative or support services provided by the Company. Except as specifically required in the performance of his/her duties for the Company, Employee agrees Employee will not, during the course of employment by the Company and for so long thereafter as the pertinent information or documentation remain Trade Secrets, Confidential Information

or Company Property, directly or indirectly use, disclose or disseminate to any other person, organization or entity or otherwise use or disclose any Trade Secrets, Confidential Information of Company Property. The obligations set forth herein shall not apply to any Trade Secrets, Confidential Information or Company Property that have become generally known to competitors of the Company through lawful means and without violation of any law or any agreement not to disclose Trade Secrets, Confidential Information, or Company Property. Employee agrees and acknowledges a business shall be deemed to be in competition with the Company if it is engaged in the sale or rental of books, eBooks, eBook readers, digital content and/or related merchandise. Upon the termination for any reason of his/her employment with the Company, or at any time the Company may so request, Employee shall promptly deliver to the Company all Trade Secret, Confidential Information, and Company Property, including all documents (whether in electronic or paper form) that relate or refer to Trade Secret, Confidential Information, or Company Property.

4. Intellectual Property/Assignment of Inventions . “Intellectual Property” means inventions, discoveries, improvements, documented ideas, computer programs and related documentation, and other works of authorship (“Intellectual Property”). Employee agrees to promptly disclose to the Company all Intellectual Property (including any Intellectual Property in the formative stages) made during Employee’s employment with the Company. Furthermore, Employee agrees to disclose to the Company any Intellectual Property created during the period of one year after the termination of his/her employment with the Company that relates to or constitutes an improvement upon the Company’s Intellectual Property. Employee also agrees to keep and maintain written records concerning such Intellectual Property and make these records available to the Company at all times.

5. Employee hereby assigns and agrees to assign to the Company and its successors and assigns his/her entire right title, and interest in and to any Intellectual Property, whether or not patentable, copyrightable, or subject to other forms of protection, made, created, developed, written, or conceived by Employee, either solely or jointly with others, during Employee’s employment with the Company. All Intellectual Property disclosed or made by Employee within one (1) year after termination of Employee’s employment with the Company shall be deemed to be owned by the Company unless such Intellectual Property is proved to have been conceived after termination and without the benefit of any proprietary and/or Confidential Information or Trade Secrets of the Company, its subsidiaries or affiliates. Notwithstanding the above, Employee shall retain full right and title to Intellectual Property to which all of the following conditions apply: (a) no equipment, supplies, facilities, proprietary and/or Confidential Information, Trade Secrets or Intellectual Property of the Company was used in its development; (b) it was developed entirely on Employee’s own time; (c) it does not relate to the business of the Company or to the Company’s anticipated business or developmental programs; and (d) it does not result from any work performed by Employee for the Company. Employee further agrees to assist the Company, or its designees, at the Company’s expense, but without additional compensation to Employee, in every proper way to secure the Company’s rights in the Intellectual Property and any copyrights, patents, mask work rights, or other intellectual property rights relating thereto in any and all countries. Employee further agrees that his/her obligation to execute or cause to be executed any such instrument or papers will continue after the termination of his/her employment with the Company. If the Company is unable because of Employee’s mental or physical incapacity, Employee’s refusal to comply with his/her obligations under this Agreement, or for any other reason, to secure Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright or trademark registrations covering Intellectual Property or original works of authorship assigned to the Company under this Agreement or otherwise, assigned to the company, Employee does hereby irrevocably designate and appoint the Company, through its duly authorized officers and agents, as Employee’s agent and attorney in fact, to act for and on Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright or trademark registrations thereon with the same legal force and effect as if executed by Employee. Employee understands that the Company may have entered into agreements with other parties which imposed obligations on the Company regarding Inventions made during the course of the work under such agreements or regarding the confidential nature of such works, or otherwise received from third parties’ confidential or proprietary information (“Third Party Information”). Employee agrees to be bound by all such obligations of the Company arising in connection with such Third Party Information.

6. Non-Solicitation . During Employee’s employment with the Company, Employee will have access to Trade Secrets, Confidential Information and/or other non-public Company Property, and Employee will develop certain relationships with and/or knowledge about current and/or prospective employees, customers, vendors, or contractor such that if Employee were allowed to pursue relationships with the Company’s current or prospective employees, customer, vendors, or contractors, Employee would have an unfair advantage based upon confidential information and/or relationships developed. Therefore, Employee agrees that from the date of execution of thi S Agreement until the expiration of a period of one year following the termination of Employee’s employment with the Company for any reason (the “Covered Period”), Employee will not, directly or indirectly: (a) solicit or recruit for employment offer employment to, hire, solicit, or recruit for placement, place and/or offer to place with another company or entity – on a temporary, permanent or contract basis, or otherwise – anyone who at any time during the Covered Period is or was employed by the Company or any of its parents, subsidiaries or affiliates (a “Covered Employee”); provided that, at the time of such solicitation, recruitment, offer of employment, hiring, offer to place or placement, or any time during the ninety (90) day period immediately preceding same, the Covered Employee is or was an employee of the Company or any of its parents, subsidiaries, or affiliates; (b) encourage, entice or persuade, or attempt to encourage, entice or persuade any Covered Employee to leave the Company or any of its parents, subsidiaries, or affiliates; (c) solicit or encourage (i) any customer, vendor, or contractor of Company, (ii) any entity that had been a customer, vendor, or contractor with Company within one year preceding Employee’s termination of employment with the Company, (iii) any prospective customer, vendor, or contractor of the Company actively solicited within one year before the termination of Employee’s employment with the Company, or (iv) any parent, subsidiary or affiliate of any of the foregoing, to void, terminate or diminish its relationship with the Company or any of its parents, subsidiaries, or affiliates; (d) or seek to persuade (i) any customer, vendor, or contractor of the Company, (ii) any entity that had been a customer, vendor, or contractor with Company within one year preceding Employee’s termination of employment with the Company, (iii) any prospective customer, vendor, or contractor of the Company actively solicited within one year before the termination of Employee’s employment with the Company, or (iv) any parent, subsidiary, affiliate of any of the foregoing, to conduct with anyone else any business or activity which such customer, vendor, or contractor conducts with the Company or any of its parents, subsidiaries, or affiliates.

7. Non-Compete . During Employee’s employment and for a period of one year following the termination of his/her employment with the Company for any reason, Employee agrees that, without the prior written consent of the Company, he/she will not become employed, retained, or otherwise provide any services of any kind to any business that is in competition with the business of the Company. Employee agrees and acknowledges a business shall be deemed to be in competition with the Company if it is engaged in the sale or rental of books, eBooks, eBook readers, digital content and/or related merchandise.

8. Non-Use of Trade Secrets or Confidential Information and Full Disclosure of Existing Agreements with Prior Employers . Employee acknowledges and represents that as an employee of the Company, Employee will not breach any invention, assignment or proprietary information or similar agreement Employee may have with any former employer or other party. Employee further acknowledges and represents that Employee will not bring to the Company or use in the performance of his/her duties for the Company any documents or materials of any kind from a former employer or other person or entity that Employee is not legally authorized or permitted to use and/or that are not generally available to the public. Employee also agrees that the Company has not asked him/her to use or disclose any Trade Secrets and/or Confidential Information that is confidential to any of Employee’s prior employers. Employee also agrees that he/she is not bound by any agreement (including, without limitation, any non-compete or non-solicitation agreement) that seeks to restrict the employers or entities for or with whom Employee may work, the customers, clients or prospects Employee may solicit or work with, or the former co-workers Employee may solicit or work with, or that Employee has provided written copies of any such agreement(s) to the Company’s management and has otherwise fully disclosed the existence and terms of any such agreement(s) to Company’s management.

9. Applicable Law . The validity, performance and enforceability of this Agreement shall be determined and governed by the laws of the State of New York, without regard to its conflict of law

principles. The exclusive forum for any action concerning this Agreement or the transactions contemplated hereby shall be in a court of competent jurisdiction in New York County, New York, with respect to a state court, or the United States District Court for the Eastern District of New York, with respect to a federal court EMPLOYEE HEREBY CONSENTS TO THE EXERCISE OF JURISDICTION OF THE COURT IN THE EXCLUSIVE FORUM SET FORTH IN THIS AGREEMENT AND WAIVES ANY RIGHT EMPLOYEE MAY HAVE TO CHALLENGE OR CONTEST THE REMOVAL AT ANY TIME BY THE COMPANY TO FEDERAL COURT OF ANY ACTION EMPLOYEE MAY BRING AGAINST IT IN STATE COURT. EMPLOYEE AND THE COMPANY MUTUALLY WAIVE THEIR RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT OR EMPLOYEE’S EMPLOYMENT IN GENERAL .

10 Successors . This Agreement shall inure to the benefit of the Company, its subsidiaries and affiliates, and the successors and assigns of each of them.

11. Rule of Construction . The rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in interpreting this Agreement. The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against any of the parties.

12. Amendment . No term, condition, covenant representation or acknowledgement contained in this Agreement may be amended or modified unless in writing signed by both parties, and no course of conduct shall be deemed a waiver of its provisions.

13. Reasonable Scope of Agreement . Employee acknowledges and agrees that the foregoing agreements and restrictions are reasonable and necessary for the protection of the Company and its business, and are not limited in time to the duration of Employee’s employment but extend after and shall survive the termination of his/her employment, irrespective of the reason for its termination. Employee further acknowledges and agrees that the Company shall be entitled to seek an injunction or other forms of equitable relief to prevent or terminate any violation of the foregoing restrictions. Any such relief shall be in addition to and not in lieu of any other remedy available to the Company, whether at law or in equity.

14. Severability . Employee agrees that if any part of Employee’s foregoing covenants or the duration thereof i S deemed too restrictive by a court of competent jurisdiction, the court may alter the covenants and/or duration to make the same reasonable under the circumstances, and Employee acknowledges that Employee shall be bound thereby.

15. Complete Agreement . This Agreement and the terms and conditions set out in the Offer Letter dated June 12, 2015 constitute the entire Agreement with respect to the subject matter hereof and cancels and supersedes any and all other previous agreements with respect to the subject matter hereof. The terms of this Agreement shall survive the termination of and any change in Employee’s position with the Company.

16. Employee Review of Agreement . Employee understands that he/she has the right to consult an attorney prior to the signing of this Agreement, and acknowledges that his/her signature below signifies that he/she has fully reviewed and understands all of the terms of this Agreement and that he/she has agreed to those terms.


SO AGREED:

EMPLOYEE: Frederic Argir				Barnes & Noble, Inc.



Signature				Signature

06.25.15				Michelle Smith

Date				Printed Name

				Vice President, Human Resources

				Title

				June 12, 2015

				Date

Exhibit 13.1

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data of Barnes & Noble, Inc. and its subsidiaries (collectively, the Company) set forth on the following pages should be read in conjunction with the consolidated financial statements and notes included elsewhere in this report. The Company’s fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. The Statement of Operations Data for the 52 weeks ended April 30, 2016 (fiscal 2016), 52 weeks ended May 2, 2015 (fiscal 2015) and 53 weeks ended May 3, 2014 (fiscal 2014), and the Balance Sheet Data as of April 30, 2016 and May 2, 2015 are derived from, and are incorporated by reference to, audited consolidated financial statements which are included elsewhere in this report. The Statement of Operations Data for the 52 weeks ended April 27, 2013 (fiscal 2013), April 28, 2012 (fiscal 2012), the Balance Sheet Data as of May 3, 2014, April 27, 2013 and April 28, 2012 are derived from audited consolidated financial statements not included elsewhere in this report.


Fiscal Year (In thousands of dollars, except per share data)	Fiscal 2016			Fiscal 2015			Fiscal 2014			Fiscal 2013			Fiscal 2012
STATEMENT OF OPERATIONS DATA:
Sales
Barnes & Noble Retail	$	4,028,614			4,108,243			4,295,140			4,568,247			4,852,913
NOOK		191,520			263,833			505,862			780,433			933,471
Elimination (a)		(56,290	)		(74,968	)		(167,657	)		(272,919	)		(400,847	)

Total sales		4,163,844			4,297,108			4,633,345			5,075,761			5,385,537
Cost of sales and occupancy		2,836,547			2,871,184			3,214,396			3,800,064			3,865,066

Gross profit		1,327,297			1,425,924			1,418,949			1,275,697			1,520,471

Selling and administrative expenses		1,176,778			1,192,065			1,287,163			1,380,747			1,458,556
Depreciation and amortization		135,863			143,665			168,793			180,285			187,324

Operating income (loss)		14,656			90,194			(37,007	)		(285,335	)		(125,409	)
Interest expense, net and amortization of deferred financing fees (b)		8,770			17,678			29,122			30,474			29,620

Income (loss) before taxes		5,886			72,516			(66,129	)		(315,809	)		(155,029	)
Income taxes		(8,814	)		39,644			13,011			(122,407	)		(51,436	)

Net income (loss) from continuing operations		14,700			32,872			(79,140	)		(193,402	)		(103,593	)
Net income (loss) from discontinued operations		(39,146	)		3,724			31,872			35,596			38,753

Net income (loss) attributable to Barnes & Noble, Inc.	$	(24,446	)		36,596			(47,268	)		(157,806	)		(64,840	)

Basic income (loss) per common share:
Income (loss) from continuing operations	$	0.05			0.15			(1.67	)		(3.63	)		(2.01	)
Income (loss) from discontinued operations		(0.54	)		0.06			0.54			0.61			0.68

Basic income (loss) per common share	$	(0.49	)		0.21			(1.12	)		(3.02	)		(1.34	)

Diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.05			0.15			(1.67	)		(3.63	)		(2.01	)
Income (loss) from discontinued operations		(0.54	)		0.06			0.54			0.61			0.68

Diluted income (loss) per common share	$	(0.49	)		0.21			(1.12	)		(3.02	)		(1.34	)

Weighted average common shares outstanding:
Basic		72,410			60,842			58,971			58,247			57,337
Diluted		72,542			60,928			58,971			58,247			57,337
Dividends declared per common share	$	0.60			—			—			—			—

F-1


Fiscal Year (In thousands of dollars, except per share data)	Fiscal 2016			Fiscal 2015			Fiscal 2014			Fiscal 2013			Fiscal 2012
OTHER OPERATING DATA:
Number of Barnes & Noble Retail stores		640			648			661			675			691
Comparable sales increase (decrease):
Barnes & Noble Retail store sales (c)		0.0	%		(1.9	)%		(5.8	)%		(3.4	)%		1.4	%
Barnes & Noble Retail core sales (d)		0.4	%		0.5	%		(3.1	)%		0.1	%		0.7	%

Capital expenditures	$	94,274			94,805			96,728			127,075			123,073

BALANCE SHEET DATA:

Total assets – continuing operations	$	2,012,782			2,045,104			2,270,649			2,542,108			2,707,209
Total assets – discontinued operations	$	—			1,067,327			1,122,071			980,535			955,716
Total liabilities – continuing operations	$	1,409,272			1,347,384			1,798,649			1,880,729			2,334,073
Total liabilities – discontinued operations	$	—			379,630			357,180			353,009			284,307
Long-term debt	$	47,200			—			—			77,000			324,200
Long-term subordinated note (e)	$	—			—			—			127,250			150,000
Shareholders’ Equity	$	603,510			1,189,358			658,696			713,743			852,271

(a)	Represents sales from NOOK to B&N Retail on a sell-through basis.

(b)	Amounts for fiscal 2016, fiscal 2015, fiscal 2014, fiscal 2013 and fiscal 2012 are net of interest income of $0, $58, $190, $71 and $0, respectively.

(c)

Comparable store sales increase (decrease) is calculated on a 52-week basis, including sales from stores that have been open for at least 15 months and all eReader device revenue deferred in accordance with Accounting Standards Codification 605-25, Revenue Recognition, Multiple-Element Arrangements , and does not include sales from closed or relocated stores.

(d)	Core comparable store sales, which exclude sales of NOOK ^® products, increase (decrease) is calculated on a 52-week basis, including sales from stores that have been open for at least 15 months and does not include sales from closed or relocated stores.

(e)	See Note 24 to the Notes to Consolidated Financial Statements.

F-2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Barnes & Noble, Inc.’s (Barnes & Noble or the Company) fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. As used in this section, “fiscal 2016” represents the 52 weeks ended April 30, 2016, “fiscal 2015” represents the 52 weeks ended May 2, 2015 and “fiscal 2014” represents the 53 weeks ended May 3, 2014.

General

Barnes & Noble, Inc., one of the nation’s largest booksellers, ¹ is a leading content and commerce company providing customers easy and convenient access to trade books and other content across its multi-channel distribution platform. As of April 30, 2016, the Company operates 640 bookstores in 50 states, maintains an eCommerce site, develops digital reading products and operates one of the largest digital bookstores. Barnes & Noble is utilizing the strength of its retail footprint in combination with its online and digital businesses to provide an omni-channel experience for its customers, fulfilling its commitment to offer customers any book, anytime, anywhere and in any format.

The Company’s principal business is the sale of trade books (generally, hardcover and paperback consumer titles), mass market paperbacks (such as mystery, romance, science fiction and other popular fiction), children’s books, eBooks and other digital content, NOOK ^® and related accessories, bargain books, magazines, gifts, café products and services, educational toys & games, music and movies direct to customers through its bookstores or on www.barnesandnoble.com. The Company also offers a textbook rental option to its customers through www.barnesandnoble.com. The Company offers its customers a full suite of textbook options—new, used, digital and rental.

Separation of B&N Education, Inc.

¹	Based upon sales reported in trade publications and public filings.

²	Any references to NOOK ^® include the Company’s Samsung Galaxy Tab ^® S2 NOOK ^® , Samsung Galaxy Tab E NOOK ^® , Samsung Galaxy Tab ^® 4 NOOK ^® 7.0 device and NOOK GlowLight ^TM Plus, each of which includes the trademark symbol ( ^® or ™, as applicable) even if a trademark symbol is not included.

F-3

On August 2, 2015, Barnes & Noble completed the Spin-Off of Barnes & Noble Education and distributed, on a pro rata basis, all of the shares of B&N Education common stock to the Company’s stockholders of record as of July 27, 2015. These Barnes & Noble stockholders of record as of July 27, 2015 received a distribution of 0.632 shares of B&N Education common stock for each share of Barnes & Noble common stock held as of the record date. Immediately following the completion of the Spin-Off, the Company’s stockholders owned 100% of the outstanding shares of common stock of B&N Education. Following the Spin-Off, B&N Education operates as an independent public company and as the parent of Barnes & Noble College, trading on New York Stock Exchange under the ticker symbol “BNED”.

Discontinued Operations of B&N Education, Inc.

The Company has recognized the separation of B&N Education in accordance with Accounting Standards Codification (ASC) 205-20, Discontinued Operations . As such, the historical results of Barnes & Noble Education for fiscal 2015 and fiscal 2014 have been adjusted to include pre-spin B&N Education results and separation-related costs and exclude corporate allocations with B&N Retail, and have been classified as discontinued operations. Additionally, discontinued operations for fiscal 2016 include investment banking fees (as they directly relate to the Spin-Off), as well as pre-spin B&N Education results and separation-related costs and exclude corporate allocation adjustments with B&N Retail.

Resignation Charge

F-4

equity-based awards granted pursuant to his employment agreement. As a result, Mr. Huseby received a severance payment equal to $7.7 million and additionally was entitled to 300,000 shares of the Company’s common stock pursuant to the accelerated vesting of the equity-based awards, which were settled for cash based on the closing price of the Company’s common stock on the record date of the Spin-Off in an amount equal to $8.0 million. The net cash payments related to Mr. Huseby’s resignation totaled $15.7 million during the second fiscal quarter ended October 31, 2015. Mr. Huseby’s 300,000 shares have been ratably expensed from the initial grant date, thereby reducing the total resignation charge to $10.5 million, which was recorded within selling and administrative expenses during the second fiscal quarter ended October 31, 2015.

History of B&N Education, Inc.

On September 30, 2009, Barnes & Noble acquired Barnes & Noble College Booksellers, LLC (B&N College) from Leonard and Louise Riggio. From that date until October 4, 2012, B&N College was wholly owned by Barnes & Noble Booksellers, Inc. B&N Education was initially incorporated under the name NOOK Media Inc. in July 2012 to hold Barnes & Noble’s B&N College and NOOK digital businesses. On October 4, 2012, Microsoft Corporation (Microsoft) acquired a 17.6% non-controlling preferred membership interest in B&N Education’s subsidiary B&N Education, LLC (formerly NOOK Media LLC) (the LLC), and through B&N Education, Barnes & Noble maintained an 82.4% controlling interest of the B&N College and NOOK digital businesses.

Samsung Commercial Agreement

F-5

On May 17, 2016, NOOK Digital and Samsung amended the Agreement, pursuant to which NOOK Digital agreed to a minimum purchase commitment of devices with a total retail value equal to $10.0 million during the first twelve months after launch of any co-branded NOOK tablet device. The amended minimum purchase commitment replaces all prior purchase commitments contained in the Agreement by NOOK Digital and Samsung.

Series J Preferred Stock

F-6

As a result of the transactions described above, all shares of Series J Preferred Stock were retired by the Company and are no longer outstanding.

Segments

B&N Retail

Each Barnes & Noble store features an authoritative selection of books, ranging from 22,000 to 160,000 titles. The comprehensive title selection is diverse and reflects local interests and regional titles and authors’ works. Bestsellers typically represent between approximately 4% and 6% of Barnes & Noble store sales. Product Master, the Company’s proprietary inventory management database, has approximately 17.1 million titles. It includes approximately 7.3 million active titles and provides each store with comprehensive title selections. By enhancing the Company’s existing merchandise replenishment systems, Product Master allows the Company to achieve higher in-stock positions and better productivity at the bookstore level through efficiencies in receiving, cashiering and returns

F-7

processing. Complementing this extensive on-site selection, all Barnes & Noble stores provide customers with access to the millions of books available to online shoppers at www.barnesandnoble.com by offering an option to have the book sent to the store or shipped directly to the customer.

Sterling Publishing

NOOK

This segment represents the Company’s digital business, which includes the Company’s eBookstore, digital newsstand and sales of NOOK ^® devices and accessories. The underlying strategy of the NOOK business is to offer customers any digital book, newspaper or magazine, anytime, on any device. The Company remains committed to delivering to customers the best digital bookstore experience, providing easy access to Barnes & Noble’s expansive digital collection of over four million eBooks, digital magazines and newspapers, while rationalizing its existing cost structure. As part of this commitment, the Company has a partnership with Samsung to develop co-branded NOOK ^® tablets that feature the award-winning Barnes & Noble digital reading experience, while continuing to develop and offer its own black-and-white NOOK ^® eReaders.

F-8

Results of Operations


Fiscal Year	Fiscal 2016			Fiscal 2015			Fiscal 2014
Sales (in thousands)	$	4,163,844		$	4,297,108		$	4,633,345
Net Income (Loss) From Continuing Operations (in thousands)	$	14,700		$	32,872		$	(79,140	)
Net Income (Loss) From Discontinued Operations (in thousands)	$	(39,146	)	$	3,724		$	31,872
Net Income (Loss) (in thousands)	$	(24,446	)	$	36,596		$	(47,268	)
Diluted Income (Loss) Per Common Share From Continuing Operations	$	0.05		$	0.15		$	(1.67	)
Diluted Income (Loss) Per Common Share From Discontinued Operations	$	(0.54	)	$	0.06		$	0.54
Diluted Income (Loss) Per Common Share	$	(0.49	)	$	0.21		$	(1.12	)
Comparable Sales Increase (Decrease)
Barnes & Noble Retail store sales (a)		0.0	%		(1.9	)%		(5.8	)%
Barnes & Noble Retail core sales (b)		0.4	%		0.5	%		(3.1	)%
Stores Opened
Barnes & Noble Retail stores		0			0			3
Stores Closed
Barnes & Noble Retail stores		8			13			17
Number of Stores Open at Year End
Barnes & Noble Retail stores		640			648			661
Square Feet of Selling Space at Year End (in millions)
Barnes & Noble Retail stores		16.9			17.1			17.4

(a)

Comparable store sales increase (decrease) is calculated on a 52-week basis, including sales from stores that have been open for at least 15 months and all eReader device revenue deferred in accordance with Accounting Standards Codification (ASC) 605-25, Revenue Recognition, Multiple-Element Arrangements , and does not include sales from closed or relocated stores.

(b)	Core comparable store sales, which exclude sales of NOOK ^® products, increase (decrease) is calculated on a 52-week basis, including sales from stores that have been open for at least 15 months and does not include sales from closed or relocated stores.

F-9

The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales of the Company:


Fiscal Year	Fiscal 2016			Fiscal 2015			Fiscal 2014
Sales		100.0	%		100.0	%		100.0	%
Cost of sales and occupancy		68.1			66.8			69.4

Gross profit		31.9			33.2			30.6
Selling and administrative expenses		28.3			27.7			27.8
Depreciation and amortization		3.3			3.3			3.6

Operating income (loss)		0.4			2.1			(0.8	)
Interest expense, net and amortization of deferred financing fees		0.2			0.4			0.6

Income (loss) before taxes		0.1			1.7			(1.4	)
Income taxes		(0.2	)		0.9			0.3

Income (loss) from continuing operations, net of income tax		0.4			0.8			(1.7	)
Income (loss) from discontinued operations, net of income tax		(0.9	)		0.1			0.7

Income (loss), net of income tax		(0.6	)%		0.9	%		(1.0	)%

Business Overview

The Company believes that through its omni-channel offering it is well positioned to improve results and is focused on executing four key objectives to achieve success, including: significantly reducing NOOK losses; growing online and bookstore sales; reducing B&N Retail’s cost structure; and growing its Membership program.

F-10

The Company has recently taken a number of actions that will help further reduce NOOK losses, including the exit of its Apps and Video businesses, as well as the exit of the U.K. eBook market. The Company also entered into an agreement with Bahwan CyberTek (BCT) to outsource certain NOOK functions, including cloud management and development support for NOOK software, which will enable it to close its Santa Clara, CA and Taipei offices. Additionally, the Company entered into a new partnership with Samsung to bring new co-branded devices to market.

The Company is reviewing its organizational design and exploring process improvements to look for opportunities to reduce B&N Retail’s selling and administrative expenses. The Company also retained consultants to help evaluate and benchmark its selling and administrative expenses to its peers, as well as provide recommendations.

52 Weeks Ended April 30, 2016 Compared with 52 Weeks Ended May 2, 2015

The following tables summarize the Company’s results of operations for the 52 weeks ended April 30, 2016 and 52 weeks ended May 2, 2015.

Sales


	52 Weeks Ended						52 Weeks Ended
Dollars in thousands	April 30, 2016			% Total			May 2, 2015			% Total
B&N Retail	$	4,028,614			96.8	%	$	4,108,243			95.6	%
NOOK		191,520			4.6	%		263,833			6.1	%
Elimination		(56,290	)		(1.4	)%		(74,968	)		(1.7	)%

Total Sales	$	4,163,844			100.0	%	$	4,297,108			100.0	%

The Company’s sales decreased $133.3 million, or 3.1%, during fiscal 2016 to $4.164 billion from $4.297 billion during fiscal 2015. The changes by segment are as follows:

•

B&N Retail sales decreased $79.6 million, or 1.9%, to $4.029 billion from $4.108 billion during the same period one year ago, and accounted for 96.8% of total Company sales. Online sales were impacted by challenges following the launch of the new BN.com website, decreasing $49.0 million, or 14.4%, versus the prior year. Closed stores decreased sales by $40.5 million. Device warranty reimbursements, resulting from favorable claims experience with a warranty service provider, decreased $4.8 million on a year-to-date basis as compared to the prior year due to a

F-11

smaller claim period and lower volume. These unfavorable variances were partially offset by a $3.0 million increase in gift card breakage as redemptions continue to run lower than historical patterns. B&N Retail also includes third-party sales of Sterling Publishing Co., Inc., which increased by $8.7 million, or 21.7%, on increased adult coloring book business.

Comparable store sales decreased $1.3 million, or essentially flat, as compared to the prior year. Of the $1.3 million decrease in comparable store sales, core comparable store sales, which exclude sales of NOOK ^® products, increased $13.0 million, or 0.4%, as compared to the prior year. Non-book core categories increased sales by $48.3 million, or 4.2%, on growth of the Toys & Games and Gift businesses. Book categories decreased sales by $35.3 million, or 1.5%, primarily on lower sales of Trade and Juvenile titles, partially offset by strong sales of coloring books. Sales of NOOK ^® products at B&N Retail stores decreased $14.3 million, or 19.2%, versus the prior year on lower device unit sales and lower average selling prices.

•

NOOK sales decreased $72.3 million, or 27.4%, to $191.5 million from $263.8 million during the same period one year ago, and accounted for 4.6% of total Company sales. Digital content sales decreased $47.3 million, or 26.7%, to $130.0 million primarily on lower unit sales and to a lesser extent, agency vs. non-agency mix. Device and accessories sales decreased $25.0 million, or 28.9%, to $61.5 million primarily on lower unit sales.

•

Elimination sales, which represent sales from NOOK to B&N Retail on a sell-through basis, decreased $18.7 million, or 24.9%, versus the prior year. NOOK sales, net of elimination, accounted for 3.2% of total Company sales.

In fiscal 2016, the Company closed eight Barnes & Noble stores, bringing its total number of B&N Retail stores to 640, with 16.9 million square feet, in the 50 states.

Cost of Sales and Occupancy


	52 Weeks Ended						52 Weeks Ended
Dollars in thousands	April 30, 2016			% Sales			May 2, 2015			% Sales
B&N Retail	$	2,770,209			68.8	%	$	2,798,846			68.1	%
NOOK		122,628			64.0	%		147,306			55.8	%
Elimination		(56,290	)		(29.4	)%		(74,968	)		(28.4	)%

Total Cost of Sales and Occupancy	$	2,836,547			68.1	%	$	2,871,184			66.8	%

The Company’s cost of sales and occupancy includes costs such as merchandise costs, distribution center costs (including payroll, freight, supplies, depreciation and other operating expenses), rental expense, common area maintenance and real estate taxes, partially offset by landlord tenant allowances amortized over the life of the lease.

Cost of sales and occupancy decreased $34.6 million, or 1.2%, to $2.837 billion in fiscal 2016 from $2.871 billion in fiscal 2015. Cost of sales and occupancy increased as a percentage of sales to 68.1% in fiscal 2016 from 66.8% in fiscal 2015. The percentage of sales changes by segment are as follows:

•

B&N Retail cost of sales and occupancy increased as a percentage of sales to 68.8% from 68.1%, or 70 basis points, during the same period one year ago. This increase was due to the following factors. Ecommerce margin decreased 35 basis points on the Company’s promotional activity, reserves on non-returnable products increased 30 basis points on inventory mix, distribution costs increased 15 basis points on the transition to a new third-party service provider during the year, as well as expense deleverage, higher occupancy costs of 20 basis points on expense deleverage and the lower warranty reimbursement of 10 basis points, partially offset by a favorable product mix (45 basis points).

F-12

•

NOOK cost of sales and occupancy increased as a percentage of sales to 64.0% from 55.8% during the same period one year ago. The prior year included a favorable benefit from the adjustment of lease accounting items to reflect the impact of the Palo Alto relocations. This benefit, net of closing costs, was primarily driven by the reversal of previously deferred rent liabilities upon exiting the facility. In addition, the prior year included a favorable reduction in costs of goods sold on renegotiated parts and components liabilities. Cost of sales and occupancy was also impacted by product mix and sales deleverage.

Gross Profit


	52 Weeks Ended					52 Weeks Ended
Dollars in thousands	April 30, 2016		% Sales			May 2, 2015		% Sales
B&N Retail	$	1,258,405		31.2	%	$	1,309,397		31.9	%
NOOK		68,892		50.9	%		116,527		61.7	%

Total Gross Profit	$	1,327,297		31.9	%	$	1,425,924		33.2	%

The Company’s consolidated gross profit decreased $98.6 million, or 6.9%, to $1.327 billion in fiscal 2016 from $1.426 billion in fiscal 2015. This decrease was due to the matters discussed above.

Selling and Administrative Expenses


	52 Weeks Ended					52 Weeks Ended
Dollars in thousands	April 30, 2016		% Sales			May 2, 2015		% Sales
B&N Retail	$	1,043,221		25.9	%	$	991,669		24.1	%
NOOK		133,557		98.8	%		200,396		106.1	%

Total Selling and Administrative Expenses	$	1,176,778		28.3	%	$	1,192,065		27.7	%

Selling and administrative expenses decreased $15.3 million, or 1.3%, to $1.177 billion in fiscal 2016 from $1.192 billion in fiscal 2015. Selling and administrative expenses increased as a percentage of sales to 28.3% in fiscal 2016 from 27.7% in fiscal 2015. The percentage of sales changes by segment are as follows:

•

B&N Retail selling and administrative expenses increased as a percentage of sales to 25.9% from 24.1% during the same period one year ago. The current year included executive severance costs of $10.5 million, an impairment charge on a publishing contract of $3.8 million and a net increase in pension settlement charges of $13.6 million ($20.9 million in the current year and $7.3 million in the prior year). Excluding these charges, selling and administrative expenses increased 100

F-13

basis points as a percentage of sales to 25.0% from 24.0% during the same period one year ago. Advertising costs increased 30 basis points as the Company invested in the bookstore-focused “You never know who you’ll meet at Barnes & Noble” holiday television campaign. Store payroll increased 30 basis points (on store sales) as wage increases outpaced productivity gains. The new website increased expenses by 20 basis points primarily due to a significant amount of website fixes to stabilize the site, increase traffic and improve the overall user experience. Other increases include increased employee benefit costs (20 basis points).

•

NOOK selling and administrative expenses decreased as a percentage of sales to 98.8% from 106.1% during the same period one year ago. On a dollar basis, selling and administrative expenses decreased $66.8 million on cost rationalization efforts, including lower compensation-related costs, advertising, consulting and legal costs, as well as lower variable costs on the sales decline, partially offset by higher severance, bad debt and exit costs related to the Video, Apps and UK businesses.

Depreciation and Amortization


	52 Weeks Ended					52 Weeks Ended
Dollars in thousands	April 30, 2016		% Sales			May 2, 2015		% Sales
B&N Retail	$	101,888		2.5	%	$	104,373		2.5	%
NOOK		33,975		25.1	%		39,292		20.8	%

Total Depreciation and Amortization	$	135,863		3.3	%	$	143,665		3.3	%

Depreciation and amortization decreased $7.8 million, or 5.4%, to $135.9 million in fiscal 2016 from $143.7 million in fiscal 2015. This decrease was primarily attributable to fully depreciated assets and store closings, partially offset by additional capital expenditures.

Operating Profit (Loss)


	52 Weeks Ended						52 Weeks Ended
Dollars in thousands	April 30, 2016			% Sales			May 2, 2015			% Sales
B&N Retail	$	113,296			2.8	%	$	213,355			5.2	%
NOOK		(98,640	)		(72.9	)%		(123,161	)		(65.2	)%

Total Operating Profit	$	14,656			0.4	%	$	90,194			2.1	%

The Company’s consolidated operating profit decreased $75.5 million, or 83.8%, to an operating profit of $14.7 million in fiscal 2016 from an operating profit of $90.2 million in fiscal 2015. This decrease was due to the matters discussed above.

F-14

Interest Expense, Net and Amortization of Deferred Financing Fees


	52 Weeks Ended		52 Weeks Ended
Dollars in thousands	April 30, 2016		May 2, 2015		% of Change
Interest Expense, Net and Amortization of Deferred Financing Fees	$	8,770	$	17,678		(50.4	)%

Net interest expense and amortization of deferred financing fees decreased $8.9 million, or 50.4%, to $8.8 million in fiscal 2016 from $17.7 million in fiscal 2015. This decrease was primarily due to lower interest related to the repayment of the Junior Seller Note in September 2014 and lower deferred financing fees in conjunction with the refinancing of the credit facility.

Income Taxes


	52 Weeks Ended						52 Weeks Ended
Dollars in thousands	April 30, 2016			Effective Rate			May 2, 2015		Effective Rate
Income Taxes	$	(8,814	)		(149.7	)%	$	39,644		54.7	%

The Company recorded an income tax benefit of $8.8 million in fiscal 2016 compared with an income tax provision of $39.6 million in fiscal 2015. The Company’s effective tax rate was (149.7)% and 54.7% in fiscal 2016 and fiscal 2015, respectively. The income tax (benefit)/provision in fiscal 2016 and fiscal 2015, respectively, include the impact of permanent items such as meals and entertainment, non-deductible executive compensation and changes in uncertain tax positions. Fiscal 2016 also includes the impact of the finalization of the federal income tax audit covering the 2008 through 2012 tax years, the closure of many state taxing jurisdiction statutes and the impact of new legislation enacted by Congress permanently reinstating the research and development credit. The Company continues to maintain a valuation allowance against certain state items. In the prior year, the Company recorded the tax implications of the Microsoft agreement, which do not impact the current year, as a result of the termination of the Microsoft agreement in December 2014.

In accordance with accounting principles generally accepted in the United States (GAAP) rules on accounting for income taxes, the Company evaluates the realizability of its deferred tax assets at each reporting date. The Company records a valuation allowance when it determines that it is more likely than not that all or a portion of a particular deferred tax asset will not be realized. As part of this evaluation, the Company reviews all evidence, both positive and negative, to determine if a valuation allowance is needed. The Company’s review of positive evidence included the review of historic profitability, projected profitability, feasible tax planning strategies that may be implemented and the reversal of temporary items. The Company determined that there was sufficient negative evidence to establish valuation allowances against certain deferred tax assets, totaling $6.7 million. The Company will monitor the need for additional valuation allowances at each quarter in the future and adjust the valuation allowance as necessary.

F-15

Net Income from Continuing Operations


	52 Weeks Ended				52 Weeks Ended
Dollars in thousands	April 30, 2016		Diluted EPS		May 2, 2015		Diluted EPS
Net Income from Continuing Operations	$	14,700	$	0.05	$	32,872	$	0.15

As a result of the factors discussed above, the Company reported a consolidated net income from continuing operations of $14.7 million (or $0.05 per diluted share) during fiscal 2016, compared with consolidated net income from continuing operations of $32.9 million (or $0.15 per diluted share) during fiscal 2015.

Net Income (Loss) from Discontinued Operations


	52 Weeks Ended						52 Weeks Ended
Dollars in thousands	April 30, 2016			Diluted EPS			May 2, 2015		Diluted EPS
Net Income (Loss) from Discontinued Operations	$	(39,146	)	$	(0.54	)	$	3,724	$	0.06

The Company has recognized the separation of B&N Education in accordance with ASC 205-20, Discontinued Operations . As such, the historical results of Barnes & Noble Education for fiscal 2015 have been adjusted to include pre-spin B&N Education results and separation-related costs and exclude corporate allocations with B&N Retail, and have been classified as discontinued operations. Additionally, discontinued operations for fiscal 2016 include investment banking fees (as they directly relate to the Spin-Off), as well as pre-spin B&N Education results and separation-related costs and exclude corporate allocation adjustments with B&N Retail.

Net Income (Loss)


	52 Weeks Ended						52 Weeks Ended
Dollars in thousands	April 30, 2016			Diluted EPS			May 2, 2015		Diluted EPS
Net Income (Loss)	$	(24,446	)	$	(0.49	)	$	36,596	$	0.21

As a result of the factors discussed above, the Company reported a consolidated net loss of $24.4 million (or $0.49 per diluted share) during fiscal 2016, compared with consolidated net income of $36.6 million (or $0.21 per diluted share) during fiscal 2015.

F-16

52 Weeks Ended May 2, 2015 Compared with 53 Weeks Ended May 3, 2014

The following tables summarize the Company’s results of operations for the 52 weeks ended May 2, 2015 and 53 weeks ended May 3, 2014.

Sales


	52 Weeks Ended						53 Weeks Ended
Dollars in thousands	May 2, 2015			% Total			May 3, 2014			% Total
B&N Retail	$	4,108,243			95.6	%	$	4,295,140			92.7	%
NOOK		263,833			6.1	%		505,862			10.9	%
Elimination		(74,968	)		(1.7	)%		(167,657	)		(3.6	)%

Total Sales	$	4,297,108			100.0	%	$	4,633,345			100.0	%

The Company’s sales decreased $336.2 million, or 7.3%, during fiscal 2015 to $4.297 billion from $4.633 billion during fiscal 2014. The changes by segment are as follows:

•

B&N Retail sales for the 52 weeks ended May 2, 2015, decreased $186.9 million, or 4.4%, to $4.108 billion from $4.295 billion during the 53 weeks ended May 3, 2014, and accounted for 95.6% of total Company sales. The inclusion of the 53 ^rd week contributed $56.6 million of additional sales in fiscal 2014. Excluding the 53 ^rd week, sales decreased $130.3 million, or 3.1%, for the year. The decrease was attributable to a 1.9% decrease in comparable store sales, which decreased sales by $68.7 million, closed stores, which decreased sales by $57.9 million and lower online sales, which declined by $16.3 million, or 4.6%. These unfavorable variances were partially offset by new stores, which increased sales by $5.8 million and a $7.3 million reimbursement resulting from favorable claims experience with a warranty service provider. B&N Retail also includes third-party sales of Sterling Publishing Co., Inc., which decreased by $1.6 million, or 3.9%, versus the prior year.

Of the $68.7 million decrease in comparable store sales, sales of NOOK ^® products at B&N Retail stores declined $85.1 million, or 53.2%, primarily on lower device unit volume, slightly offset by higher average selling prices, while core comparable store sales, which exclude sales of NOOK ^® products, increased $16.4 million, or 0.5%, as compared to the prior year. Non-book core categories increased sales by $21.9 million primarily due to the continued growth of the Toys & Games and Gift businesses, as the Company increasingly becomes a differentiated destination for shoppers during the holiday season and throughout the year. Book categories decreased sales by $5.5 million primarily due to lower Trade and Juvenile sales, which is attributable to stronger titles in the prior year.

•

NOOK sales decreased $242.0 million, or 47.8%, to $263.8 million during the 52 weeks ended May 2, 2015 from $505.9 million during the 53 weeks ended May 3, 2014, and accounted for 6.1% of total Company sales. The inclusion of the 53 ^rd week contributed $9.2 million of additional sales in fiscal 2014. Device and accessories sales decreased $173.7 million, or 66.7%, to $86.5 million on lower unit sales, partially offset by higher average selling prices. Digital content sales decreased $68.3 million, or 27.8%, to $177.3 million during the 52 weeks ended May 2, 2015 on lower unit sales, partially offset by higher average selling prices.

F-17

•

The elimination represents sales from NOOK to B&N Retail on a sell-through basis. The $92.7 million, or 55.3%, decrease versus the prior year was due to the lower device sales at B&N Retail. NOOK sales, net of elimination, accounted for 4.4% of total Company sales.

In fiscal 2015, the Company closed 13 Barnes & Noble stores, bringing its total number of B&N Retail stores to 648, with 17.1 million square feet, in the 50 states and the District of Columbia.

Cost of Sales and Occupancy


	52 Weeks Ended						53 Weeks Ended
Dollars in thousands	May 2, 2015			% Sales			May 3, 2014			% Sales
B&N Retail	$	2,798,846			68.1	%	$	2,958,468			68.9	%
NOOK		147,306			55.8	%		423,585			83.7	%
Elimination		(74,968	)		(28.4	)%		(167,657	)		(33.1	)%

Total Cost of Sales and Occupancy	$	2,871,184			66.8	%	$	3,214,396			69.4	%

Cost of sales and occupancy decreased $343.2 million, or 10.7%, to $2.871 billion in fiscal 2015 from $3.214 billion in fiscal 2014. Cost of sales and occupancy decreased as a percentage of sales to 66.8% in fiscal 2015 from 69.4% in fiscal 2014. The percentage of sales changes by segment are as follows:

•

B&N Retail cost of sales and occupancy decreased as a percentage of sales to 68.1% in fiscal 2015 from 68.9% in fiscal 2014. This decrease was attributable to a higher sales mix of higher margin core products (which exclude NOOK ^® products), which decreased cost of goods sold and occupancy as a percentage of sales by 60 basis points, lower core product markdowns, which decreased cost of goods sold and occupancy as a percentage of sales by 30 basis points on a lower mix of bestselling titles, increased vendor allowances on additional showroom partnerships, which decreased cost of sales and occupancy as a percentage of sales by 60 basis points and a $7.3 million reimbursement resulting from favorable claims experience with a warranty service provider (included in sales), which decreased cost of goods sold and occupancy as a percentage of sales by 20 basis points. These favorable variances were partially offset by higher occupancy costs, which increased cost of goods sold and occupancy as a percentage of sales by 40 basis points, expense deleverage of 35 basis points against the sales decline and lower vendor settlements of 20 basis points.

•

NOOK cost of sales and occupancy decreased as a percentage of sales to 55.8% in fiscal 2015 from 83.7% in fiscal 2014. This decrease is due to a higher mix of higher margin content sales, lower occupancy, freight and returns in the current year, as well as improved margin on devices.

The current year includes a benefit from the adjustment of lease accounting items to reflect the impact of the Palo Alto relocations. This benefit, net of closing related costs, of $5.5 million was primarily driven by the reversal of previously deferred rent liabilities upon exiting the facility. In addition, cost of goods sold and occupancy included the recognition of a $6.9 million benefit on the settlement of previously estimated and accrued parts and components liabilities.

F-18

The current year also includes higher device recoverability rates resulting from a new relationship with a third-party purchaser of returned product.

The prior year included a reduction in cost of sales of $25.7 million as the Company sold through devices at higher average selling prices than originally anticipated and also was able to use parts and components, which were previously written down, to build more devices to meet higher than expected demand. The prior year also included $21.8 million of inventory charges to write down device development and other costs reflective of the Company’s revised device strategy.

Gross Profit


	52 Weeks Ended					53 Weeks Ended
Dollars in thousands	May 2, 2015		% Sales			May 3, 2014		% Sales
B&N Retail	$	1,309,397		31.9	%	$	1,336,672		31.1	%
NOOK		116,527		61.7	%		82,277		24.3	%

Total Gross Profit	$	1,425,924		33.2	%	$	1,418,949		30.6	%

The Company’s consolidated gross profit increased $7.0 million, or 0.5%, to $1.426 billion in fiscal 2015 from $1.419 billion in fiscal 2014. This increase was due to the matters discussed above.

Selling and Administrative Expenses


	52 Weeks Ended					53 Weeks Ended
Dollars in thousands	May 2, 2015		% Sales			May 3, 2014		% Sales
B&N Retail	$	991,669		24.1	%	$	987,479		23.0	%
NOOK		200,396		106.1	%		299,684		88.6	%

Total Selling and Administrative Expenses	$	1,192,065		27.7	%	$	1,287,163		27.8	%

Selling and administrative expenses decreased $95.1 million, or 7.4%, to $1.192 billion in fiscal 2015 from $1.287 billion in fiscal 2014. Fiscal 2015 includes $9.5 million of separation related costs. Selling and administrative expenses decreased as a percentage of sales to 27.7% in fiscal 2015 from 27.8% in fiscal 2014. The percentage of sales changes by segment are as follows:

•

B&N Retail selling and administrative expenses increased as a percentage of sales to 24.1% in fiscal 2015 from 23.0% in fiscal 2014. This increase was primarily due to deleveraging against the sales decline of 30 basis points, primarily due to store payroll given the comparable store sales decline. The increase also included higher professional fees, which increased selling and administrative expenses as a percentage of sales by 20 basis points (including separation-related costs and legal fees), a pension settlement charge, which increased selling and administrative expenses as a percentage of sales by 20 basis points and higher advertising costs, which increased selling and administrative expenses as a percentage of sales by 10 basis points.

•

NOOK selling and administrative expenses increased as a percentage of sales to 106.1% in fiscal

F-19

2015 from 88.6% in fiscal 2014. Fiscal 2014 included a $28.4 million asset impairment resulting from the relocation of the Palo Alto, CA facility. Excluding the impairment charge, selling and administrative expenses as a percentage of sales increased on sales deleverage. On a dollar basis excluding this charge, expenses declined $70.9 million primarily on cost rationalization, including compensation, legal and consulting costs of approximately $46.6 million, lower advertising costs of $12.0 million and lower variable expenses commensurate with the sales decline.

Depreciation and Amortization


	52 Weeks Ended					53 Weeks Ended
Dollars in thousands	May 2, 2015		% Sales			May 3, 2014		% Sales
B&N Retail	$	104,373		2.5	%	$	125,991		2.9	%
NOOK		39,292		20.8	%		42,802		12.7	%

Total Depreciation and Amortization	$	143,665		3.3	%	$	168,793		3.6	%

Depreciation and amortization decreased $25.1 million, or 14.9%, to $143.7 million in fiscal 2015 from $168.8 million in fiscal 2014. This decrease was primarily attributable to fully depreciated assets and store closings at B&N Retail, partially offset by additional capital expenditures.

Operating Profit (Loss)


	52 Weeks Ended						53 Weeks Ended
Dollars in thousands	May 2, 2015			% Sales			May 3, 2014			% Sales
B&N Retail	$	213,355			5.2	%	$	223,202			5.2	%
NOOK		(123,161	)		(65.2	)%		(260,209	)		(76.9	)%

Total Operating Profit (Loss)	$	90,194			2.1	%	$	(37,007	)		(0.8	)%

The Company’s consolidated operating profit increased $127.2 million, or 343.7%, to an operating profit of $90.2 million in fiscal 2015 from an operating loss of $37.0 million in fiscal 2014. This increase was due to the matters discussed above.

F-20

Interest Expense, Net and Amortization of Deferred Financing Fees


	52 Weeks Ended		53 Weeks Ended
Dollars in thousands	May 2, 2015		May 3, 2014		% of Change
Interest Expense, Net and Amortization of Deferred Financing Fees	$	17,678	$	29,122		(39.3	)%

Net interest expense and amortization of deferred financing fees decreased $11.4 million, or 39.3%, to $17.7 million in fiscal 2015 from $29.1 million in fiscal 2014. This decrease was due to lower interest related to the repayment of the Junior Seller Note in September 2014, lower average borrowings and the terminated Microsoft commercial agreement.

Income Taxes


	52 Weeks Ended					53 Weeks Ended
Dollars in thousands	May 2, 2015		Effective Rate			May 3, 2014		Effective Rate
Income Taxes	$	39,644		54.7	%	$	13,011		(19.7	)%

The Company recorded an income tax provision in fiscal 2015 of $39.6 million compared with an income tax provision of $13.0 million in fiscal 2014. The Company’s effective tax rate increased to 54.7% in fiscal 2015 compared with (19.7)% in fiscal 2014. The higher effective tax rate in fiscal 2015 was due primarily to the impacts of the Microsoft Agreement and non-deductible expenses, partly offset by valuation allowances, R&D tax credits and changes to unrecognized tax benefits.

Net Income (Loss) from Continuing Operations


	52 Weeks Ended				53 Weeks Ended
Dollars in thousands	May 2, 2015		Diluted EPS		May 3, 2014			Diluted EPS
Net Income (Loss) from Continuing Operations	$	32,872	$	0.15	$	(79,140	)	$	(1.67	)

As a result of the factors discussed above, the Company reported a consolidated net income from continuing operations of $32.9 million (or $0.15 per diluted share) during fiscal 2015, compared with consolidated net loss from continuing operations of $79.1 million (or $1.67 per diluted share) during fiscal 2014.

F-21

Net Income from Discontinued Operations


	52 Weeks Ended				53 Weeks Ended
Dollars in thousands	May 2, 2015		Diluted EPS		May 3, 2014		Diluted EPS
Net Income from Discontinued Operations	$	3,724	$	0.06	$	31,872	$	0.54

Net Income (Loss)


	52 Weeks Ended				53 Weeks Ended
Dollars in thousands	May 2, 2015		Diluted EPS		May 3, 2014			Diluted EPS
Net Income (Loss)	$	36,596	$	0.21	$	(47,268	)	$	(1.12	)

As a result of the factors discussed above, the Company reported a consolidated net income of $36.6 million (or $0.21 per diluted share) during fiscal 2015, compared with consolidated net loss of $47.3 million (or $1.12 per diluted share) during fiscal 2014.

Seasonality

Liquidity and Capital Resources

The primary sources of the Company’s cash are net cash flows from operating activities, funds available under its credit facility and short-term vendor financing.

The Company’s cash and cash equivalents were $13.8 million as of April 30, 2016, compared with $14.6 million as of May 2, 2015. The Company had $47.2 million in borrowings under its $700.0 million New Credit Facility at April 30, 2016 and no borrowings under its $1.0 billion previous Credit Facility at May 2, 2015. The Company had $47.9 million of outstanding letters of credit as of April 30, 2016 compared with $66.9 million as of May 2, 2015.

F-22

Additional year-over-year balance sheet changes include the following:

•

Receivables, net increased $64.7 million, or 107.3%, to $124.9 million as of April 30, 2016, compared to $60.3 million as of May 2, 2015, primarily due to the Apple settlement receivable as well as higher third-party Sterling business.

•

Merchandise inventories, net decreased $62.0 million, or 6.2%, to $933.7 million as of April 30, 2016, compared to $995.7 million as of May 2, 2015. Retail inventories decreased $57.5 million, or 5.9%, primarily on targeted inventory reductions. NOOK inventories decreased $4.5 million, or 26.2%, versus the prior year commensurate with the decline in device sales volume.

•

Prepaid expenses and other current assets increased $11.9 million, or 12.7%, to $105.9 million as of April 30, 2016, compared to $94.0 million as of May 2, 2015, primarily due to tax differences.

•

Property and equipment, net decreased $43.2 million, or 12.6%, to $298.6 million as of April 30, 2016, compared to $341.7 million as of May 2, 2015, as depreciation outpaced capital expenditures.

•

Intangible assets, net decreased $4.7 million, or 1.5%, to $310.9 million as of April 30, 2016, compared to $315.7 million as of May 2, 2015, on additional amortization and a $3.8 million impairment of a publishing contract.

•

Other non-current assets increased $5.7 million, or 72.4%, to $13.6 million as of April 30, 2016, compared to $7.9 million as of May 2, 2015. Financing fees related to the New Credit Facility were partially offset by the amortization of financing fees over the past twelve months.

•

Accounts payable decreased $4.0 million, or 0.8%, to $480.6 million as of April 30, 2016, compared to $484.6 million as of May 2, 2015. Accounts payable were 51.5% and 48.7% of merchandise inventories as of April 30, 2016 and May 2, 2015, respectively. This ratio is subject to changes in product mix and the timing of purchases, payments and returns.

•

Accrued liabilities increased $33.5 million, or 10.3%, to $360.2 million as of April 30, 2016, compared to $326.7 million as of May 2, 2015. Accrued liabilities include deferred income, accrued taxes, compensation, occupancy related, legal and other selling and administrative miscellaneous accruals.

•

Gift card liabilities decreased $5.0 million, or 1.4%, to $353.1 million as of April 30, 2016, compared to $358.1 million as of May 2, 2015. The Company estimates the portion of the gift card liability for which the likelihood of redemption is remote based upon the Company’s historical redemption patterns. The Company recognized gift card breakage of $29.1 million and $26.1 million during the 52 weeks ended April 30, 2016 and May 2, 2015, respectively. Additional breakage may be required if gift card redemptions continue to run lower than historical patterns.

•

Long-term deferred taxes increased $38.2 million, or 242.0%, to $54.0 million as of April 30, 2016, compared to $15.8 million as of May 2, 2015. This increase is primarily due to an increase of timing differences and a change in valuation allowances.

•

Other long-term liabilities decreased $48.0 million, or 29.6%, to $114.2 million as of April 30, 2016, compared to $162.2 million as of May 2, 2015, due to lower deferred rent and lower tax reserves.

•

During July 2015, the outstanding Series J Preferred stock was converted to shares of the Company’s Common Stock.

The Company has arrangements with third-party manufacturers to produce certain NOOK ^® products. These manufacturers procure and assemble unfinished parts and components from third-party suppliers based on forecasts provided by the Company. Given production lead times, commitments are generally made far in advance of finished product delivery. Based on current purchase commitments and product development plans, the Company records a provision for purchase commitments. Future charges may be required based on changes in forecasted sales or strategic direction.

F-23

The Company provided credits to eligible customers resulting from the settlements reached with certain publishers in antitrust lawsuits filed by various State Attorney Generals and private class plaintiffs regarding the price of digital books. The Company’s customers were entitled to $44.2 million in total credits as a result of the settlement, which was funded by these publishers. During fiscal 2015, the Company received $31.9 million from these publishers related to this liability to the Company’s customers, all of which were activated by customers as of March 2015. These customers’ credits that were not activated by March 2015 expired.

Apple Settlement

The Company provided credits to eligible customers resulting from the settlement reached with Apple Inc. (Apple) in an antitrust lawsuit filed by various State Attorneys General and private class plaintiffs regarding the price of digital books. The Company’s customers were entitled to $95.7 million in total credits as a result of the settlement, which is funded by Apple. If a customer’s credit is not used to make a purchase within one year, the entire credit will expire. The Company recorded estimated redemptions of $53.8 million as a receivable from Apple and a liability to its customers with a deadline of June 2017 for the activation of all credits.

Cash Flow

Net cash flows provided by operating activities for fiscal 2016 were $195.7 million, as compared to net cash flows used in operating activities of $0.7 million for fiscal 2015. The favorable year-over-year comparison was primarily attributable to changes in working capital.

Net cash flows used in investing activities for fiscal 2016 were $94.3 million, as compared to net cash flows used in investing activities of $94.8 million for fiscal 2015. The Company’s investing activities consist principally of capital expenditures for the maintenance of existing stores, merchandising initiatives, and enhancements to systems and the website. Capital expenditures totaled $94.3 million and $94.8 million during fiscal 2016 and fiscal 2015, respectively.

Net cash flows used in financing activities for fiscal 2016 were $47.8 million as the Company returned $72.8 million to its shareholders via common dividends and share repurchases, offset by net proceeds from its credit facility. Net cash flows used in financing activities of $169.8 million for fiscal 2015 included the repayment of the Junior Seller Note, the acquisition of preferred membership interests and preferred dividends, offset by Microsoft proceeds.

Capital Structure

Microsoft Investment

F-24

a commercial agreement with Microsoft, pursuant to which, among other things, the LLC would develop and distribute a Windows 8 application for eReading and digital content purchases, and an intellectual property license and settlement agreement with Microsoft and Microsoft Licensing GP. The parties closed Morrison’s investment in the LLC and the commercial agreement became effective on October 4, 2012.

On December 3, 2014, Morrison, Microsoft, Barnes & Noble and Barnes & Noble Education entered into agreements, pursuant to which Morrison’s interest in the LLC was purchased by Barnes & Noble Education and the Microsoft commercial agreement was terminated effective as of such date. Pursuant to the Purchase Agreement (the Purchase Agreement) among Barnes & Noble, Barnes & Noble Education, Morrison and Microsoft, Barnes & Noble Education purchased from Morrison, and Morrison sold, all of its $300.0 million convertible Series A preferred limited liability company interest in the LLC in exchange for an aggregate purchase price of $124.9 million consisting of (i) $62.4 million in cash and (ii) 2,737,290 shares of common stock, par value $0.001 per share, of Barnes & Noble. The Purchase Agreement closed on December 4, 2014. The Company accounted for this transaction in accordance with ASC 810-10, Non-Controlling Interest (ASC 810-10) and it accordingly was reflected as an equity transaction. In connection with the closing, the parties entered into a Digital Business Contingent Payment Agreement, pursuant to which Microsoft is entitled to receive 22.7% of the proceeds from, among other events or transactions, (1) any future dividends or other distributions received from Barnes & Noble’s NOOK digital business at any time until the date that is three years from the closing, subject to a one-year extension under certain circumstances, and (2) the sale of Barnes & Noble’s NOOK digital business at any time until the date that is three years from the closing, subject to a one-year extension under certain circumstances.

Pearson Investment

On December 21, 2012, the LLC entered into an agreement with a subsidiary of Pearson plc (Pearson) to make a strategic investment in the LLC. That transaction closed on January 22, 2013, and Pearson invested approximately $89.5 million of cash in the LLC in exchange for preferred membership interests representing a 5% equity stake in the LLC. Following the closing of the transaction, Barnes & Noble owned approximately 78.2% of the LLC and Microsoft owned approximately 16.8%. The preferred membership interests had a liquidation preference equal to the original investment. In addition, the LLC granted warrants to Pearson to purchase up to an additional 5% of the LLC under certain conditions. Upon the completion of the acquisition of Pearson’s interest in the LLC, as stated below, the temporary equity was converted to permanent equity.

On December 22, 2014, Barnes & Noble entered into a Purchase Agreement (the Pearson Purchase Agreement) among Barnes & Noble, Barnes & Noble Education, NOOK Media Member Two LLC, a Delaware limited liability company (NOOK Member Two), Pearson Education, Inc. (Pearson Education) and Pearson Inc., pursuant to which Barnes & Noble Education and NOOK Member Two purchased from Pearson Education all of its convertible Series B preferred limited liability company interest in the LLC and all of its warrants to purchase additional Series B preferred limited liability company interests, in exchange for an aggregate purchase price equal to (i) $13.8 million in cash and (ii) 602,927 shares of common stock, par value $0.001 per share, of Barnes & Noble. The transactions under the Pearson Purchase Agreement closed on December 22, 2014. The Company accounted for this transaction in accordance with ASC 810-10 and it accordingly was reflected as an equity transaction. As a condition to closing, the parties entered into an amended and restated Digital Business Contingent Payment Agreement, pursuant to which a Digital Business Contingent Payment Agreement dated as of December 3, 2014, by and between Barnes & Noble, the LLC and Pearson, was amended and restated to include provisions consistent with the Digital Business Contingent Payment Agreement entered into with Morrison on December 3, 2014.

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Samsung Agreement

Under the Agreement, NOOK Digital committed to purchase a minimum of 1.0 million NOOK ^® -Samsung co-branded devices from Samsung within 12 months after the launch of the initial co-branded device, which occurred on August 20, 2014. The 12-month period was automatically extended by three months due to the quantity of sales of such co-branded devices through December 31, 2014, and the period was further extended until June 30, 2016 by an amendment executed by the parties on March 7, 2015.

Preferred Shares

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As a result of the transactions described above, all shares of Series J Preferred Stock were retired by the Company and are no longer outstanding.

Resignation Charge

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Credit Facility

Prior to August 3, 2015, the Company was party to an amended and restated credit facility with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and other lenders, dated as of April 29, 2011 (as amended and modified to date, the Credit Facility), consisting of up to $1.0 billion in aggregate commitments under a five-year asset-backed revolving credit facility, which was scheduled to expire on April 29, 2016.

On August 3, 2015, the Company and certain of its subsidiaries entered into a credit agreement (New Credit Agreement) with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and the other lenders from time to time party thereto, under which the lenders committed to provide a five-year asset-backed revolving credit facility in an aggregate committed principal amount of $700.0 million (New Credit Facility). Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Wells Fargo Bank, N.A. and SunTrust Robinson Humphrey, Inc. are the joint lead arrangers for the New Credit Facility. The $700.0 million New Credit Facility replaced the $1.0 billion Credit Facility. Proceeds from the New Credit Facility are used for general corporate purposes, including seasonal working capital needs.

The Company and certain of its subsidiaries are permitted to borrow under the New Credit Facility. The New Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the New Credit Facility (collectively, the Loan Parties), but excluding the equity interests in the Company and its subsidiaries, intellectual property, equipment and certain other property. Borrowings under the New Credit Facility are limited to a specified percentage of eligible collateral. The Company has the option to request an increase in commitments under the New Credit Facility of up to $250.0 million, subject to certain restrictions.

Interest under the New Credit Facility accrues, at the election of the Company, 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 New Credit Facility. Loans will initially bear interest at LIBOR plus 1.750% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.750% per annum, in the alternative, and thereafter the interest rate will fluctuate between LIBOR plus 2.000% per annum and LIBOR plus 1.500% per annum (or between the alternate base rate plus 1.000% per annum and the alternate base rate plus 0.500% per annum), based upon the average daily availability for the immediately preceding fiscal quarter.

The New Credit Agreement 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 New Credit Facility were to fall below certain specified levels, certain additional covenants (including fixed charge coverage ratio requirements) would be triggered, and the lenders would assume dominion and control over the Loan Parties’ cash.

The New Credit Agreement 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 New Credit Agreement also contains customary affirmative covenants and representations and warranties.

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The following table presents selected information related to the Company’s credit facilities (in thousands):


	Fiscal 2016			Fiscal 2015			Fiscal 2014
Credit facility at period end	$	47,200			—			—
Average balance outstanding during the period	$	66,948			18,227			48,254
Maximum borrowings outstanding during the period	$	293,200			202,800			180,300
Weighted average interest rate during the period ^(a)		8.21	%		38.18	%		15.65	%
Interest rate at end of period		2.69	%		0.00	%		0.00	%

(a)	Includes commitment fees.

The Company wrote off $0.5 million of deferred financing fees related to the Credit Facility during the 52 weeks ended April 30, 2016 and the remaining unamortized deferred financing fees of $3.5 million were deferred and are being amortized over the five-year term of the New Credit Facility. The Company also incurred $5.7 million of fees to secure the New Credit Facility, which are being amortized over the five-year term accordingly.

Fees expensed with respect to the unused portion of the credit facilities were $2.8 million, $4.7 million and $4.4 million during fiscal 2016, fiscal 2015 and fiscal 2014, respectively.

The Company had $47.9 million of outstanding letters of credit under its New Credit Facility as of April 30, 2016 compared with $66.9 million under the previous Credit Facility as of May 2, 2015.

The Company has no agreements to maintain compensating balances.

Capital Investment

The Company’s investing activities consist principally of capital expenditures for the maintenance of existing stores, merchandising initiatives, and enhancements to systems and the website. Capital expenditures totaled $94.3 million, $94.8 million and $96.7 million during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Fiscal 2017 capital expenditure levels are expected to be approximately $100.0 million, although commitment to many such expenditures has not yet been made. Capital expenditures planned for fiscal 2017 primarily include new store development, merchandising initiatives, maintenance of existing stores, enhancements to systems and the website.

Based upon the Company’s current operating levels and capital expenditures for fiscal 2017, management believes cash and cash equivalents on hand, funds available under its credit facility and short-term vendor financing will be sufficient to meet the Company’s normal working capital and debt service requirements for at least the next twelve months. The Company regularly evaluates its capital structure and conditions in the financing markets to ensure it maintains adequate flexibility to successfully execute its business plan.

On October 20, 2015, the Company’s Board of Directors authorized a new stock repurchase program of up to $50.0 million of its common shares. Stock repurchases under this program may be made through open market and privately negotiated transactions from time to time and in such amounts as management deems appropriate. The repurchase problem has no expiration date and may be suspended or discontinued at any time. The Company’s repurchase plan is intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. During fiscal 2016, the Company repurchased 2,763,142 shares at a cost of $26.7 million under this plan. The Company has remaining capacity of approximately $23.3 million under this program as of April 30, 2016.

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As of April 30, 2016, the Company has repurchased 37,941,321 shares at a cost of approximately $1.1 billion since the inception of the Company’s stock repurchase programs. The repurchased shares are held in treasury.

Contractual Obligations

The following table sets forth the Company’s contractual obligations as of April 30, 2016 (in millions):


Contractual Obligations	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Operating lease obligations (a)	$	1,109.1	$	312.2	$	456.6	$	220.8	$	119.5
Purchase obligations (b)		57.7		37.6		20.1		—		—
Interest obligations (c)		11.7		2.8		5.5		3.4		—
Other long-term liabilities reflected on the Company’s balance sheet under U.S. GAAP (d)		—		—		—		—		—

Total	$	1,178.5	$	352.6	$	482.2	$	224.2	$	119.5

(a)	Excludes obligations under store leases for insurance, taxes and other maintenance costs, which totaled approximately 20.7% of the minimum rent payments under those leases.

(b)	Includes hardware and software maintenance contracts and inventory purchase commitments.

(c)	Represents commitment fees related to the Company’s Credit Facility.

(d)	Excludes $14.6 million of unrecognized tax benefits for which the Company cannot make a reasonably reliable estimate of the amount and period of payment. See Note 12 to the Notes to Consolidated Financial Statements.

See also Note 11 to the Notes to Consolidated Financial Statements for information concerning the Company’s pension and postretirement plans.

Off-Balance Sheet Arrangements

As of April 30, 2016, the Company had no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Impact of Inflation

The Company does not believe that inflation has had a material effect on its net sales or results of operations.

Certain Relationships and Related Transactions

See Note 24 to the Notes to Consolidated Financial Statements.

Critical Accounting Policies

The “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

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section of this report discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. 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. The Company does 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

Revenue from sales of the Company’s products is recognized at the time of sale or shipment, other than those with multiple elements and Free On Board (FOB) destination point shipping terms. The Company accrues for estimated sales returns in the period in which the related revenue is recognized based on historical experience. ECommerce revenue from sales of products ordered through the Company’s websites is recognized upon estimated delivery and receipt of the shipment by its customers. Freight costs are included within the Company’s cost of sales and occupancy. Sales taxes collected from retail customers are excluded from reported revenues. All of the Company’s sales are recognized as revenue on a “net” basis, including sales in connection with any periodic promotions offered to customers. The Company does not treat any promotional offers as expenses.

In accordance with ASC 605-25, Revenue Recognition, Multiple-Element Arrangements, and Accounting Standards Updates (ASU) No. 2009-13 and 2009-14, for multiple-element arrangements that involve tangible products that contain software that is essential to the tangible product’s functionality, undelivered software elements that relate to the tangible product’s essential software and other separable elements, the Company allocates revenue to all deliverables using the relative selling-price method. Under this method, revenue is allocated at the time of sale to all deliverables based on their relative selling price using a specific hierarchy. The hierarchy is as follows: vendor-specific objective evidence, third-party evidence of selling price, or best estimate of selling price. NOOK ^® device revenue is recognized at the segment point of sale.

The Company includes post-service customer support (PCS) in the form of software updates and potential increased functionality on a when-and-if-available basis with the purchase of a NOOK ^® from the Company. Using the relative selling-price method described above, the Company allocates revenue based on the best estimate of selling price for the deliverables as no vendor-specific objective evidence or third-party evidence exists for any of the elements. Revenue allocated to NOOK ^® and the software essential to its functionality is recognized at the time of sale, provided all other conditions for revenue recognition are met. Revenue allocated to the PCS is deferred and recognized on a straight-line basis over the 2-year estimated life of a NOOK ^® device.

The average percentage of a NOOK ^® ’s sales price that is deferred for undelivered items and recognized over its 2-year estimated life ranges between 0% and 4%, depending on the type of device sold. The amount of NOOK ^® -related deferred revenue as of April 30, 2016 and May 2, 2015 was $0.2 million and $2.3 million, respectively. These amounts are classified on the Company’s balance sheet in accrued liabilities for the portion that is subject to deferral for one year or less and other long-term liabilities for the portion that is subject to deferral for more than one year.

The Company also pays certain vendors who distributed NOOK ^® a commission on the content sales sold through that device. The Company accounts for these transactions as a reduction in the sales

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price of the NOOK ^® based on historical trends of content sales and a liability is established for the estimated commission expected to be paid over the life of the product. The Company recognizes revenue of the content at the point of sale of the content. The Company records revenue from sales of digital content, sales of third-party extended warranties, service contracts and other products, for which the Company is not obligated to perform, and for which the Company does not meet the criteria for gross revenue recognition under ASC 605-45-45, Reporting Revenue Gross as a Principal versus Net as an Agent , on a net basis. All other revenue is recognized on a gross basis.

The Company rents physical textbooks. Revenue from the rental of physical textbooks is deferred and recognized over the rental period commencing at point of sale. The Company offers a buyout option to allow the purchase of a rented book at the end of the semester. The Company records the buyout purchase when the customer exercises and pays the buyout option price. In these instances, the Company would accelerate any remaining deferred rental revenue at the point of sale.

NOOK acquires the rights to distribute digital content from publishers and distributes the content on www.barnesandnoble.com, NOOK ^® devices and other eBookstore platforms. Certain digital content is distributed under an agency pricing model, in which the publishers set prices for eBooks and NOOK receives a commission on content sold through the eBookstore. The majority of the Company’s eBooks are sold under the agency model.

The Barnes & Noble Member Program offers members greater discounts and other benefits for products and services, as well as exclusive offers and promotions via e-mail or direct mail, for an annual fee of $25.00, which is non-refundable after the first 30 days. Revenue is recognized over the twelve-month period based upon historical spending patterns for Barnes & Noble Members.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09). The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-12, is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted for annual reporting periods beginning after December 15, 2016. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company has not yet selected a transition method nor has it determined the impact of adoption on its consolidated financial statements.

Merchandise Inventories

Merchandise inventories, which primarily consist of finished goods, are stated at the lower of cost or market. Cost is determined primarily by the retail inventory method under the first-in, first-out (FIFO) basis. NOOK merchandise inventories are recorded based on the average cost method.

Market is determined based on the estimated net realizable value, which is generally the selling price. Reserves for non-returnable inventory are based on the Company’s history of liquidating non-returnable inventory. The Company does 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 the Company’s history of liquidating non-returnable inventory are incorrect, it may be exposed to losses or gains that could be material. A 10% change in actual non-returnable inventory reserve would have affected pre-tax earnings by approximately $5.4 million in fiscal 2016.

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The Company also estimates and accrues 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 Company does 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 the Company’s estimates regarding shortage rates are incorrect, it 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 $0.7 million in fiscal 2016.

Internal-Use Software and Website Development Costs

Direct costs incurred to develop software for internal use and website development costs are capitalized and amortized over an estimated useful life of three to seven years. During fiscal 2016 and 2015, the Company capitalized costs, primarily related to labor, consulting, hardware and software, of $31.5 million and $37.1 million, respectively. Amortization of previously capitalized amounts was $30.5 million, $27.6 million and $24.2 million for fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Costs related to the design or maintenance of internal-use software and website development are expensed as incurred.

Research and Development Costs for Software Products

The Company follows the guidance in ASC 985-20, Cost of Software to be Sold, Leased or Marketed, regarding software development costs to be sold, leased, or otherwise marketed. Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. A certain amount of judgment and estimation is required to assess when technological feasibility is established, as well as the ongoing assessment of the recoverability of capitalized costs. The Company’s products reach technological feasibility shortly before the products are released and, therefore, research and development costs are generally expensed as incurred.

Stock-Based Compensation

The calculation of stock-based employee compensation expense involves estimates that require management’s judgment. These estimates include the fair value of each of the stock option awards granted, which is estimated on the date of grant using a Black-Scholes option pricing model. There are two significant inputs into the Black-Scholes option pricing model: expected volatility and expected term. The Company estimates expected volatility based on traded option volatility of the Company’s stock over a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived from historical exercise experience under the Company’s stock option plans and represents the period of time that stock option awards granted are expected to be outstanding. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate, and only recognize expense for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period. See Note 6 to the Consolidated Financial Statements for a further discussion on stock-based compensation.

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The Company does not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions used to determine stock-based compensation expense. However, if actual results are not consistent with the Company’s estimates or assumptions, the Company may be exposed to changes in stock-based compensation expense that could be material. If actual results are not consistent with the assumptions used, the stock-based compensation expense reported in the Company’s financial statements may not be representative of the actual economic cost of the stock-based compensation. A 10% change in the Company’s stock-based compensation expense for the year ended April 30, 2016 would have affected pre-tax earnings by approximately $1.4 million in fiscal 2016.

Property and Equipment and Other Long-Lived Assets

The Company’s long-lived assets include property and equipment and amortizable intangibles. At April 30, 2016, the Company had $298.6 million of property and equipment, net of accumulated depreciation, and $1.6 million of amortizable intangible assets, net of amortization, accounting for approximately 14.9% of the Company’s total assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and considers market participants in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets . The Company evaluates long-lived assets for impairment at the individual Barnes & Noble store level, which is the lowest level at which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, the Company will first compare the carrying amount of the assets to the individual store’s estimated future undiscounted cash flows. If the estimated future cash flows are less than the carrying amount of the assets, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the assets to the individual store’s fair value based on its 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. Impairment losses included in selling and administrative expenses related to amortizable assets totaled $0.2 million, $0.4 million and $30.8 million during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. The Company does 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, the Company may be exposed to losses that could be material. A 10% decrease in the Company’s estimated discounted cash flows would not have resulted in a material impairment charge on the Company’s results of operations in fiscal 2016.

Goodwill and Unamortizable Intangible Assets

The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance sheets.

At April 30, 2016, the Company had $211.3 million of goodwill and $309.3 million of unamortizable intangible assets (those with an indefinite useful life), accounting for approximately 25.9% of the Company’s total assets. ASC 350-30, Goodwill and Other Intangible Assets (ASC 350-30), requires that goodwill and other unamortizable intangible assets no longer be amortized, but instead be tested for impairment at least annually or earlier if there are impairment indicators.

The Company performs a two-step process for impairment testing of goodwill as required by ASC 350-30. The first step of this test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount. The second step (if necessary) measures the amount of the impairment. The Company completed its annual goodwill impairment test as of the first day of the third

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quarter of fiscal 2016. In performing the valuations, the Company used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions. Based on the results of the Company’s step one testing, the fair values of the B&N Retail and NOOK reporting units, as of that date, exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed and no goodwill impairment was recognized. Goodwill is subject to further risk of impairment if B&N Retail comparable store sales decline or store closings accelerate. There were no impairment losses included in selling and administrative expenses related to goodwill during fiscal 2016, fiscal 2015 and fiscal 2014.

The Company tests unamortizable intangible assets by comparing the fair value and the carrying value of such assets. The Company also completed its annual impairment tests for its other unamortizable intangible assets by comparing the estimated fair value to the carrying value of such assets. Impairment losses included in selling and administrative expenses related to unamortizable intangible assets totaled $3.8 million, $0 and $1.6 million during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Changes in market conditions, among other factors, could have a material impact on these estimates.

During fiscal 2016, the Company impaired one of its publishing contracts due to a significant drop in current year business with that publisher, driven by lower title offerings, product quality and the loss of a distribution partner. As a result, the Company recorded an impairment charge of $3.8 million in selling and administrative expenses. During fiscal 2014, the Company recorded $1.6 million of impairments related to a certain publishing contract. The publishing contracts include the value of long-standing relationships with authors, agents and publishers established upon the Company’s acquisition of Sterling in 2003. Given Sterling’s strong history of maintaining such relationships, the Company believes they produce value indefinitely without an identifiable remaining useful life. However, given the continued declines in the physical book business, certain of these contracts were impaired.

A 10% decrease in the Company’s estimated discounted cash flows would have no impact on the Company’s evaluation of publishing contracts in fiscal 2016.

Gift Cards

The Company sells gift cards, which can be used in its stores, on www.barnesandnoble.com, on NOOK ^® devices and at B&N Education stores. The Company does not charge administrative or dormancy fees on gift cards and gift cards have no expiration dates. Upon the purchase of a gift card, a liability is established for its cash value. Revenue associated with gift cards is deferred until redemption of the gift card. Over time, a portion of the gift cards issued is typically not redeemed. The Company estimates the portion of the gift card liability for which the likelihood of redemption is remote based upon the Company’s historical redemption patterns. The Company records this amount in income on a straight-line basis over a 12-month period beginning in the 13 ^th month after the month the gift card was originally sold. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to recognize revenue associated with gift cards. Additional breakage may be required if gift card redemptions continue to run lower than historical patterns.

The Company recognized gift card breakage of $29.1 million, $26.1 million and $23.2 million during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. The Company had gift card liabilities of $353.1 million and $358.1 million as of April 30, 2016 and May 2, 2015, respectively. If estimates regarding the Company’s history of gift card breakage are incorrect, it may be exposed to losses or gains that could be material. A 25 basis point change in the Company’s gift card breakage rate at April 30, 2016 would have affected pre-tax earnings by approximately $15.0 million in fiscal 2016.

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Income Taxes

Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. In the ordinary course of business, tax issues may arise where the ultimate outcome is uncertain. Additionally, the Company’s tax returns are subject to audit by various tax authorities. Consequently, changes in the Company’s estimates for contingent tax liabilities may materially impact the Company’s results of operations or financial position. A 1% variance in the Company’s effective tax rate would have affected the Company’s results of operations in fiscal 2016 by $0.1 million.

Disclosure Regarding Forward-Looking Statements

This report contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and similar expressions, as they relate to Barnes & Noble or the management of Barnes & Noble, identify forward-looking statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS


(In thousands, except per share data)	Fiscal 2016			Fiscal 2015		Fiscal 2014
Sales	$	4,163,844		$	4,297,108	$	4,633,345
Cost of sales and occupancy		2,836,547			2,871,184		3,214,396

Gross profit		1,327,297			1,425,924		1,418,949
Selling and administrative expenses		1,176,778			1,192,065		1,287,163
Depreciation and amortization		135,863			143,665		168,793

Operating income (loss)		14,656			90,194		(37,007	)
Interest expense, net and amortization of deferred financing fees		8,770			17,678		29,122

Income (loss) before income taxes		5,886			72,516		(66,129	)
Income taxes provision (benefit)		(8,814	)		39,644		13,011

Net income (loss) from continuing operations	$	14,700		$	32,872	$	(79,140	)
Net income (loss) from discontinued operations		(39,146	)		3,724		31,872

Net income (loss)	$	(24,446	)	$	36,596	$	(47,268	)

Basic income (loss) per common share:
Income (loss) from continuing operations	$	0.05		$	0.15	$	(1.67	)
Income (loss) from discontinued operations		(0.54	)		0.06		0.54

Basic income (loss) per common share	$	(0.49	)	$	0.21	$	(1.12	)

Diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.05		$	0.15	$	(1.67	)
Income (loss) from discontinued operations		(0.54	)		0.06		0.54

Diluted income (loss) per common share	$	(0.49	)	$	0.21	$	(1.12	)

Weighted average common shares outstanding:
Basic		72,410			60,842		58,971
Diluted		72,542			60,928		58,971
Dividends declared per common share	$	0.60		$	—	$	—

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


(In thousands)	Fiscal 2016			Fiscal 2015			Fiscal 2014
Net income (loss)	$	(24,446	)	$	36,596		$	(47,268	)
Other comprehensive income (loss), net of tax:		3,662			(9,370	)		4,919
(Increase) decrease in minimum pension liability (net of deferred tax benefit (expense) of $(2,188), $4,603 and $(3,001), respectively)
Pension reclassification (net of deferred tax benefit (expense) of $(7,780), $(2,707) and $0, respectively) (see Note 11)		13,022			4,610			—

Total comprehensive income (loss)	$	(7,762	)	$	31,836		$	(42,349	)

See accompanying notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS


(In thousands, except per share data)	April 30, 2016			May 2, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	13,838		$	14,646
Receivables, net		124,917			60,265
Merchandise inventories, net		933,723			995,738
Prepaid expenses and other current assets		105,912			93,965
Current assets of discontinued operations		—			447,626

Total current assets		1,178,390			1,612,240

Property and equipment:
Land and land improvements		2,541			2,541
Buildings and leasehold improvements		1,058,452			1,057,975
Fixtures and equipment		1,560,005			1,531,315

		2,620,998			2,591,831
Less accumulated depreciation and amortization		2,322,418			2,250,096

Net property and equipment		298,580			341,735

Goodwill		211,276			215,197
Intangible assets, net		310,904			315,653
Other non-current assets		13,632			7,905
Non-current assets of discontinued operations		—			619,701

Total assets	$	2,012,782		$	3,112,431

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	480,574		$	484,574
Accrued liabilities		360,194			326,660
Gift card liabilities		353,103			358,146
Current liabilities of discontinued operations		—			303,613

Total current liabilities		1,193,871			1,472,993

Long-term debt		47,200			—
Long-term deferred taxes		54,017			15,795
Other long-term liabilities		114,184			162,209
Non-current liabilities of discontinued operations		—			76,017
Redeemable Preferred Shares; $0.001 par value; 5,000 shares authorized; 0 and 204 shares issued, respectively		—			196,059
Shareholders’ equity:
Common stock; $0.001 par value; 300,000 shares authorized; 111,228 and 98,115 shares issued, respectively		112			98
Additional paid-in capital		1,738,034			1,927,997
Accumulated other comprehensive income (loss)		151			(16,533	)
Retained earnings		(24,349	)		357,512
Treasury stock, at cost, 37,941 and 34,841 shares, respectively		(1,110,438	)		(1,079,716	)

Total shareholders’ equity		603,510			1,189,358

Commitments and contingencies		—			—

Total liabilities and shareholders’ equity	$	2,012,782		$	3,112,431

See accompanying notes to consolidated financial statements.

F-39

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


(In thousands)	Barnes & Noble, Inc. Shareholders’ Equity
	Common Stock		Additional Paid-In Capital			Accumlated Other Comprehensive Gains (Losses)			Retained Earnings			Treasury Stock at Cost			Total
Balance at April 27, 2013	$	93		1,383,848			(16,692	)		410,349			(1,063,855	)	$	713,743
Net loss		—		—			—			(47,268	)		—			(47,268	)
Minimum pension liability, net of tax		—		—			4,919			—			—			4,919
Exercise of 66 common stock options		1		1,031			—			—			—			1,032
Stock options and restricted stock tax benefits		—		(1,587	)		—			—			—			(1,587	)
Stock-based compensation expense		—		12,171			—			—			—			12,171
Accretive dividend on preferred stockholders		—		—			—			(3,032	)		—			(3,032	)
Accrued/paid dividends for preferred stockholders		—		—			—			(16,028	)		—			(16,028	)
Treasury stock acquired, 286 shares		—		—			—			—			(5,254	)		(5,254	)

Balance at May 3, 2014	$	94		1,395,463			(11,773	)		344,021			(1,069,109	)	$	658,696
Net income		—		—			—			36,596			—			36,596
Minimum pension liability, net of tax		—		—			(9,370	)		—			—			(9,370	)
Pension reclassification (see Note 11)		—		—			4,610			—			—			4,610
Exercise of 83 common stock options		1		1,282			—			—			—			1,283
Stock options and restricted stock tax benefits		—		652			—			—			—			652
Stock-based compensation expense		—		19,989			—			—			—			19,989
Accretive dividend on preferred stockholders		—		—			—			(7,340	)		—			(7,340	)
Accrued/paid dividends for preferred stockholders		—		—			—			(15,765	)		—			(15,765	)
Treasury stock acquired, 477 shares		—		—			—			—			(10,607	)		(10,607	)
Acquisition of preferred membership interest		3		313,295			—			—			—			313,298
Settlement of Microsoft commercial liability		—		197,316			—			—			—			197,316

Balance at May 2, 2015	$	98		1,927,997			(16,533	)		357,512			(1,079,716	)	$	1,189,358

See accompanying notes to consolidated financial statements.

F-40

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)


(In thousands)	Barnes & Noble, Inc. Shareholders’ Equity
	Common Stock		Additional Paid-In Capital			Accumlated Other Comprehensive Gains (Losses)			Retained Earnings			Treasury Stock at Cost			Total
Balance at May 2, 2015	$	98		1,927,997			(16,533	)		357,512			(1,079,716	)	$	1,189,358
Net loss		—		—			—			(24,446	)		—			(24,446	)
Minimum pension liability, net of tax		—		—			3,662			—			—			3,662
Pension reclassification		—		—			13,022			—			—			13,022
Exercise of 111 common stock options		2		1,301			—			—			—			1,303
Stock options and restricted stock tax benefits		—		1,094			—			—			—			1,094
Stock-based compensation expense		—		14,889			—			—			—			14,889
Accretive dividend on preferred stockholders and membership interests		—		—			—			(4,204	)		—			(4,204	)
Inducement fee paid upon conversion of Series J preferred stock		—		—			—			(3,657	)		—			(3,657	)
Cash dividends declared		—		—			—			(46,056	)		—			(46,056	)
Accrued dividends for long-term incentive awards		—		—			—			(451	)		—			(451	)
Purchase of treasury stock related to stock-based compensation, 337 shares		—		—			—			—			(4,004	)		(4,004	)
Treasury stock repurchase plan, 2,763 shares		—		—			—			—			(26,718	)		(26,718	)
Dividend to preferred shareholders paid in shares		—		1,783			—			(1,783	)		—			—
Common shares issued upon conversion of Series J preferred stock		12		200,250			—			—			—			200,262
Cash settlement of equity award		—		(8,022	)		—			—			—			(8,022	)
Separation of B&N Education, Inc.		—		(401,258	)		—			(301,264	)		—			(702,522	)

Balance at April 30, 2016	$	112		1,738,034			151			(24,349	)		(1,110,438	)	$	603,510

See accompanying notes to consolidated financial statements.

F-41

CONSOLIDATED STATEMENTS OF CASH FLOWS


Fiscal Year	Fiscal 2016			Fiscal 2015			Fiscal 2014
(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(24,446	)	$	36,596		$	(47,268	)
Net income (loss) from discontinued operations		(39,146	)		3,724			31,872

Net income (loss) from continuing operations	$	14,700		$	32,872		$	(79,140	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization (including amortization of deferred financing fees)		139,138			149,143			174,750
Stock-based compensation expense		14,201			16,875			11,154
Impairment charges		3,991			366			32,379
Deferred taxes		34,604			(3,858	)		58,098
(Gain) loss on disposal of property and equipment		2,428			4,605			(920	)
Decrease in other long-term liabilities		(48,025	)		(4,201	)		(5,223	)
Pension contributions		(12,707	)		(13,667	)		(1,904	)
Pension reclassification		20,802			7,317			—
Net (increase) decrease in other non-current assets		(3,405	)		1,019			3,983
Changes in operating assets and liabilities, net		29,960			(191,201	)		82,507

Net cash flows provided by (used in) operating activities	$	195,687		$	(730	)	$	275,684

Cash flows from investing activities:
Purchases of property and equipment		(94,274	)		(94,805	)		(96,728	)
Net (increase) decrease in other non-current assets		—			—			3,402

Net cash flows used in investing activities	$	(94,274	)	$	(94,805	)	$	(93,326	)

Cash flows from financing activities:
Proceeds from credit facility		929,500			349,400			734,000
Payments on credit facility		(882,300	)		(349,400	)		(811,000	)
Cash dividends paid		(46,056	)		—			—
Treasury stock repurchase plan		(26,718	)		—			—
Cash settlement of equity award		(8,022	)		—			—
Payment of new credit facility related fees		(5,701	)		—			—
Purchase of treasury stock related to stock-based compensation		(4,004	)		(10,607	)		(5,254	)
Cash dividends paid to preferred shareholders		(3,941	)		(16,026	)		(15,768	)
Inducement fee paid upon conversion of Series J preferred stock		(3,657	)		—			—
Excess tax benefit from stock-based compensation		1,838			1,865			560
Proceeds from exercise of common stock options		1,303			1,282			1,031
Payment of Junior Seller Note		—			(127,250	)		—
Acquisition of preferred membership interests		—			(76,175	)		—
Net proceeds from Microsoft commercial agreement financing arrangement		—			57,161			84,675

Net cash flows used in financing activities	$	(47,758	)	$	(169,750	)	$	(11,756	)

Cash flows from discontinued operations:
Operating cash flows		(81,643	)		57,657			48,255
Investing cash flows		(16,505	)		(58,183	)		(39,156	)
Financing cash flows (including cash at date of Spin-Off)		(16,029	)		—			—

Net cash flows provided by (used in) discontinued operations		(114,177	)		(526	)		9,099

Net increase (decrease) in cash and cash equivalents		(60,522	)		(265,811	)		179,701
Cash and cash equivalents at beginning of period		74,360			340,171			160,470

Cash and cash equivalents at end of period		13,838			74,360			340,171
Cash and cash equivalents of discontinued operations		—			(59,714	)		(144,269	)

Cash and cash equivalents at end of period	$	13,838		$	14,646		$	195,902

Changes in operating assets and liabilities, net:
Receivables, net	$	(64,652	)	$	44,715		$	8,097
Merchandise inventories, net		62,015			(36,448	)		206,121
Prepaid expenses and other current assets		(11,947	)		(28,228	)		4,197
Accounts payable and accrued liabilities		44,544			(171,240	)		(135,908	)

Changes in operating assets and liabilities, net	$	29,960		$	(191,201	)	$	82,507

See accompanying notes to consolidated financial statements.

F-42

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


Fiscal Year	Fiscal 2016		Fiscal 2015		Fiscal 2014
(In thousands)
Supplemental cash flow information
Cash paid during the period for:
Interest	$	12,217	$	16,548	$	20,115
Income taxes (net of refunds)	$	16,107	$	95,584	$	3,471
Non-cash financing activity:
Accrued dividends for long-term incentive awards	$	451	$	—	$	—
Dividends to preferred stockholders paid in shares	$	1,783	$	—	$	—
Issuance of common stock upon conversion of Series J preferred stock	$	200,262	$	—	$	—
Accrued dividends on redeemable preferred stock	$	—	$	3,941	$	4,202
Acquisition of preferred membership interests for 2,737,290 shares of common stock of Barnes & Noble, Inc.	$	—	$	76,175	$	—

See accompanying notes to consolidated financial statements.

F-43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Thousands of dollars, except per share data)

For the 52 weeks ended April 30, 2016 (fiscal 2016), 52 weeks ended May 2, 2015 (fiscal 2015) and 53 weeks ended May 3, 2014 (fiscal 2014).

Summary of Significant Accounting Policies

Business

Barnes & Noble, Inc. (Barnes & Noble or the Company), one of the nation’s largest booksellers, ³ is a leading content and commerce company providing customers easy and convenient access to trade books and other content across its multi-channel distribution platform. As of April 30, 2016, the Company operates 640 bookstores in 50 states, maintains an eCommerce site, develops digital reading products and operates one of the largest digital bookstores. Barnes & Noble is utilizing the strength of its retail footprint in combination with its online and digital businesses to provide an omni-channel experience for its customers, fulfilling its commitment to offer customers any book, anytime, anywhere and in any format.

Barnes & Noble Retail (B&N Retail) operates 640 retail bookstores, primarily under the Barnes & Noble Booksellers ^® trade name, and includes the Company’s eCommerce site. B&N Retail also includes Sterling Publishing Co., Inc. (Sterling or Sterling Publishing), a leader in general trade book publishing. The NOOK segment represents the Company’s digital business, offering digital books and magazines for sale and consumption online, NOOK ^® ⁴ reading devices, co-branded NOOK ^® tablets and reading software for iOS, Android and Windows 8.

The Company’s principal business is the sale of trade books (generally, hardcover and paperback consumer titles), mass market paperbacks (such as mystery, romance, science fiction and other popular fiction), children’s books, eBooks and other digital content, NOOK ^® and related accessories, bargain books, magazines, gifts, café products and services, educational toys & games, music and movies direct to customers through its bookstores or on www.barnesandnoble.com. The Company offers its customers a full suite of textbook options — new, used, digital and rental.

The Company identifies its operating segments based on the way the business is managed (focusing on the financial information distributed) and the manner in which the chief operating decision maker interacts with other members of management, and makes decisions on the allocation of resources. The Company’s two operating segments are B&N Retail and NOOK.

Separation of B&N Education, Inc.

³	Based upon sales reported in trade publications and public filings.

⁴	Any references to NOOK ^® include the Company’s Samsung Galaxy Tab ^® S2 NOOK ^® , Samsung Galaxy Tab E NOOK ^® , Samsung Galaxy Tab ^® 4 NOOK ^® 7.0 device and NOOK GlowLight ^TM Plus, each of which includes the trademark symbol ( ^® or ™, as applicable) even if a trademark symbol is not included.

F-44

The distribution was subject to the satisfaction or waiver of certain conditions as set forth in B&N Education’s Registration Statement on Form S-1, which was filed with the SEC on February 26, 2015 and was amended on April 29, 2015, June 4, 2015, June 29, 2015, July 13, 2015, July 14, 2015 and July 15, 2015.

Discontinued Operations of B&N Education, Inc.

History of B&N Education, Inc.

F-45

On July 14, 2015, the Board approved the final distribution ratio and declared a pro rata dividend of the outstanding shares of B&N Education common stock, which resulted in the complete legal and structural separation of the two companies on August 2, 2015.

Consolidation

The consolidated financial statements include the accounts of Barnes & Noble, Inc. and its wholly and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

Merchandise Inventories

Merchandise inventories are stated at the lower of cost or market. Cost is determined primarily by the retail inventory method under the first-in, first-out (FIFO) basis. NOOK merchandise inventories are recorded based on the average cost method.

F-46

Property and Equipment and Other Long-Lived Assets

Property and equipment are carried at cost, less accumulated depreciation and amortization. For financial reporting purposes, depreciation is computed using the straight-line method over estimated useful lives. Maintenance and repairs are expensed as incurred, while major maintenance and remodeling costs are capitalized if they extend the useful life of the asset. Leasehold improvements are capitalized and amortized over the shorter of their estimated useful lives or the terms of the respective leases. Fixtures and equipment are capitalized and amortized over the shorter of their estimated useful lives or 10 years. Capitalized lease acquisition costs are being amortized over the lease terms of the underlying leases. System costs are capitalized and included in property and equipment. These costs are depreciated over their estimated useful lives from the date the systems become operational. The Company had $298,580 and $341,735 of property and equipment, net of accumulated depreciation, at April 30, 2016 and May 2, 2015, respectively, and $134,850, $139,204 and $161,252 of depreciation expense for fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Capitalized software costs of $79,890 and $39,897 for fiscal 2016 and fiscal 2015, respectively, are included in property and equipment.

The Company had $1,610 and $2,519 of amortizable intangible assets, net of amortization, at April 30, 2016 and May 2, 2015, respectively. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and considers market participants in accordance with Accounting Standards Codification (ASC) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets (ASC 360-10). The Company evaluates long-lived assets for impairment at the individual Barnes & Noble store level, which is the lowest level at which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, the Company will first compare the carrying amount of the assets to the individual store’s estimated future undiscounted cash flows. If the estimated future cash flows are less than the carrying amount of the assets, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the assets to the individual store’s fair value based on its 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. Impairment losses included in selling and administrative expenses related to amortizable assets totaled $150, $366 and $30,777 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively.

Goodwill and Unamortizable Intangible Assets

The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance sheets.

At April 30, 2016, the Company had $211,276 of goodwill and $309,294 of unamortizable intangible assets (those with an indefinite useful life), accounting for approximately 25.9% of the Company’s total assets. ASC 350-30, Goodwill and Other Intangible Assets , requires that goodwill and other unamortizable intangible assets no longer be amortized, but instead be tested for impairment at least annually or earlier if there are impairment indicators. The Company performs a two-step process for impairment testing of goodwill as required by ASC 350-30. The first step of this test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount. The second step (if necessary) measures the amount of the impairment. The Company completed its annual goodwill impairment test as of the first day of the third quarter of fiscal 2016. In performing the valuations, the Company used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions. Based on the results of the Company’s step one testing, the fair values of the B&N Retail and NOOK reporting units as of that date exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed and no goodwill impairment was recognized. There were no impairment losses included in selling and administrative expenses related to goodwill during fiscal 2016, fiscal 2015 and fiscal 2014.

F-47

The Company tests unamortizable intangible assets by comparing the fair value and the carrying value of such assets. The Company also completed its annual impairment tests for its other unamortizable intangible assets by comparing the estimated fair value to the carrying value of such assets. Impairment losses included in selling and administrative expenses related to unamortizable intangible assets totaled $3,840, $0 and $1,602 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Changes in market conditions, among other factors, could have a material impact on these estimates.

During fiscal 2016, the Company impaired one of its publishing contracts due to a significant drop in current year business with that publisher, driven by lower title offerings, product quality and the loss of a distribution partner. As a result, the Company recorded an impairment charge of $3,840 in selling and administrative expenses. During fiscal 2014, the Company recorded $1,602 of impairments related to a certain publishing contract. The publishing contracts include the value of long-standing relationships with authors, agents and publishers established upon the Company’s acquisition of Sterling in 2003. Given Sterling’s strong history of maintaining such relationships, the Company believes they produce value indefinitely without an identifiable remaining useful life. However, given the continued declines in the physical book business, certain of these contracts were impaired.

Deferred Charges

Costs incurred to obtain long-term financing are amortized over the terms of the respective debt agreements using the straight-line method, which approximates the interest method. Unamortized costs included in other non-current assets as of April 30, 2016 and May 2, 2015 were $7,796 and $5,371, respectively. Amortization expense included in interest and amortization of deferred financing fees was $3,276, $5,477 and $5,957 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively.

Revenue Recognition

In accordance with ASC No. 605-25, Revenue Recognition, Multiple-Element Arrangements, and Accounting Standards Updates (ASU) No. 2009-13 and 2009-14, for multiple-element arrangements that involve tangible products that contain software that is essential to the tangible product’s functionality, undelivered software elements that relate to the tangible product’s essential software and other separable elements, the Company allocates revenue to all deliverables using the relative selling-price method. Under this method, revenue is allocated at the time of sale to all deliverables based on their relative selling price using a specific hierarchy. The hierarchy is as follows: vendor-specific objective evidence, third-party evidence of selling price, or best estimate of selling price. NOOK ^® device revenue is recognized at the segment point of sale.

F-48

specific objective evidence or third-party evidence exists for any of the elements. Revenue allocated to NOOK ^® and the software essential to its functionality is recognized at the time of sale, provided all other conditions for revenue recognition are met. Revenue allocated to the PCS is deferred and recognized on a straight-line basis over the 2-year estimated life of a NOOK ^® device.

The average percentage of a NOOK ^® ’s sales price that is deferred for undelivered items and recognized over its 2-year estimated life ranges between 0% and 4%, depending on the type of device sold. The amount of NOOK ^® -related deferred revenue as of April 30, 2016 and May 2, 2015 was $160 and $2,345, respectively. These amounts are classified on the Company’s balance sheet in accrued liabilities for the portion that is subject to deferral for one year or less and other long-term liabilities for the portion that is subject to deferral for more than one year.

The Company also pays certain vendors who distributed NOOK ^® a commission on the content sales sold through that device. The Company accounts for these transactions as a reduction in the sales price of the NOOK ^® based on historical trends of content sales and a liability is established for the estimated commission expected to be paid over the life of the product. The Company recognizes revenue of the content at the point of sale of the content. The Company records revenue from sales of digital content, sales of third-party extended warranties, service contracts and other products, for which the Company is not obligated to perform, and for which the Company does not meet the criteria for gross revenue recognition under ASC 605-45-45, Reporting Revenue Gross as a Principal versus Net as an Agent , on a net basis. All other revenue is recognized on a gross basis.

NOOK acquires the rights to distribute digital content from publishers and distributes the content on www.barnesandnoble.com, NOOK ^® devices and other eBookstore platforms. Certain digital content is distributed under an agency pricing model, in which the publishers set prices for eBooks and NOOK receives a commission on content sold through the eBookstore. The majority of the Company’s eBooks are sold under the agency model.

F-49

Research and Development Costs for Software Products

The Company follows the guidance in ASC 985-20, Cost of Software to Be Sold, Leased or Marketed , regarding software development costs to be sold, leased, or otherwise marketed. Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. A certain amount of judgment and estimation is required to assess when technological feasibility is established, as well as the ongoing assessment of the recoverability of capitalized costs. The Company’s products reach technological feasibility shortly before the products are released and, therefore, research and development costs are generally expensed as incurred.

Internal-Use Software and Website Development Costs

Direct costs incurred to develop software for internal use and website development costs are capitalized and amortized over an estimated useful life of three to seven years. During fiscal 2016 and 2015, the Company capitalized costs, primarily related to labor, consulting, hardware and software, of $31,531 and $37,145, respectively. Amortization of previously capitalized amounts was $30,461, $27,618 and $24,194 for fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Costs related to the design or maintenance of internal-use software and website development are expensed as incurred.

Advertising Costs

The costs of advertising are expensed as incurred during the year pursuant to ASC 720-35, Advertising Costs . Advertising costs charged to selling and administrative expenses were $53,569, $50,210 and $57,247 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively.

The Company receives payments and credits from vendors pursuant to co-operative advertising and other programs, including payments for product placement in stores, catalogs and online. In accordance with ASC 605-50-25-10, Customer’s Accounting for Certain Consideration Received from a Vendor , the Company classifies certain co-op advertising received as a reduction in costs of sales and occupancy. Allowances received from vendors exceeded gross advertising costs in each of the fiscal years noted above.

Closed Store Expenses

When the Company closes or relocates a store, the Company charges unrecoverable costs to expense. Such costs include the net book value of abandoned fixtures and leasehold improvements and, when a store is closed prior to the expiration of the lease, a provision for future lease obligations, net of expected sublease recoveries. Costs associated with store closings of $744, $1,301 and $2,423 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively, are included in selling and administrative expenses in the accompanying consolidated statements of operations.

Net Earnings (Loss) Per Common Share

In accordance with ASC 260-10-45, Share-Based Payment Arrangements and Participating Securities and the Two-Class Method, unvested share-based payment awards that contain rights to receive non-forfeitable dividends are considered participating securities. The Company’s unvested restricted shares and unvested restricted stock units granted prior to July 15, 2015 and shares issuable under the Company’s deferred compensation plan are considered participating securities. Cash dividends to restricted stock units and performance-based stock units granted on or after July 15, 2015 are not distributed until and except to the extent that the restricted stock units vest, and in the case of performance-based stock units, until and except to the extent that the performance metrics are achieved or are otherwise deemed satisfied. Stock options do not receive cash dividends. As such, these awards are not considered participating securities.

F-50

Basic earnings per common share is calculated by dividing the net income, adjusted for preferred dividends and income allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted net income per common share reflects the dilution that would occur if any potentially dilutive instruments were exercised or converted into common shares. The dilutive effect of participating securities is calculated using the more dilutive of the treasury stock method or two-class method. Other potentially dilutive securities include preferred stock, stock options, restricted stock units granted after July 15, 2015, and performance-based stock units and are included in diluted shares to the extent they are dilutive under the treasury stock method for the applicable periods. See Note 10 to the Consolidated Financial Statements for further information regarding the calculation of basic and diluted earnings (loss) per common share.

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 bases 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. The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance, if determined to be necessary. The Company establishes a reserve for uncertain tax positions. If the Company considers that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, it recognizes the tax benefit. A reserve for an uncertain income tax position will be recognized if it has less than a 50% likelihood of being sustained. The tax positions are analyzed periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments for those positions. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

Stock-Based Compensation

The calculation of stock-based employee compensation expense involves estimates that require management’s judgment. These estimates include the fair value of each of the stock option awards granted, which is estimated on the date of grant using a Black-Scholes option pricing model. There are two significant inputs into the Black-Scholes option pricing model: expected volatility and expected term. The Company estimates expected volatility based on traded option volatility of the Company’s stock over a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived from historical exercise experience under the Company’s stock option plans and represents the period of time that stock option awards granted are expected to be outstanding. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate, and only recognize expense for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period. See Note 5 to the Consolidated Financial Statements for a further discussion on stock-based compensation.

Gift Cards

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Company estimates the portion of the gift card liability for which the likelihood of redemption is remote based upon the Company’s historical redemption patterns. The Company records this amount in income on a straight-line basis over a 12-month period beginning in the 13th month after the month the gift card was originally sold. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to recognize revenue associated with gift cards. Additional breakage may be required if gift card redemptions continue to run lower than historical patterns.

The Company recognized gift card breakage of $29,074, $26,080 and $23,221 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. The Company had gift card liabilities of $353,103 and $358,146 as of April 30, 2016 and May 2, 2015, respectively.

Accounts Receivable

Accounts receivable, as presented on the Company’s Consolidated Balance Sheets, is 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 historic trends, the financial condition of the Company’s customers and an evaluation of economic conditions. The Company writes off uncollectible trade receivables once collection efforts have been exhausted. Costs associated with allowable customer markdowns and operational chargebacks, net of the expected recoveries, are part of the provision for allowances included in accounts receivable. These provisions result from seasonal negotiations, as well as historic deduction trends net of expected recoveries, and the evaluation of current market conditions.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform with the fiscal 2016 presentation.

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 includes provisions to simplify certain aspects related to the accounting for share-based awards and the related financial statement presentation. This ASU includes a requirement that the tax effect related to the settlement of share-based awards be recorded in income tax benefit or expense in the statements of earnings. This change is required to be adopted prospectively in the period of adoption. In addition, the ASU modifies the classification of certain share-based payment activities within the statements of cash flows and these changes are required to be applied retrospectively to all periods presented, or in certain cases prospectively, beginning in the period of adoption. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-04, Liabilities – Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products (ASU 2016-04). ASU 2016-04 requires entities that sell prepaid stored-value products redeemable for goods, services or cash at third-party merchants to recognize breakage (i.e. the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard. Under current GAAP, there is diversity in practice in how entities account for breakage that results when a consumer does not redeem the entire product balance. Some entities view liabilities for prepaid stored-value products that can be redeemed only for goods or services from a third party as non-financial because the issuer’s obligation to the consumer will be settled by the transfer of goods or services, not cash. Others view these liabilities as financial, given

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that the issuer is ultimately obligated to transfer cash to a third party. This ASU clarifies that an entity’s liability for prepaid stored-value products within its scope meets the definition of a financial liability. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. Entities will apply the guidance using either a modified retrospective approach or a full retrospective approach. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet.
ASU 2016-02 requires expanded disclosures about the nature and terms of lease agreements and is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes, Balance Sheet Classification of Deferred Taxes
(ASU 2015-17). This standard requires all deferred tax assets and liabilities to be classified as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts. In addition, valuation allowance allocations between current and non-current deferred tax assets are no longer required because those allowances also will be classified as non-current. ASU 2015-17 is effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and early adoption is permitted. Entities are permitted to apply the amendments either prospectively or retrospectively. The Company early adopted ASU 2015-17 on a retrospective basis, and deferred taxes previously classified as components of current assets and current liabilities were reclassified to non-current assets and non-current liabilities, respectively, as of May 2, 2015.

In July 2015, the FASB issued an ASU 2015-11, Simplifying the Measurement of Inventory ( ASU 2015-11), modifying the accounting for inventory. Under ASU 2015-11, the measurement principle for inventory will change from lower of cost or market value to lower of cost and net realizable value. ASU 2015-11 defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is applicable to inventory that is accounted for under the first-in, first-out method and is effective for reporting periods after December 15, 2016, with early adoption permitted. The Company has not yet determined the impact of adoption on its consolidated financial statements.

In June 2015, the FASB issued ASU 2015-10, Technical Corrections and Improvements . The amendments in this update cover a wide range of Topics in the Codification. The amendments in this update represent changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This update is the final version of Proposed Accounting Standards Update 2014-240, Technical Corrections and Improvements , which has been deleted. The adoption did not have a material effect on the Company’s consolidated financial position or results of operations.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). ASU 2015-03 simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. In August 2015, FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (ASU 2015-15). ASU 2015-15 clarifies the presentation and measuring of debt issuance costs incurred in connection with line-of-credit arrangements given the lack of guidance on this topic in ASU 2015-03. For line-of-credit arrangements, an entity can continue to present debt issuance costs as an asset and amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. ASU 2015-03, as amended, is effective for annual reporting periods beginning after December 15, 2015, including interim periods within such annual reporting periods with early adoption permitted. ASU 2015-03 is to be retrospectively adopted to each prior reporting period presented. The Company does not expect the adoption of this guidance to have a material effect on our consolidated financial statements.

Effective May 3, 2015, the Company was required to adopt ASU 2014-08, Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity . The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. The Company has classified the Spin-Off of Barnes & Noble Education as discontinued operations starting the second quarter ended October 31, 2015.

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In May 2014, the FASB issued ASU 2014-09. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-12, is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted for annual reporting periods beginning after December 15, 2016. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company has not yet selected a transition method nor has it determined the impact of adoption on its consolidated financial statements.

Reporting Period

The Company’s fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. The reporting periods ended April 30, 2016 contained 52 weeks, May 2, 2015 contained 52 weeks, and May 3, 2014 contained 53 weeks.

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Discontinued Operations of Barnes & Noble Education, Inc.

The Company has recognized the separation of B&N Education in accordance with Accounting Standards Codification (ASC) 205-20, Discontinued Operations . As such, the historical results of Barnes & Noble Education for fiscal 2015 and fiscal 2014 have been adjusted to include pre-spin B&N Education results and separation-related costs and exclude corporate allocations with B&N Retail, and have been classified as discontinued operations. Additionally, discontinued operations for fiscal 2016 include investment banking fees (as they directly relate to the Spin-Off), as well as pre-spin B&N Education results and separation-related costs and exclude corporate allocation adjustments with B&N Retail.

The following financial information presents the discontinued operations for fiscal 2016, fiscal 2015 and fiscal 2014:


	Fiscal 2016			Fiscal 2015		Fiscal 2014
Sales	$	238,983		$	1,772,389	$	1,748,012
Cost of sales and occupancy		186,697			1,325,814		1,309,026

Gross profit		52,286			446,575		438,986
Selling and administrative expenses		94,933			353,087		319,773
Depreciation and amortization		13,100			50,509		48,014

Operating income (loss) from discontinued operations		(55,747	)		42,979		71,199
Interest expense, net and amortization of deferred financing fees		3			210		385

Income (loss) before income taxes from discontinued operations		(55,750	)		42,769		70,814
Income taxes		(16,604	)		39,045		38,942

Net income (loss) from discontinued operations	$	(39,146	)	$	3,724	$	31,872

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The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations:


	May 2, 2015
Carrying amounts of assets included as part of discontinued operations:
Cash and cash equivalents	$	59,714
Receivables, net		38,311
Merchandise inventories, net		297,425
Prepaid expenses and other current assets		52,176

Total current assets		447,626

Property and equipment:
Buildings and leasehold improvements		149,065
Fixtures and equipment		335,404

		484,469
Less accumulated depreciation and amortization		376,911

Net property and equipment		107,558

Goodwill		274,070
Intangible assets, net		198,190
Other non-current assets		39,883

Total assets classified as discontinued operations in the consolidated balance sheet	$	1,067,327

Carrying amounts of liabilities included as part of discontinued operations:
Accounts payable	$	170,490
Accrued liabilities		133,123

Total current liabilities		303,613
Long-term deferred taxes		41,924
Other long-term liabilities		34,093

Total liabilities classified as discontinued operations in the consolidated balance sheet	$	379,630

Resignation Charge

On August 2, 2015, Michael P. Huseby resigned from the Company’s Board of Directors and as Chief Executive Officer of the Company, which was contingent upon the successful separation of B&N Education. In connection with his termination of employment, he received severance payments based on the terms of his employment agreement with the Company, effective as of January 7, 2014. Under the terms of his employment agreement, upon a resignation for “Good Reason”, Mr. Huseby was entitled to receive lump-sum severance equal to two times the sum of (a) annual base salary, (b) the average annual incentive compensation paid to the named executive officer with respect to the preceding two completed years and (c) the cost of benefits. In addition, Mr. Huseby was entitled to accelerated vesting of the equity-based awards granted pursuant to his employment agreement. As a result, Mr. Huseby received a severance payment equal to $7,742 and additionally was entitled to 300,000 shares of the Company’s common stock pursuant to the accelerated vesting of the equity-based awards, which were settled for cash based on the closing price of the Company’s common stock on the record date of the Spin-Off in an amount equal to $8,022. The net cash payments related to Mr. Huseby’s resignation totaled $15,764 during the second fiscal quarter ended October 31, 2015. Mr. Huseby’s 300,000 shares have been ratably

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expensed from the initial grant date, thereby reducing the total resignation charge to $10,510, which was recorded within selling and administrative expenses during the second fiscal quarter ended October 31, 2015.

Apple Settlement

The Company provided credits to eligible customers resulting from the settlement reached with Apple Inc. (Apple) in an antitrust lawsuit filed by various State Attorneys General and private class plaintiffs regarding the price of digital books. The Company’s customers were entitled to $95,707 in total credits as a result of the settlement, which is funded by Apple. If a customer’s credit is not used to make a purchase within one year, the entire credit will expire. The Company recorded estimated redemptions of $53,809 as a receivable from Apple and a liability to its customers with a deadline of June 2017 for the activation of all credits.

Credit Facility

Prior to August 3, 2015, the Company was party to an amended and restated credit facility with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and other lenders, dated as of April 29, 2011 (as amended and modified to date, the Credit Facility), consisting of up to $1,000,000 in aggregate commitments under a five-year asset-backed revolving credit facility, which expired on April 29, 2016.

On August 3, 2015, the Company and certain of its subsidiaries entered into a credit agreement (New Credit Agreement) with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and the other lenders from time to time party thereto, under which the lenders committed to provide a five-year asset-backed revolving credit facility in an aggregate committed principal amount of $700,000 (New Credit Facility). Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Wells Fargo Bank, N.A. and SunTrust Robinson Humphrey, Inc. are the joint lead arrangers for the New Credit Facility. The $700,000 New Credit Facility replaced the $1,000,000 Credit Facility. Proceeds from the New Credit Facility are expected to be used for general corporate purposes, including seasonal working capital needs.

The Company and certain of its subsidiaries will be permitted to borrow under the New Credit Facility. The New Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the New Credit Facility (collectively, the Loan Parties), but excluding the equity interests in the Company and its subsidiaries, intellectual property, equipment and certain other property. Borrowings under the New Credit Facility are limited to a specified percentage of eligible collateral. The Company has the option to request an increase in commitments under the New Credit Facility of up to $250,000, subject to certain restrictions.

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The Company wrote off $460 of deferred financing fees related to the Credit Facility during fiscal 2016 and the remaining unamortized deferred financing fees of $3,542 were deferred and will be amortized over the five-year term of the New Credit Facility. The Company also incurred $5,701 of fees to secure the New Credit Facility, which will be amortized over the five-year term accordingly.

The Company had $47,200 of outstanding debt under the New Credit Facility as of April 30, 2016 and no outstanding debt under the previous Credit Facility as of May 2, 2015.

The following table presents selected information related to the Company’s credit facilities:


	Fiscal 2016			Fiscal 2015			Fiscal 2014
Credit facility at period end	$	47,200			—			—
Average balance outstanding during the period	$	66,948			18,227			48,254
Maximum borrowings outstanding during the period	$	293,200			202,800			180,300
Weighted average interest rate during the period ^(a)		8.21	%		38.18	%		15.65	%
Interest rate at end of period		2.69	%		0.00	%		0.00	%

(a)	Includes commitment fees.

Fees expensed with respect to the unused portion of the credit facilities were $2,781, $4,658 and $4,375 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. The Company had $47,895 of outstanding letters of credit under its New Credit Facility as of April 30, 2016 compared with $66,946 under the previous Credit Facility as of May 2, 2015.

The Company has no agreements to maintain compensating balances.

Stock-Based Compensation

The Company maintains four share-based incentive plans: the 1996 Incentive Plan, the 2004 Incentive Plan, the 2009 Incentive Plan and the Amended and Restated 2009 Incentive Plan. Prior to June 2, 2009, the Company issued restricted stock and stock options under the 1996 and 2004 Incentive Plans. On June 2, 2009, the Company’s shareholders approved the 2009 Incentive Plan. Under the 2009 Incentive Plan, the Company has issued restricted stock units, restricted stock and stock options. On September 11, 2012, the Company’s shareholders approved the Amended and Restated 2009 Incentive Plan. Under the Amended and Restated 2009 Incentive Plan, the Company has issued performance-based stock units, restricted stock units, restricted stock and stock options. At April 30, 2016, there were approximately 7,251,953 shares of common stock available for future grants under the Amended and Restated 2009 Incentive Plan.

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A restricted stock award is an award of common stock that is subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and 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 and are considered to be currently issued and outstanding. The Company’s restricted stock awards vest over a period of one to four years. The Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, straight-line over the period during which the restrictions lapse. For these purposes, the fair market value of the restricted stock is determined based on the closing price of the Company’s common stock on the grant date.

A restricted stock unit is a grant valued in terms of the Company’s common stock, but no stock is issued at the time of grant. The restricted stock units may be redeemed for one share of common stock each 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 of unvested restricted stock units have no voting rights but are entitled to receive dividends and other distributions thereon. Cash dividends to restricted stock units granted on or after July 15, 2015 are not distributed until the restricted stock units vest. The Company’s restricted stock units vest over a period of one to four years. The Company expenses the cost of the restricted stock units, which is determined to be the fair market value of the shares at the date of grant, straight-line over the period during which the restrictions lapse. For these purposes, the fair market value of the restricted stock unit is determined based on the closing price of the Company’s common stock on the grant date.

A performance-based stock unit is a grant valued in terms of the Company’s common stock, but no stock is issued at the time of grant. Each performance-based stock unit may be redeemed for one share of common stock once vested. In general, upon the achievement of a minimum threshold, 50% to 150% of these awards vest at the end of a three year performance period from the date of grant based upon achievement of the performance goal specified in the performance-based stock unit agreement. Performance-based stock units are generally subject to forfeiture if employment terminates prior to the settlement of the award. The grantee cannot transfer the units except in very limited circumstances and with the consent of the compensation committee. Shares of unvested performance-based stock units have no voting rights but are entitled to receive dividends and other distributions thereon. Cash dividends to performance-based stock units are not distributed until the award is settled. The Company expenses the cost of the performance-based stock units, which is determined to be the fair market value of the shares at the date of grant, ratably over the requisite service period, based on the probability of achieving the performance goal, with changes in expectations recognized as an adjustment to earnings in the period of the change. If the performance goal is not met, no compensation cost is recognized and any previously recognized compensation cost is reversed.

The Company uses the Black-Scholes option-pricing model to value the Company’s stock options for each stock option award. Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant. The fair value of the Company’s stock option awards, which are generally subject to pro-rata vesting annually over four years, is expensed on a straight-line basis over the vesting period of the stock options. The expected volatility assumption is based on traded options volatility of the Company’s stock over a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived from historical exercise experience under the Company’s stock option plans and represents the period of time that stock option awards granted are expected to be outstanding. The expected term assumption incorporates

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the contractual term of an option grant, which is ten years, as well as the vesting period of an award, which is generally pro-rata vesting annually over four years. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.

The Company recognizes stock-based compensation costs, net of estimated forfeitures, for only those shares expected to vest on a straight-line basis over the requisite service period of the award. The Company estimates the forfeiture rates based on its historical experience.

No stock options were granted during fiscal 2016, fiscal 2015 or fiscal 2014.

Stock-Based Compensation Activity

The following table presents a summary of the Company’s stock option activity:


	Number of Shares (in thousands)			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Balance, April 27, 2013		3,376		$	17.91			6.24 years	$	7,331
Granted		—			0.00
Exercised		(66	)		15.71
Forfeited		(2,272	)		16.95

Balance, May 3, 2014		1,039		$	20.14			4.53 years	$	725
Granted		—			0.00
Exercised		(83	)		15.47
Forfeited		(501	)		24.12

Balance, May 2, 2015		455		$	16.62			6.27 years	$	3,114
Granted		—			0.00	^(a)
Exercised		(111	)		11.71	^(a)
Forfeited		(239	)		10.89	^(a)
Adjustment due to the Spin-Off of B&N Education		219

Balance, April 30, 2016		324		$	11.29			5.09 years	$	516

Vested and expected to vest in the future at April 30, 2016		324		$	11.29			5.09 years	$	516
Exercisable at April 30, 2016		324		$	11.29			5.09 years	$	516
Available for grant at April 30, 2016		7,252

(a)	Weighted average exercise price is calculated using exercise price prior to the Spin-Off and after the Spin-Off.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the related fiscal year and the exercise price, multiplied by the related in-the-money options) that would have

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been received by the option holders had they exercised their options at the end of the fiscal year. This amount changes based on the market value of the Company’s common stock. Total intrinsic value of options exercised for fiscal 2016, fiscal 2015 and fiscal 2014 (based on the difference between the Company’s stock price on the exercise date and the respective exercise price, multiplied by the number of options exercised) was $546, $596 and $227, respectively.

As of April 30, 2016, there was no unrecognized compensation expense related to unvested stock options granted under the Company’s share-based compensation plans.

The following table presents a summary of the Company’s restricted stock activity:


	Number of Shares (in thousands)			Weighted Average Grant Date Fair Value
Balance, April 27, 2013		285		$	15.91
Granted		61			13.81
Vested		(194	)		16.15
Forfeited		(53	)		16.02

Balance, May 3, 2014		99		$	14.09
Granted		43			22.24
Vested		(96	)		14.10
Forfeited		(3	)		13.46

Balance, May 2, 2015		43		$	22.24
Granted		64			13.04
Vested		(43	)		22.24
Forfeited		—			—

Balance, April 30, 2016		64		$	13.04

Total fair value of shares of restricted stock that vested during fiscal 2016, fiscal 2015 and fiscal 2014 was $637, $2,188 and $2,955, respectively. As of April 30, 2016, there was $350 of unrecognized stock-based compensation expense related to non-vested restricted stock awards. That cost is expected to be recognized over a weighted average period of 0.46 years.

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The following table presents a summary of the Company’s restricted stock unit activity:


	Number of Shares (in thousands)			Weighted Average Grant Date Fair Value
Balance, April 27, 2013		1,878		$	16.38
Granted		2,469			15.12
Vested		(497	)		16.76
Forfeited		(723	)		17.13

Balance, May 3, 2014		3,127		$	15.15
Granted		291			19.40
Vested		(1,054	)		15.19
Forfeited		(309	)		15.94

Balance, May 2, 2015		2,055		$	15.62
Granted		692			18.82	^(a)
Vested		(1,312	)		10.68	^(a)
Forfeited		(1,054	)		10.74	^(a)
Adjustment due to the Spin- Off of B&N Education		1,057

Balance, April 30, 2016		1,438		$	13.76

(a)	Weighted average grant date fair value is calculated using the grant price prior to the Spin-Off and after the Spin-Off.

Total fair value of shares of restricted stock units that vested during fiscal 2016, fiscal 2015 and fiscal 2014 were $18,047, $23,578 and $9,475, respectively. As of April 30, 2016, there was $13,926 of unrecognized stock-based compensation expense related to non-vested restricted stock units. That cost is expected to be recognized over a weighted average period of 1.66 years.

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The following table presents a summary of the Company’s performance-based stock unit activity:


	Number of Shares (in thousands)			Weighted Average Grant Date Fair Value
Balance, April 27, 2013		—		$	0.00
Granted		—			0.00
Vested		—			0.00
Forfeited		—			0.00

Balance, May 3, 2014		—		$	0.00
Granted		—			0.00
Vested		—			0.00
Forfeited		—			0.00

Balance, May 2, 2015		—		$	0.00
Granted		110			28.08	^(a)
Vested		—			0.00	^(a)
Forfeited		(17	)		18.46	^(a)
Adjustment due to the Spin- Off of B&N Education		58

Balance, April 30, 2016		151		$	18.41

(a)	Weighted average grant date fair value is calculated using the grant price prior to the Spin-Off and after the Spin-Off.

Total fair value of shares of performance-based stock units that vested during fiscal 2016, fiscal 2015 and fiscal 2014 were $0, in each years. As of April 30, 2016, there was $2,004 of unrecognized stock-based compensation expense related to non-vested performance-based stock units. That cost is expected to be recognized over a weighted average period of 2.21 years.

For fiscal 2016, fiscal 2015 and fiscal 2014, stock-based compensation expense of $14,201, $16,874 and $11,154, respectively, is included in selling and administrative expenses.

Receivables, Net

Receivables represent customer, private and public institutional and government billings, credit/debit card, advertising, landlord and other receivables due within one year as follows:


	April 30, 2016		May 2, 2015
Trade accounts	$	21,000	$	17,457
Credit/debit card receivables		28,232		27,174
eBook settlement receivable (see Note 4)		53,809		—
Other receivables		21,876		15,634

Total receivables, net	$	124,917	$	60,265

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Other Long-Term Liabilities

Other long-term liabilities consist primarily of deferred rent, tax liabilities and reserves, and long-term insurance liabilities. The Company provides for minimum rent expense over the lease terms (including the build-out period) on a straight-line basis. The excess of such rent expense over actual lease payments (net of tenant allowances) is classified as deferred rent. Other long-term liabilities include store closing expenses and long-term deferred revenues. The Company had the following long-term liabilities at April 30, 2016 and May 2, 2015:


	April 30, 2016		May 2, 2015
Deferred rent	$	70,006	$	90,871
Tax liabilities and reserves		13,758		43,090
Insurance liabilities		15,219		15,277
Other		15,201		12,971

Total other long-term liabilities	$	114,184	$	162,209

Fair Values of Financial Instruments

In accordance with ASC 820, Fair Value Measurements and Disclosures (ASC 820), 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 the Company to develop its own assumptions

The Company’s financial instruments include cash, receivables, gift cards, accrued liabilities and accounts payable. The fair values of cash, receivables, accrued liabilities and accounts payable approximate carrying values because of the short-term nature of these instruments. The Company believes that its credit facility approximates fair value since interest rates are adjusted to reflect current rates.

10.

Net Earnings (Loss) Per Share

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Basic earnings per common share are calculated by dividing the net income, adjusted for preferred dividends and income allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted net income per common share reflects the dilution that would occur if any potentially dilutive instruments were exercised or converted into common shares. The dilutive effect of participating securities is calculated using the more dilutive of the treasury stock method or two-class method. Other potentially dilutive securities include preferred stock, stock options, restricted stock units granted after July 15, 2015, and performance-based stock units and are included in diluted shares to the extent they are dilutive under the treasury stock method for the applicable periods.

During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. Due to the net loss during fiscal 2016 and fiscal 2014, participating securities in the amounts of 2,163,190 and 3,048,040, respectively, were excluded from the calculation of loss per share using the two-class method because the effect would be antidilutive. The Company’s outstanding non-participating securities consisting of dilutive stock options were 31,778 for fiscal 2014 and accretion/payments of dividends on preferred shares were also excluded from the calculation of loss per share using the two-class method because the effect would be antidilutive.

The following is a reconciliation of the Company’s basic and diluted income (loss) per share calculation:


	Fiscal 2016			Fiscal 2015			Fiscal 2014
Numerator for basic income (loss) per share:
Net income (loss) from continuing operations attributable to Barnes & Noble, Inc.	$	14,700			32,872			(79,140	)
Inducement fee paid upon conversion of Series J preferred stock		(3,657	)		—			—
Preferred stock dividends		—			(15,767	)		(16,028	)
Preferred stock dividends paid in shares		(1,783	)		—			—
Accretion of dividends on preferred stock and membership units		(4,204	)		(7,339	)		(3,032	)
Less allocation of dividends to participating securities		(1,219	)		—			—
Less allocation of undistributed earnings to participating securities		—			(535	)		—

Net income (loss) from continuing operations available to common shareholders		3,837			9,231			(98,200	)
Net income (loss) from discontinued operations attributable to Barnes & Noble, Inc.		(39,146	)		3,724			31,872
Less allocation of undistributed earnings to participating securities		—			(204	)		—

Net income (loss) from discontinued operations available to common shareholders		(39,146	)		3,520			31,872

Net income (loss) available to common shareholders	$	(35,309	)		12,751			(66,328	)

Numerator for diluted income (loss) per share:
Net income (loss) from continuing operations available to common shareholders	$	3,837			9,231			(98,200	)

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	Fiscal 2016			Fiscal 2015			Fiscal 2014
Preferred stock dividends ^(a)		—			—			—
Accretion of dividends on preferred stock ^(a)		—			—			—
Allocation of undistributed earnings to participating securities		—			535			—
Less diluted allocation of undistributed earnings to participating securities		—			(534	)		—

Net income (loss) from continuing operations available to common shareholders		3,837			9,232			(98,200	)
Net income (loss) from discontinued operations available to common shareholders		(39,146	)		3,520			31,872
Allocation of undistributed earnings to participating securities		—			204			—
Less diluted allocation of undistributed earnings to participating securities		—			(204	)		—

Net income (loss) from discontinued operations available to common shareholders		(39,146	)		3,520			31,872

Net income (loss) available to common shareholders	$	(35,309	)		12,752			(66,328	)

Denominator for basic income (loss) per share:
Basic weighted average common shares		72,410			60,842			58,971
Denominator for diluted income (loss) per share:
Basic weighted average shares		72,410			60,842			58,971
Preferred shares ^(a)		—			—			—
Average dilutive options		118			86			—
Average dilutive non-participating securities		14			—			—

Diluted weighted average common shares		72,542			60,928			58,971

Basic income (loss) per common share:
Income (loss) from continuing operations	$	0.05			0.15			(1.67	)
Income (loss) from discontinued operations		(0.54	)		0.06			0.54

Basic income (loss) per common share		(0.49	)		0.21			(1.12	)

Diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.05			0.15			(1.67	)
Income (loss) from discontinued operations		(0.54	)		0.06			0.54

Diluted income (loss) per common share		(0.49	)		0.21			(1.12	)

(a)	Although the Company was in a net income position during the 52 weeks ended April 30, 2016 and May 2, 2015, the dilutive effect of the Company’s convertible preferred shares was excluded from the calculation of income per share using the two-class method because the effect would be antidilutive.

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11.

Employees’ Retirement and Defined Contribution Plans

As of December 31, 1999, substantially all employees of the Company were covered under a non-contributory defined benefit pension plan (the Pension Plan). As of January 1, 2000, the Pension Plan was amended so that employees no longer earn benefits for subsequent service. Effective December 31, 2004, the Barnes & Noble.com Employees’ Retirement Plan (the B&N.com Retirement Plan) was merged with the Pension Plan. Substantially all employees of Barnes & Noble.com were covered under the B&N.com Retirement Plan. As of July 1, 2000, the B&N.com Retirement Plan was amended so that employees no longer earn benefits for subsequent service. Subsequent service continues to be the basis for vesting of benefits not yet vested at December 31, 1999 and June 30, 2000 for the Pension Plan and the B&N.com Retirement Plan, respectively.

On June 18, 2014, the Company’s Board of Directors approved a resolution to terminate the Pension Plan. The Pension Plan termination was effective November 1, 2014 and the accrued benefit for active participants was vested as of such date. As a result of the Pension Plan termination, pension liability and other comprehensive loss increased by $15,747, before tax, during the 13 weeks ended August 2, 2014. The pension liability was settled in either a lump sum payment or a purchased annuity. A special lump sum opportunity was offered to the terminated vested participants in the Pension Plan during the 13 weeks ended November 1, 2014, which triggered settlement accounting in the period ended January 31, 2015. The settlement represented 735 participants who elected to receive a lump sum of their benefit, totaling $15,190. The distributions primarily took place in December 2014 and resulted in a settlement charge of $7,317, which was reclassified from other comprehensive income to selling and administrative expenses during fiscal 2015. In addition, the Pension Plan received a favorable determination letter, dated October 15, 2015, from the IRS. This determination letter rules that the termination of the Pension Plan, as amended, does not affect its tax-qualified status.

The net impact of the Pension Plan termination, special lump sum opportunity, settlement accounting and remeasurement and regular plan experience, was an increase in pension liability of $3,062 and a decrease in other comprehensive income of $6,503, before tax, in fiscal 2015.

In fiscal 2016 there was a final Pension Plan termination lump sum opportunity offered to the remaining 2,300 active and terminated vested participants at the final Pension Plan termination distribution date. To effectuate the full plan liquidation, lump sum payments totaling approximately $18,100 were distributed in March 2016 to about 1,800 participants who elected to receive an immediate distribution of their benefit as part of the plan termination lump sum window. Benefits for the remaining plan population were transferred to Massachusetts Mutual Life Insurance Company for an annuity purchase premium of $34,500, which was paid on March 28, 2016. As of April 30, 2016, approximately $250 in assets remained in the trust to cover the monthly annuity benefits for May 2016.

For fiscal 2016, regular annual expense was $4,433, with pension settlement charge of $20,897 from the plan liquidation, for a total pension expense for fiscal 2016 of $25,330. Pension expense was $10,434 and $2,465 for fiscal 2015 and fiscal 2014, respectively.

The Company maintains a defined contribution plan (the Savings Plan) for the benefit of substantially all employees. Total Company contributions charged to employee benefit expenses for the Savings Plan were $12,251, $12,363 and $13,269 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. In addition, the Company provides certain health care and life insurance benefits (the Postretirement Plan) to certain retired employees, limited to those receiving benefits or retired as of April 1, 1993. Total Company contributions charged to employee benefit expenses for the Postretirement Plan were $150, $52 and $44 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively.

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12.

Income Taxes

Income (loss) before income taxes for fiscal 2016, fiscal 2015 and fiscal 2014 are as follows:


	Fiscal 2016			Fiscal 2015		Fiscal 2014
Domestic operations	$	6,827			68,535		(66,862	)
Foreign operations		(941	)		3,981		733

Total income (loss) before taxes	$	5,886			72,516		(66,129	)

Income tax provisions (benefits) for fiscal 2016, fiscal 2015 and fiscal 2014 are as follows:


	Fiscal 2016			Fiscal 2015			Fiscal 2014
Current:
Federal	$	(47,053	)		39,514			(43,024	)
State		3,908			2,674			(2,219	)
Foreign		(273	)		1,314			156

Total current		(43,418	)		43,502			(45,087	)

Deferred:
Federal		21,570			6,099			42,695
State		13,018			(10,001	)		15,403
Foreign		16			44			—

Total deferred		34,604			(3,858	)		58,098

Total	$	(8,814	)		39,644			13,011

Reconciliation between the effective income tax rate and the federal statutory income tax rate is as follows:


	Fiscal 2016			Fiscal 2015			Fiscal 2014
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		8.3			10.8			(6.3	)
Change to unrecognized tax benefits		(111.3	)		0.2			(2.9	)
Excess executive compensation		8.0			3.7			(1.0	)
Meals and entertainment disallowance		5.1			1.1			(0.8	)
Tax credits		(76.3	)		(3.9	)		4.3
Joint venture net loss allocation		—			33.1			(30.3	)
Change in valuation allowance		108.6			(19.8	)		(17.6	)
Changes in deferred taxes and payables		(134.8	)		(5.4	)		—
State law changes		4.7			—			—
Other, net		3.0			(0.1	)		(0.1	)

Effective income tax rate		(149.7	)%		54.7	%		(19.7	)%

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In 2016, the effective rate reconciliation percentages are impacted by the Company’s lower pre-tax earnings as compared to fiscal 2015 and fiscal 2014. In 2016, as shown above in the Changes in deferred taxes and payables, certain adjustments to earnings were recorded to correct immaterial errors attributable to prior fiscal years. The Company has evaluated the effects of these errors, both qualitatively and quantitatively, and concluded that the correction of these errors in prior period amounts is not material to the current period or any previously reported periods, including quarterly reporting.

The joint venture net loss allocation identified in the table above refers to our obligation under the joint venture with Microsoft and Pearson that was terminated in fiscal 2015 to allocate items of loss and expense to Microsoft for income tax purposes. In fiscal 2015, this commitment resulted in an additional allocation for tax purposes of $105,542 of joint venture losses to Microsoft.

The Company recorded an income tax benefit of $8,814 million in fiscal 2016 compared with an income tax provision of $39,644 and $13,011 million in fiscal 2015 and fiscal 2014, respectively. The Company’s effective tax rate was (149.7)%, 54.7% and (19.7)% in fiscal 2016, fiscal 2015 and fiscal 2014, respectively. The income tax (benefit)/provision in fiscal 2016, fiscal 2015 and fiscal 2014, respectively, include the impact of permanent items such as meals and entertainment, non-deductible executive compensation and changes in uncertain tax positions. Fiscal 2016 also includes the impact of the finalization of the federal income tax audit covering the 2008 through 2012 tax years, the closure of many state taxing jurisdiction statutes and the impact of new legislation enacted by Congress permanently reinstating the research and development credit. The Company continues to maintain a valuation allowance against certain state items. In fiscal 2015 and fiscal 2014, the Company recorded the tax implications of the Microsoft agreement, which do not impact the current year, as a result of the termination of the Microsoft agreement in December 2014.

The Company accounts 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. At April 30, 2016 and May 2, 2015, the significant components of the Company’s deferred taxes consisted of the following:


	April 30, 2016			May 2, 2015
Deferred tax assets:
Accrued liabilities	$	124,475		$	119,458
Inventory		3,844			15,616
Insurance liability		8,392			8,212
Loss and credit carryovers		31,100			24,411
Lease transactions		13,813			23,685
Pension		670			6,175
Stock-based compensation		1,918			3,373
Other		503			1,132

Gross deferred tax assets		184,715			202,062

Valuation allowance		(7,903	)		(1,215	)

Net deferred tax assets		176,812			200,847

Deferred tax liabilities:
Prepaid expenses		(5,678	)		(6,778	)
Goodwill and intangible asset amortization		(133,267	)		(131,338	)
Investment in Barnes & Noble.com		(78,650	)		(78,526	)
Depreciation		(13,234	)		—

Gross deferred tax liabilities		(230,829	)		(216,642	)

Net deferred tax liabilities	$	(54,017	)	$	(15,795	)

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 the Company’s ability to utilize its deferred tax assets, it considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis. The Company has recorded a valuation allowance of $7,903 and $1,215 at April 30, 2016 and May 2, 2015, respectively. The $6,688 increase in the valuation allowance during fiscal 2016 is due principally to the expected inability to utilize California R&D Credits due to statutory tax law limitations.

At April 30, 2016, and based on its tax year ended January 2016, the Company had federal net operating loss carryforwards (NOLs) of approximately $53,222 and state net operating loss carryforwards of $76,230 that are available to offset taxable income in its respective taxing jurisdiction. The federal net operating losses begin to expire in 2019 through 2024. The

F-69

utilization of federal net operating loss carryforward is limited to approximately $6,653 on an annual basis. NOLs not used during a particular period may be carried forward to future years, though not beyond the expiration years. Additionally, the Company had approximately $75,790 of state NOLs that have no annual limitation and expire beginning in 2030. The Company had net federal and state tax credits totaling $6,641, which have an indefinite life.

As of April 30, 2016, the Company had $14,572 of unrecognized tax benefits, all of which, if recognized, would affect the Company’s effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal 2016, fiscal 2015 and fiscal 2014 is as follows:


Balance at April 27, 2013	$	21,326
Additions for tax positions of the current period		2,693
Additions for tax positions of prior periods		2,206
Reductions due to settlements		—
Reductions for tax positions of prior periods		(7,070	)

Balance at May 3, 2014	$	19,155
Additions for tax positions of the current period		731
Additions for tax positions of prior periods		—
Reductions due to settlements		—
Reductions for tax positions of prior periods		(1,504	)

Balance at May 2, 2015	$	18,382
Additions for tax positions of the current period		238
Additions for tax positions of prior periods		7,433
Reductions due to settlements		(5,980	)
Reductions for tax positions of prior periods		(5,501	)

Balance at April 30, 2016	$	14,572

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company recorded net interest and penalties (benefit) expense of approximately $(7,774), $1,394 and $472 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. As of April 30, 2016 and May 2, 2015, the Company had net accrued interest and penalties of $4,226 and $12,000, respectively.

The Company completed the federal income tax audit covering tax years 2008 through 2012. As a result, many state statutes expired upon the filing of amended state income tax returns reflecting the federal audit adjustments. Accordingly the amount of unrecognized tax benefits decreased by $5,980. Further, we believe that it is reasonably possible that the total amount of unrecognized tax benefits at April 30, 2016 could decrease by approximately $7,384 within the next twelve months, as a result of settlement of certain tax audits or lapses of statutes of limitations which could impact the effective tax rate.

As of April 30, 2016, the Company has not provided for deferred taxes on the excess of financial reporting over the tax basis of investments in certain foreign subsidiaries because the Company plans to utilize the foreign earnings to facilitate the closing of certain foreign operations. If these earnings were repatriated in the future, additional income and withholding tax expense would be incurred. Due to complexities in the laws of the foreign jurisdictions and the assumptions that would have to be made, it is not practicable to estimate the total amount of income taxes that would have to be provided on such earnings.

The Company is 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 from fiscal 2014 and forward. Some earlier years remain open for a small minority of states.

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adoption is permitted. Entities are permitted to apply the amendments either prospectively or retrospectively. The Company early adopted ASU 2015-17 on a retrospective basis, and deferred taxes previously classified as components of current assets and current liabilities were reclassified to non-current assets and non-current liabilities, respectively, as of May 2, 2015. The amounts reclassified from current assets to non-current liabilities was $117,816 and $120,707 in fiscal 2015 and fiscal 2014, respectively.

13.

Intangible Assets and Goodwill


Amortizable intangible assets	Useful Life		As of May 2, 2015
Amortizable intangible assets	Useful Life		Gross Carrying Amount		Accumulated Amortization			Total
Technology		5-10	$	10,710	$	(8,933	)	$	1,777
Distribution contracts		10		8,325		(7,608	)		717
Other		3-10		5,725		(5,700	)		25

			$	24,760	$	(22,241	)	$	2,519


Unamortizable intangible assets			Trade Name		Publishing Contracts			Total
Balance at May 3, 2014			$	293,400	$	19,734		$	313,134
Impairment				—		—			—

Balance at May 2, 2015			$	293,400	$	19,734		$	313,134

Total amortizable and unamortizable intangible assets								$	315,653


Amortizable intangible assets	Useful Life		As of April 30, 2016
Amortizable intangible assets	Useful Life		Gross Carrying Amount		Accumulated Amortization			Total
Technology		5-10	$	10,710	$	(9,589	)	$	1,121
Distribution contracts		10		8,325		(7,905	)		420
Other		3-10		6,375		(6,306	)		69

			$	25,410	$	(23,800	)	$	1,610


Unamortizable intangible assets			Trade Name		Publishing Contracts			Total
Balance at May 2, 2015			$	293,400	$	19,734		$	313,134
Impairment				—		(3,840	)		(3,840	)

Balance at April 30, 2016			$	293,400	$	15,894		$	309,294

Total amortizable and unamortizable intangible assets								$	310,904

All amortizable intangible assets are being amortized over their useful life on a straight-line basis, with the exception of certain other acquired intangible assets, which are amortized on an accelerated basis.

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Aggregate Amortization Expense:
For the 52 weeks ended April 30, 2016	$	1,012
For the 52 weeks ended May 2, 2015	$	4,461
For the 53 weeks ended May 3, 2014	$	7,542

Estimated Amortization Expense:
(12 months ending on or about April 30)
2017	$	744
2018	$	541
2019	$	324

The Company tests unamortizable intangible assets by comparing the fair value and the carrying value of such assets. Impairment losses included in selling and administrative expenses related to unamortizable intangible assets totaled $3,840, $0 and $1,602 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Changes in market conditions, among other factors, could have a material impact on these estimates.

The changes in the carrying amount of goodwill by segment for fiscal 2016 are as follows:


	B&N Retail Segment			NOOK Segment		Total Company
Balance as of May 3, 2014	$	219,119			—	$	219,119
Benefit of excess tax amortization (a)		(3,922	)		—		(3,922	)

Balance as of May 2, 2015	$	215,197			—	$	215,197

Benefit of excess tax amortization (a)		(3,921	)		—		(3,921	)

Balance as of April 30, 2016	$	211,276			—	$	211,276

(a)

The tax basis of goodwill arising from an acquisition during the 52 weeks ended January 29, 2005 exceeded the related basis for financial reporting purposes by approximately $96,576. In accordance with ASC 740-10-30, Accounting for Income Taxes, the Company is recognizing the tax benefits of amortizing such excess as a reduction of goodwill as it is realized on the Company’s income tax return.

14.

Microsoft Investment

On April 27, 2012, Barnes & Noble entered into an investment agreement, pursuant to which Barnes & Noble transferred to the LLC its digital device, digital content and college bookstore businesses, and Morrison Investment Holdings, Inc. (Morrison) purchased from the LLC 300,000 convertible preferred membership interests in the LLC (Series A Preferred) for an aggregate purchase price of $300,000. Concurrently with its entry into this agreement, Barnes & Noble also entered into a commercial agreement with Microsoft, pursuant to which, among other things, the LLC would develop and distribute a Windows 8 application for eReading and digital content purchases, and an intellectual property license and settlement agreement with Microsoft and Microsoft Licensing GP. The parties closed Morrison’s investment in the LLC and the commercial agreement became effective on October 4, 2012.

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On December 3, 2014, Morrison, Microsoft, Barnes & Noble and Barnes & Noble Education entered into agreements, pursuant to which Morrison’s interest in the LLC was purchased by Barnes & Noble Education and the Microsoft commercial agreement was terminated effective as of such date. Pursuant to the Purchase Agreement (the Purchase Agreement) among Barnes & Noble, Barnes & Noble Education, Morrison and Microsoft, Barnes & Noble Education purchased from Morrison, and Morrison sold, all of its $300,000 convertible Series A preferred limited liability company interest in the LLC in exchange for an aggregate purchase price of $124,850 consisting of (i) $62,425 in cash and (ii) 2,737,290 shares of common stock, par value $0.001 per share, of Barnes & Noble. The Purchase Agreement closed on December 4, 2014. The Company accounted for this transaction in accordance with ASC 810-10, Non-Controlling Interest (ASC 810-10) and it accordingly was reflected as an equity transaction. In connection with the closing, the parties entered into a Digital Business Contingent Payment Agreement, pursuant to which Microsoft is entitled to receive 22.7% of the proceeds from, among other events or transactions, (1) any future dividends or other distributions received from Barnes & Noble’s NOOK digital business at any time until the date that is three years from the closing, subject to a one-year extension under certain circumstances, and (2) the sale of Barnes & Noble’s NOOK digital business at any time until the date that is three years from the closing, subject to a one-year extension under certain circumstances.

15.

Pearson

On December 21, 2012, the LLC entered into an agreement with a subsidiary of Pearson plc (Pearson) to make a strategic investment in the LLC. That transaction closed on January 22, 2013, and Pearson invested approximately $89,500 of cash in the LLC in exchange for preferred membership interests representing a 5% equity stake in the LLC. Following the closing of the transaction, Barnes & Noble owned approximately 78.2% of the LLC and Microsoft owned approximately 16.8%. The preferred membership interests had a liquidation preference equal to the original investment. In addition, the LLC granted warrants to Pearson to purchase up to an additional 5% of the LLC under certain conditions. Upon the completion of the acquisition of Pearson’s interest in the LLC, as stated below, the temporary equity was converted to permanent equity.

On December 22, 2014, Barnes & Noble entered into a Purchase Agreement (the Pearson Purchase Agreement) among Barnes & Noble, Barnes & Noble Education, NOOK Media Member Two LLC, a Delaware limited liability company (NOOK Member Two), Pearson Education, Inc. (Pearson Education) and Pearson Inc., pursuant to which Barnes & Noble Education and NOOK Member Two purchased from Pearson Education all of its convertible Series B preferred limited liability company interest in the LLC and all of its warrants to purchase additional Series B preferred limited liability company interests, in exchange for an aggregate purchase price equal to (i) $13,750 in cash and (ii) 602,927 shares of common stock, par value $0.001 per share, of Barnes & Noble. The transactions under the Pearson Purchase Agreement closed on December 22, 2014. The Company accounted for this transaction in accordance with ASC 810-10 and it accordingly was reflected as an equity transaction. As a condition to closing, the parties entered into an amended and restated Digital Business Contingent Payment Agreement, pursuant to which a Digital Business Contingent Payment Agreement dated as of December 3, 2014, by and between Barnes & Noble, the LLC and Pearson, was amended and restated to include provisions consistent with the Digital Business Contingent Payment Agreement entered into with Morrison on December 3, 2014.

16.

Samsung Commercial Agreement

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On May 17, 2016, NOOK Digital and Samsung amended the Agreement, pursuant to which NOOK Digital agreed to a minimum purchase commitment of devices with a total retail value equal to $10,000 during the first twelve months after launch of any co-branded NOOK tablet device. The amended minimum purchase commitment replaces all prior purchase commitments contained in the Agreement by NOOK Digital and Samsung.

17.

Palo Alto Lease

On June 5, 2014, the Company entered into an Assignment of Lease for its 208,000 square foot Palo Alto, California campus. NOOK employees were moved to a new facility in Santa Clara, California, while Barnes & Noble College’s digital education employees were relocated to a facility in Mountain View, California. The relocations occurred during the first quarter of fiscal 2015.

In the fourth quarter of fiscal 2014, the Company recorded an asset impairment charge of $28,440 within selling and administrative expenses related to this relocation. Since the assignment of lease was being actively negotiated in fiscal 2014 and was completed prior to the issuance of the financial statements, the impaired assets that resulted from the completion of the assignment were reflected in the financial statements for fiscal 2014 in accordance with ASC 855-10, Subsequent Events . Of the $28,440 asset impairment charge that was recorded in fiscal 2014, $23,928 related to leasehold improvements, $2,750 related to furniture, fixtures, machinery and equipment and $1,762 related to assets under construction. The Company determined the impairment charge by comparing the estimated fair value to its carrying amount. The fair value was developed primarily using the cost approach in evaluating the replacement cost of the asset (Level 2 fair value assumptions) and then adjusting any value due to economic obsolescence, functional obsolescence or physical deterioration. The amount of the fair value measurement of the assets related to the relocation as of May 3, 2014 was $10,624. The lease termination was accounted for in the first quarter of fiscal 2015, which was the period in which the lease was assigned.

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18.

Series J Preferred Stock

On August 18, 2011, the Company entered into an investment agreement between the Company and Liberty GIC, Inc. (Liberty), pursuant to which the Company issued and sold to Liberty, and Liberty purchased, 204,000 shares of the Company’s Series J Preferred Stock, par value $0.001 per share (Preferred Stock), for an aggregate purchase price of $204,000 in a private placement exempt from the registration requirements of the 1933 Act. The shares of Preferred Stock were convertible, at the option of the holders, into shares of Common Stock representing 16.6% of the Common Stock outstanding as of August 29, 2011 (after giving pro forma effect to the issuance of the Preferred Stock) based on the initial conversion rate. The initial conversion rate reflected an initial conversion price of $17.00 and was subject to adjustment in certain circumstances. The initial dividend rate for the Preferred Stock was equal to 7.75% per annum of the initial liquidation preference of the Preferred Stock paid quarterly and subject to adjustment in certain circumstances.

On July 9, 2015, the Company completed the Conversion. Pursuant to the terms of the Conversion Agreements, the Series J Holders converted an aggregate of 103,995 shares of Preferred Stock into 6,117,342 shares of Company Common Stock, and made an aggregate cash payment to the Series J Holders of $3,657 plus cash in lieu of fractional shares in connection with the Conversion.

The number of shares of Company Common Stock issued was determined based on a conversion ratio of 58.8235 shares of Company Common Stock per share of Preferred Stock converted, which was the conversion rate in the Certificate of the Designations with respect to the Preferred Stock dated as of August 18, 2011.

As a result of the transactions described above, all shares of Series J Preferred Stock were retired by the Company and are no longer outstanding.

19.

Shareholders’ Equity

On October 20, 2015 the Company’s Board of Directors authorized a new stock repurchase program of up to $50,000 of its common shares. Stock repurchases under this program may be made through open market and privately negotiated transactions from time to time and in such amounts as

F-75

management deems appropriate. The repurchase program has no expiration date and may be suspended or discontinued at any time. The Company’s repurchase plan is intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. During the 52 weeks ended April 30, 2016, the Company repurchased 2,763,142 shares at a cost of $26,718 under this plan. The Company has remaining capacity of approximately $23,282 under this program as of April 30, 2016. As of April 30, 2016, the Company has repurchased 37,941,321 shares at a cost of approximately $1,083,720 since the inception of the Company’s stock repurchase programs. The repurchased shares are held in treasury.

20.

Commitments and Contingencies

The Company leases retail stores, warehouse facilities, office space and equipment. Substantially all of the B&N Retail stores are leased under non-cancelable agreements, which expire at various dates through 2029 with various renewal options for additional periods. The agreements, which have been classified as operating leases, generally provide for both minimum and percentage rentals and require the Company to pay insurance, taxes and other maintenance costs. Percentage rentals are based on sales performance in excess of specified minimums at various stores.

The Company leases office space in New York, New York and Santa Clara, California for its NOOK operations.

Rental expense under operating leases is as follows:


	Fiscal 2016		Fiscal 2015		Fiscal 2014
Minimum rentals	$	297,322		294,214		303,161
Percentage rentals		1,821		2,305		2,711

	$	299,143		296,519		305,872

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Future minimum annual rentals, excluding percentage rentals, required under B&N Retail leases that had initial, non-cancelable lease terms greater than one year, and NOOK leases as of April 30, 2016 are:


Fiscal Year
2017	$	312,193
2018		257,517
2019		199,045
2020		140,073
2021		80,692
After 2021		119,543

	$	1,109,063

The Company provides for minimum rent expense over the lease terms (including the build-out period) on a straight-line basis. The excess of such rent expense over actual lease payments (net of tenant allowances) is reflected in other long-term liabilities and accrued liabilities in the accompanying balance sheets.

Purchase obligations, which include hardware and software maintenance contracts and inventory purchase commitments, as of April 30, 2016 are as follows:


Less Than 1 Year	$	37,578
1-3 Years		20,078
3-5 Years		—
More Than 5 Years		—

Total	$	57,656

21.

Segment Reporting

The Company’s two operating segments are B&N Retail and NOOK.

B&N Retail

NOOK

This segment includes the Company’s digital business, including the development and support of the Company’s NOOK ^® product offerings. The digital business includes digital content such as eBooks, digital newsstand and sales of NOOK ^® devices and accessories to B&N.

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Summarized financial information concerning the Company’s reportable segments is presented below:


Sales by Segment	52 weeks ended April 30, 2016			52 weeks ended May 2, 2015			53 weeks ended May 3, 2014
B&N Retail	$	4,028,614		$	4,108,243		$	4,295,140
NOOK		191,520			263,833			505,862
Elimination		(56,290	)		(74,968	)		(167,657	)

Total	$	4,163,844		$	4,297,108		$	4,633,345


Sales by Product Line	52 weeks ended April 30, 2016			52 weeks ended May 2, 2015			53 weeks ended May 3, 2014
Media ^(a)		70	%		70	%		67	%
Digital ^(b)		5	%		7	%		12	%
Other ^(c)		25	%		23	%		21	%

Total		100	%		100	%		100	%


Depreciation and Amortization	52 weeks ended April 30, 2016		52 weeks ended May 2, 2015		53 weeks ended May 3, 2014
B&N Retail	$	101,888	$	104,373	$	125,991
NOOK		33,975		39,292		42,802

Total	$	135,863	$	143,665	$	168,793


Operating Income (Loss)	52 weeks ended April 30, 2016			52 weeks ended May 2, 2015			53 weeks ended May 3, 2014
B&N Retail	$	113,296		$	213,355		$	223,202
NOOK		(98,640	)		(123,161	)		(260,209	)

Total	$	14,656		$	90,194		$	(37,007	)


Capital Expenditures	52 weeks ended April 30, 2016		52 weeks ended May 2, 2015		53 weeks ended May 3, 2014
B&N Retail	$	81,277	$	73,783	$	66,763
NOOK		12,997		21,022		29,965

Total	$	94,274	$	94,805	$	96,728


Total Assets ^(d)	As of April 30, 2016		As of May 2, 2015
B&N Retail	$	1,873,381	$	1,633,554
NOOK		139,401		411,550
Discontinued Operations		—		1,067,327

Total	$	2,012,782	$	3,112,431

^(a)	Includes tangible books, music, movies, rentals and newsstand.

^(b)	Includes NOOK ^® , related accessories, eContent and warranties.

^(c)	Includes Toys & Games, café products, gifts and miscellaneous other.

^(d)	Excludes intercompany balances.

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A reconciliation of operating income (loss) from reportable segments to income (loss) from continuing operations before taxes in the consolidated financial statements is as follows:


	52 weeks ended April 30, 2016			52 weeks ended May 2, 2015			53 weeks ended May 3, 2014
Reportable segments operating income (loss)	$	14,656		$	90,194		$	(37,007	)
Interest expense, net and amortization of deferred financing costs		(8,770	)		(17,678	)		(29,122	)

Consolidated income (loss) before taxes	$	5,886		$	72,516		$	(66,129	)

22.

Legal Proceedings

The Company records a liability when it believes that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount of a loss or potential loss. The Company may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others: (i) if the damages sought are indeterminate; (ii) if proceedings are in the early stages; (iii) if there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) if there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) if there are significant factual issues to be determined or resolved; (vi) if the proceedings involve a large number of parties; (vii) if relevant law is unsettled or novel or untested legal theories are presented; or (viii) if the proceedings are taking place in jurisdictions where the laws are complex or unclear. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.

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The following is a discussion of the material legal matters involving the Company.

PIN Pad Litigation

Cassandra Carag individually and on behalf of others similarly situated v. Barnes & Noble, Inc., Barnes & Noble Booksellers, Inc. and DOES 1 through 100 inclusive

On November 27, 2013, former Associate Store Manager Cassandra Carag (Carag) brought suit in Sacramento County Superior Court, asserting claims on behalf of herself and all other hourly (non-exempt) Barnes & Noble employees in California in the preceding four years for unpaid regular and overtime wages based on alleged off-the-clock work, penalties and pay based on missed meal and rest breaks, and for improper wage statements, payroll records, and untimely pay at separation as a result of the alleged pay errors during employment. Via the complaint, Carag seeks to recover unpaid wages and statutory penalties for all hourly Barnes & Noble employees within California from November 27, 2009 to present. On February 13, 2014, the Company filed an Answer in the state court and concurrently requested removal of the action to federal court. On May 30, 2014, the federal court granted Plaintiff’s motion to remand the case to state court and denied Plaintiff’s motion to strike portions of the Answer to the Complaint (referring the latter motion to the lower court for future consideration).

Adrea LLC v. Barnes & Noble, Inc., barnesandnoble.com llc and NOOK Media LLC

With respect to the Adrea matter described herein, the Company has determined, based on its current knowledge, that a loss is probable.

F-80

Beginning October 7, 2014, through and including October 22, 2014, the case was tried to a jury in the Southern District of New York. The jury returned its verdict on October 27, 2014. The jury found no infringement with respect to the ‘851 patent, and infringement with respect to the ‘501 and ‘703 patents. It awarded damages in the amount of $1,330. The jury further found no willful infringement with respect to any patent.

23.

Barnes & Noble Education, Inc. Transactions

Direct Costs Incurred Related to On-going Agreements with Barnes & Noble Education (Subsequent to the Spin-Off)

In connection with the separation of B&N Education, the Company entered into a Separation and Distribution Agreement with B&N Education on July 14, 2015 and several other ancillary agreements on August 2, 2015. These agreements govern the relationship between the parties after the separation and allocate between the parties various assets, liabilities, rights and obligations following the separation, including inventory purchases, employee benefits, intellectual property, information technology, insurance and tax-related assets and liabilities. The agreements also describe the Company’s future commitments to provide B&N Education with certain transition services following the Spin-Off. These agreements include the following:

•

a Separation and Distribution Agreement that sets forth the Company’s and B&N Education’s agreements regarding the principal actions that both parties took in connection with the Spin-Off and aspects of this relationship following the Spin-Off. The term of the agreement is perpetual after the Distribution date;

•

a Transition Services Agreement, pursuant to which the Company agreed to provide B&N Education with specified services for a limited time to help ensure an orderly transition following the Spin-Off. The Transition Services Agreement specifies the calculation of B&N Education costs for these services. The agreement will expire and services under it will cease no later than two years following the Spin-Off date or sooner in the event B&N Education no longer requires such services;

•

a Tax Matters Agreement governs the respective rights, responsibilities and obligations of the Company and B&N Education after the Spin-Off with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests). The agreement will expire after two years following the Spin-Off date;

•

an Employee Matters Agreement with B&N Education, addressing employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities arising out of employee compensation and benefits programs, in which B&N Education employees participated prior to the Spin-Off. The agreement will expire and services under it will cease when B&N Education no longer requires such services; and

F-81

•

a Trademark License Agreement, pursuant to which the Company grants B&N Education an exclusive license in certain licensed trademarks and a non-exclusive license in other licensed trademarks. The term of the agreement is perpetual after the Spin-Off date.

Summary of Transactions with Barnes & Noble Education

During the 39 weeks ended April 30, 2016 (i.e. second, third and fourth quarter of fiscal 2016, periods presented as discontinued operations after the Spin-Off), the Company charged B&N Education $22,673 for purchases of inventory and direct costs incurred under the agreements discussed above.

As of April 30, 2016, amounts due from B&N Education for book purchases and direct costs incurred under the agreements discussed above were $5,246.

24.

Certain Relationships and Related Transactions

The Company believes that the transactions and agreements discussed below (including renewals of any existing agreements) between the Company and related third parties are at least as favorable to the Company as the transactions and agreements that could have been entered into with unrelated parties at the time they were entered into. The Audit Committee of the Board of Directors utilizes procedures in evaluating the terms and provisions of proposed related party transactions or agreements in accordance with the fiduciary duties of directors under Delaware law. The Company’s related party transaction procedures contemplate Audit Committee review and approval of all new agreements, transactions or courses of dealing with related parties, including any modifications, waivers or amendments to existing related party transactions. The Company tests to ensure that the terms of related party transactions are at least as favorable to the Company as the terms that could have been obtained from unrelated parties at the time of the transaction. The Audit Committee considers, at a minimum, the nature of the relationship between the Company and the related party, the history of the transaction (in the case of modifications, waivers or amendments), the terms of the proposed transaction, the Company’s rationale for entering the transaction and the terms of comparable transactions with unrelated third parties. In addition, management and internal audit annually analyze all existing related party agreements and transactions and review them with the Audit Committee.

The Company completed the acquisition (the Acquisition) of B&N College from Leonard Riggio and Louise Riggio (the Sellers) on September 30, 2009. In connection with the closing of the Acquisition, the Company issued the Sellers (i) a senior subordinated note in the principal amount of $100,000, with interest of 8% per annum payable on the unpaid principal amount, which was paid on December 15, 2010 in accordance with its scheduled due date, and (ii) a junior subordinated note in the principal amount of $150,000 (the Junior Seller Note), with interest of 10% per annum payable on the unpaid principal amount, which was paid on September 30, 2014 in accordance with its scheduled due date. Pursuant to a settlement agreed to on June 13, 2012, the Sellers waived their right to receive $22,750 in principal amount (and interest on such principal amount) of the Junior Seller Note.

In fiscal 2011, the Company entered into an agreement with MBS Textbook Exchange, Inc. (MBS), which is majority-owned by Leonard Riggio and other members of the Riggio family. MBS is a new and used textbook wholesaler, which also sells textbooks online and provides bookstore systems and distant learning distribution services. Pursuant to this agreement, MBS agrees to purchase at the end of a given semester certain agreed upon textbooks, which the Company shall have rented to students during such semester. Total sales to MBS under this program were $2, $619 and $1,388 for fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Total outstanding amounts payable to MBS for these arrangements, net of any amounts due, were $183 and $165 for fiscal 2016 and fiscal 2015, respectively.

F-82

The Company purchases new and used textbooks directly from MBS. Total purchases were $7,092, $14,594 and $14,371 for fiscal 2016, fiscal 2015 and fiscal 2014, respectively. MBS sells used books through the Barnes & Noble dealer network. The Company earned a commission of $268, $316 and $315 on the MBS used book sales in fiscal 2016, fiscal 2015 and fiscal 2014, respectively. In addition, Barnes & Noble hosts pages on its website, through which Barnes & Noble customers are able to sell used books directly to MBS. The Company is paid a fixed commission on the price paid by MBS to the customer. Total commissions paid to the Company under this arrangement were $68, $91 and $99 for fiscal 2016, fiscal 2015 and fiscal 2014, respectively.

In fiscal 2010, the Company entered into an agreement with TXTB.com LLC (TXTB), a subsidiary of MBS, pursuant to which the marketplace program on the Barnes & Noble website was made available through the TXTB website. The Company receives a fee from third-party sellers for sales of marketplace items sold on the TXTB website and, upon receipt of such fee, the Company remits a separate fee to TXTB for those sales. In fiscal 2011, the Company entered into an agreement with TXTB, pursuant to which the Company became the exclusive provider of trade books to TXTB customers through the TXTB website. TXTB receives a commission from the Company on each purchase by a TXTB customer. In fiscal 2013, the Company also entered into an agreement with MBS Direct, a division of MBS, pursuant to which the marketplace program on the Barnes & Noble website was made available through the MBS Direct website. The Company receives a fee from third-party sellers for sales of marketplace items sold on the MBS Direct website and, upon receipt of such fee, the Company remits a separate fee to MBS Direct for those sales. Total commissions paid to TXTB and MBS Direct under these arrangements were $515, $429 and $238 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Outstanding amounts payable to TXTB and MBS Direct were $0 and $7 for fiscal 2016 and fiscal 2015, respectively.

In fiscal 2010, the Company entered into an Aircraft Time Sharing Agreement with LR Enterprises Management LLC (LR Enterprises), which is owned by Leonard Riggio and Louise Riggio, pursuant to which LR Enterprises granted the Company the right to use a jet aircraft owned by it on a time-sharing basis in accordance with, and subject to the reimbursement of certain operating costs and expenses as provided in, the Federal Aviation Regulations (FAR). Such operating costs were $63, $155 and $175 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively. LR Enterprises is solely responsible for the physical and technical operation of the aircraft, aircraft maintenance and the cost of maintaining aircraft liability insurance, other than insurance obtained for the specific flight as requested by the Company, as provided in the FAR.

The Company has leases for two locations for its corporate offices with related parties: the first location is leased from an entity, in which Leonard Riggio has a majority interest, under a lease expiring in 2023, and the second location is leased from an entity, in which Leonard Riggio has a minority interest, under a lease expiring in 2016. The space was rented at an aggregate annual rent, including real estate taxes, of approximately $7,784, $6,834 and $4,299 during fiscal 2016, fiscal 2015 and fiscal 2014, respectively.

F-83

The Company leased an office/warehouse from a partnership, in which Leonard Riggio has a 50% interest, pursuant to a lease terminated effective December 30, 2015. The space was rented at an annual rent of $456, $262 and $707 during fiscal 2016 through the date of termination, fiscal 2015 and fiscal 2014, respectively. During fiscal 2015, the Company received credits totaling $418, representing the net effect of inadvertent overpayment of construction expenses and underpayment of base rent previously paid. Net of subtenant income, the Company paid rent of $179 during fiscal 2016 through the date of termination, received $174 during fiscal 2015 due to credits noted above and paid $270 during fiscal 2014.

The Company was provided with national freight distribution and trucking services by Argix Direct Inc. (Argix), a company in which a brother of Leonard Riggio owned a 20% interest. The Company paid Argix $19,102, $47,536 and $52,087 for such services during fiscal 2016 through the date of termination, fiscal 2015 and fiscal 2014, respectively. The contracted relationship between Argix and the Company has terminated due to Argix exiting the industry during fiscal 2016.

On August 18, 2011, the Company entered into an investment agreement between the Company and Liberty GIC, Inc. (Liberty), pursuant to which the Company issued and sold to Liberty, and Liberty purchased, 204,000 shares of the Company’s Series J Preferred Stock, par value $0.001 per share (Preferred Stock), for an aggregate purchase price of $204,000 in a private placement exempt from the registration requirements of the 1933 Act. The shares of Preferred Stock were convertible, at the option of the holders, into shares of Common Stock representing 16.6% of the Common Stock outstanding as of August 29, 2011 (after giving pro forma effect to the issuance of the Preferred Stock) based on the initial conversion rate. The initial conversion rate reflected an initial conversion price of $17.00 and was subject to adjustment in certain circumstances. The initial dividends rate for the Preferred Stock was equal to 7.75% per annum of the initial liquidation preference of the Preferred Stock paid quarterly and subject to adjustment in certain circumstances.

As a result of the Forced Conversion and an earlier voluntary conversion, all shares of Series J Preferred were retired by the Company and are no longer outstanding.

The Company purchased trade books, primarily craft and hobby books, from Leisure Arts, Inc. (Leisure Arts), a subsidiary of Liberty Media. Total purchases from Leisure Arts following the date of the Liberty investment were $38 during fiscal 2014. In fiscal 2013, the Company entered into an agreement with Sirius XM Radio, Inc. (Sirius), a subsidiary of Liberty Media, pursuant to which Sirius registered for the NOOK ^® developer program whereby Sirius applications were made available for consumer download on NOOK ^® devices. Total commissions received from Sirius during fiscal 2014 were $1.

25.

Dividends

The Company paid a dividend to preferred shareholders in the amount of $3,941 and $16,026 in fiscal 2016 and fiscal 2015, respectively.

F-84

The Company paid a dividend to common stockholders in the amount of $46,056 and $0 during fiscal 2016 and fiscal 2015, respectively.

26.

Selected Quarterly Financial Information (Unaudited)

A summary of quarterly financial information for fiscal 2016 and fiscal 2015 is as follows:


Fiscal 2016 Quarterly Period Ended On	August 1, 2015			October 31, 2015			January 30, 2016		April 30, 2016			Fiscal Year 2016
Sales	$	978,559			894,654			1,413,947		876,684			4,163,844
Gross profit		300,098			269,786			491,655		265,758			1,327,297

Net income (loss) from continuing operations		(7,751	)		(27,203	)		80,262		(30,608	)		14,700
Net loss from discontinued operations		(27,123	)		(12,023	)		—		—			(39,146	)

Net income (loss)	$	(34,874	)		(39,226	)		80,262		(30,608	)		(24,446	)

Basic income (loss) per common share:
Income (loss) from continuing operations	$	(0.27	)		(0.36	)		1.04		(0.42	)		0.05
Loss from discontinued operations		(0.41	)		(0.16	)		—		—			(0.54	)

Basic income (loss) per common share	$	(0.68	)		(0.52	)		1.04		(0.42	)		(0.49	)


Diluted income (loss) per common share:
Income (loss) from continuing operations	$	(0.27	)		(0.36	)		1.04		(0.42	)		0.05
Loss from discontinued operations		(0.41	)		(0.16	)		—		—			(0.54	)

Diluted income (loss) per common share	$	(0.68	)		(0.52	)		1.04		(0.42	)		(0.49	)


Fiscal 2015 Quarterly Period Ended On	August 2, 2014			November 1, 2014			January 31, 2015		May 2, 2015			Fiscal Year 2015
Sales	$	1,010,353			936,544			1,440,132		910,079			4,297,108
Gross profit		334,602			285,731			505,784		299,807			1,425,924

Net income (loss) from continuing operations		2,023			(5,109	)		38,977		(3,019	)		32,872
Net income (loss) from discontinued operations		(30,472	)		17,407			33,191		(16,402	)		3,724

Net income (loss)	$	(28,449	)		12,298			72,168		(19,421	)		36,596

Basic income (loss) per common share:
Income (loss) from continuing operations	$	(0.05	)		(0.16	)		0.45		(0.12	)		0.15
Income (loss) from discontinued operations		(0.51	)		0.28			0.51		(0.26	)		0.06

Basic income (loss) per common share	$	(0.56	)		0.12			0.96		(0.37	)		0.21


Diluted income (loss) per common share:
Income (loss) from continuing operations	$	(0.05	)		(0.16	)		0.45		(0.12	)		0.15
Income (loss) from discontinued operations		(0.51	)		0.28			0.51		(0.26	)		0.06

Diluted income (loss) per common share	$	(0.56	)		0.12			0.96		(0.37	)		0.21

27.

Subsequent Events

Dividends to Stockholders

On June 8, 2016, the Company announced its Board of Directors declared a quarterly cash dividend of $0.15 per share, payable on July 29, 2016 to stockholders of record at the close of business on July 8, 2016.

F-85

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Barnes & Noble, Inc.

We have audited the accompanying consolidated balance sheets of Barnes & Noble, Inc. as of April 30, 2016 and May 2, 2015, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended April 30, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Barnes & Noble, Inc. at April 30, 2016 and May 2, 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended April 30, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Barnes & Noble, Inc.’s internal control over financial reporting as of April 30, 2016, 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 23, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, NY

June 23, 2016

F-86

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Barnes & Noble, Inc.

We have audited Barnes & Noble, Inc.’s internal control over financial reporting as of April 30, 2016, 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). Barnes & Noble, Inc.’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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.

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.

In our opinion, Barnes & Noble, Inc. maintained, in all material respects, effective internal control over financial reporting as of April 30, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Barnes & Noble, Inc. as of April 30, 2016 and May 2, 2015, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended April 30, 2016 of Barnes & Noble, Inc. and our report dated June 23, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, NY

June 23, 2016

F-87

MANAGEMENT’S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS

The management of Barnes & Noble, 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 statement of policy regarding ethical and lawful conduct. 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 Audit Department of the Company 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 accompanies the Consolidated Financial Statements.

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 2016 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.

F-88

Exhibit 21.1

Significant Subsidiaries of Barnes & Noble, Inc.

1.	Barnes & Noble Booksellers, Inc., a Delaware corporation.

2.	Barnes & Noble International LLC, a Delaware limited liability company.

3.	Barnes & Noble Marketing Services LLC, a Virginia limited liability company.

4.	Barnes & Noble Purchasing, Inc., a New York corporation.

5.	Barnes & Noble Services, Inc., a New York corporation.

6.	NOOK Digital, LLC, a Delaware limited liability company.

7.	Sterling Publishing Co., Inc., a Delaware corporation.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-3 No. 333-201222, No. 333-23855, No. 333-69731, No. 33-84826 and No. 33-89258) of Barnes & Noble, Inc., and

(2) Registration Statement (Form S-8 No. 333-27033, No. 33-89260, No. 333-90538, No. 333-116382, No. 333-59111, No. 333-160560 and No. 333-183869) pertaining to the Employees’ Savings Plan of Barnes & Noble, Inc.;

of our reports dated June 23, 2016, with respect to the consolidated financial statements and schedule of Barnes & Noble, Inc. and the effectiveness of internal control over financial reporting of Barnes & Noble, Inc. included in this Annual Report (Form 10-K) of Barnes & Noble, Inc. for the year ended April 30, 2016.

/s/ ERNST & YOUNG LLP

New York, New York

June 23, 2016

Exhibit 31.1

CERTIFICATION BY THE

CHIEF EXECUTIVE OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald D. Boire, certify that:

I have reviewed this report on Form 10-K of Barnes & Noble, Inc.;

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;

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;

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:

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

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):

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 23, 2016

By:

/s/ Ronald D. Boire

Ronald D. Boire

Chief Executive Officer

Barnes & Noble, Inc.

Exhibit 31.2

CERTIFICATION BY THE

CHIEF FINANCIAL OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Allen W. Lindstrom, certify that:

I have reviewed this report on Form 10-K of Barnes & Noble, Inc.;

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 23, 2016

By:

/s/ Allen W. Lindstrom

Allen W. Lindstrom

Chief Financial Officer

Barnes & Noble, Inc.

Exhibit 32.1

CERTIFICATION 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

In connection with the annual report of Barnes & Noble, Inc. (the “Company”) on Form 10-K for the period ended April 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald D. Boire, 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/ Ronald D. Boire

Ronald D. Boire

Chief Executive Officer

Barnes & Noble, Inc.

June 23, 2016

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.

Exhibit 32.2

CERTIFICATION 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

In connection with the annual report of Barnes & Noble, Inc. (the “Company”) on Form 10-K for the period ended April 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Allen W. Lindstrom, 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/Allen W. Lindstrom

Allen W. Lindstrom

Chief Financial Officer

Barnes & Noble, Inc.

June 23, 2016