Barnes & Noble Education, Inc. (Form: 10-Q, Received: 03/05/2019 17:04:02)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

FORM 10-Q

_______________________________________________

(Mark One)



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

For the quarterly period ended January 26, 2019



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

For the transition period from to

Commission File Number: 1-37499

_______________________________________________

BARNES & NOBLE EDUCATION, INC.

(Exact Name of Registrant as Specified in Its Charter)

_______________________________________________



Delaware		46-0599018
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

120 Mountain View Blvd., Basking Ridge, NJ		07920
(Address of Principal Executive Offices)		(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (908) 991-2665

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

_______________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨

		Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

As of February 15, 2019 , 45,560,891 shares of Common Stock, par value $0.01 per share, were outstanding.

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Fiscal Quarter Ended January 26, 2019

Index to Form 10-Q



			Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations – For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018		3
	Condensed Consolidated Balance Sheets – As of January 26, 2019, January 27, 2018 and April 28, 2018		4
	Condensed Consolidated Statements of Cash Flows – For the 39 weeks ended January 26, 2019 and January 27, 2018		5
	Condensed Consolidated Statements of Equity – As of January 26, 2019 and January 27, 2018		6
	Notes to Condensed Consolidated Financial Statements		7
	Note 1.	Organization	7
	Note 2.	Summary of Significant Accounting Policies	7
	Note 3.	Recent Accounting Pronouncements	10
	Note 4.	Acquisitions	11
	Note 5.	Revenue	11
	Note 6.	Segment Reporting	13
	Note 7.	Equity and Earnings Per Share	16
	Note 8.	Fair Values of Financial Instruments	17
	Note 9.	Credit Facility	18
	Note 10.	Supplementary Information	18
	Note 11.	Employee Benefit Plans	18
	Note 12.	Stock-Based Compensation	19
	Note 13.	Income Taxes	19
	Note 14.	Legal Proceedings	20
	Note 15.	Subsequent Event	20

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	Results of Operations		23
	Adjusted Earnings (Non-GAAP)		36
	Adjusted EBITDA (Non-GAAP)		35
	Liquidity and Capital Resources		37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		41
Item 4.	Controls and Procedures		41

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings		42
Item 1A.	Risk Factors		42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		42
Item 5.	Other Information		42
Item 6.	Exhibits		43
	SIGNATURES		44
	EXHIBIT INDEX		45

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PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)



	13 weeks ended						39 weeks ended
	January 26, 2019			January 27, 2018			January 26, 2019		January 27, 2018
Sales:
Product sales and other	$	494,311		$	542,729		$	1,568,329	$	1,697,769
Rental income	56,019			60,662			134,251		148,194
Total sales	550,330			603,391			1,702,580		1,845,963
Cost of sales:
Product and other cost of sales	384,275			420,499			1,211,998		1,328,353
Rental cost of sales	33,102			35,893			80,259		88,711
Total cost of sales	417,377			456,392			1,292,257		1,417,064
Gross profit	132,953			146,999			410,323		428,899
Selling and administrative expenses	110,941			112,438			325,408		327,625
Depreciation and amortization expense	16,374			17,007			49,333		48,728
Impairment loss (non-cash)	—			313,130			—		313,130
Restructuring and other charges	2,500			—			2,500		5,429
Transaction costs	117			49			654		1,895
Operating income (loss)	3,021			(295,625		)	32,428		(267,908		)
Interest expense, net	2,546			2,954			7,904		7,828
Income (loss) before income taxes	475			(298,579		)	24,524		(275,736		)
Income tax (benefit) expense	(294		)	(15,344		)	2,680		(6,113		)
Net income (loss)	$	769		$	(283,235	)	$	21,844	$	(269,623	)

Earnings (loss) per share of common stock:
Basic	$	0.02		$	(6.04	)	$	0.46	$	(5.77	)
Diluted	$	0.02		$	(6.04	)	$	0.46	$	(5.77	)
Weighted average shares of common stock outstanding:
Basic	47,561			46,914			47,220		46,712
Diluted	47,937			46,914			47,772		46,712

See accompanying notes to condensed consolidated financial statements.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)



	January 26, 2019			January 27, 2018			April 28, 2018
	(unaudited)			(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	22,049		$	22,373		$	16,126
Receivables, net	231,106			243,434			100,060
Merchandise inventories, net	579,582			600,419			443,559
Textbook rental inventories	50,577			61,427			47,779
Prepaid expenses and other current assets	20,691			26,354			11,847
Total current assets	904,005			954,007			619,371
Property and equipment, net	109,414			112,062			111,287
Intangible assets, net	208,439			224,314			219,129
Goodwill	53,982			49,282			49,282
Other noncurrent assets	40,216			40,915			40,142
Total assets	$	1,316,056		$	1,380,580		$	1,039,211
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	464,933		$	488,954		$	187,909
Accrued liabilities	219,713			252,202			125,556
Short-term borrowings	—			—			100,000
Total current liabilities	684,646			741,156			413,465
Long-term deferred taxes, net	7,991			4,278			2,106
Other long-term liabilities	58,632			73,468			59,277
Long-term borrowings	70,100			113,000			96,400
Total liabilities	821,369			931,902			571,248
Commitments and contingencies	—			—			—
Stockholders' equity:
Preferred stock, $0.01 par value; authorized, 5,000 shares; issued and outstanding, none	—			—			—
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 51,026, 50,028 and 50,032 shares, respectively; outstanding, 47,561, 46,914 and 46,917 shares, respectively	511			500			501
Additional paid-in capital	724,164			715,088			717,323
Accumulated deficit	(198,359		)	(237,260		)	(220,203		)
Treasury stock, at cost	(31,629		)	(29,650		)	(29,658		)
Total stockholders' equity	494,687			448,678			467,963
Total liabilities and stockholders' equity	$	1,316,056		$	1,380,580		$	1,039,211

See accompanying notes to condensed consolidated financial statements.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



	39 weeks ended
	January 26, 2019			January 27, 2018
Cash flows from operating activities:
Net income (loss)	$	21,844		$	(269,623	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization expense	49,333			48,728
Amortization of deferred financing costs	1,127			1,127
Impairment loss (non-cash)	—			313,130
Deferred taxes	5,885			(12,594		)
Stock-based compensation expense	6,851			6,223
Changes in other long-term liabilities	(823		)	(23,252		)
Changes in other operating assets and liabilities, net	91,645			76,626
Net cash flows provided by operating activities	175,862			140,365
Cash flows from investing activities:
Purchases of property and equipment	(31,711		)	(30,101		)
Acquisition of businesses, net of cash acquired	(10,000		)	(58,259		)
Net change in other noncurrent assets	43			(404		)
Net cash flows used in investing activities	(41,668		)	(88,764		)
Cash flows from financing activities:
Proceeds from borrowings under Credit Agreement	374,000			481,600
Repayments of borrowings under Credit Agreement	(500,300		)	(528,200		)
Purchase of treasury shares	(1,971		)	(1,630		)
Net cash flows used in financing activities	(128,271		)	(48,230		)
Net increase in cash, cash equivalents and restricted cash	5,923			3,371
Cash, cash equivalents and restricted cash at beginning of period	16,869			21,697
Cash, cash equivalents and restricted cash at end of period	$	22,792		$	25,068
Changes in other operating assets and liabilities, net:
Receivables, net	$	(131,046	)	$	(157,043	)
Merchandise inventories	(136,023		)	(166,354		)
Textbook rental inventories	(2,798		)	(8,601		)
Prepaid expenses and other current assets	(8,844		)	(15,159		)
Accounts payable and accrued liabilities	370,356			423,783
Changes in other operating assets and liabilities, net	$	91,645		$	76,626

See accompanying notes to condensed consolidated financial statements.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(In thousands)

(unaudited)




				Additional
	Common Stock			Paid-In			Accumulated			Treasury Stock				Total
	Shares	Amount		Capital			Deficit			Shares	Amount			Equity
Balance at April 29, 2017	49,372	$	494	$	708,871		$	32,363		2,855	$	(28,020	)	$	713,708
Stock-based compensation expense				6,223										6,223
Vested equity awards	656	6		(6		)								—
Shares repurchased for tax withholdings for vested stock awards										259	(1,630		)	(1,630		)
Net loss							(269,623		)					(269,623		)
Balance at January 27, 2018	50,028	$	500	$	715,088		$	(237,260	)	3,114	$	(29,650	)	$	448,678


				Additional
	Common Stock			Paid-In			Accumulated			Treasury Stock				Total
	Shares	Amount		Capital			Deficit			Shares	Amount			Equity
Balance at April 28, 2018	50,032	$	501	$	717,323		$	(220,203	)	3,115	$	(29,658	)	$	467,963
Stock-based compensation expense				6,851										6,851
Vested equity awards	994	10		(10		)								—
Shares repurchased for tax withholdings for vested stock awards										350	(1,971		)	(1,971		)
Net income							21,844							21,844
Balance at January 26, 2019	51,026	$	511	$	724,164		$	(198,359	)	3,465	$	(31,629	)	$	494,687

See accompanying notes to condensed consolidated financial statements.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Unless the context otherwise indicates, references in these Notes to the accompanying condensed consolidated financial statements to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc., a Delaware corporation. References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC, a Delaware corporation. References to “Student Brands” refer to our direct-to-student subscription-based writing services business operated through our subsidiary Student Brands, LLC.

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended April 28, 2018, which includes consolidated financial statements for the Company for each of the three fiscal years ended April 28, 2018 , April 29, 2017 and April 30, 2016 (Fiscal 2018 , Fiscal 2017 and Fiscal 2016 , respectively) and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the 13 weeks ended July 28, 2018 and the unaudited condensed consolidated financial statements in our Form 10-Q for the 26 weeks ended October 27, 2018.

Note 1. Organization

Description of Business

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for higher education and K-12 institutions across the United States, one of the largest textbook wholesalers, and a leading provider of digital education services. Through its Barnes & Noble College (“BNC”) and MBS Textbook Exchange (“MBS”) subsidiaries, Barnes & Noble Education operates 1,453 physical and virtual bookstores and serves more than 6 million students, delivering essential educational content and tools within a dynamic omnichannel retail environment. Additionally, through our Digital Student Solutions ("DSS") businesses, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large footprint with direct access to students and faculty, our well-established, deep relationships with partners and stable, long-term contracts, and our well-recognized brands. We expect to continue to grow our business by introducing scalable and advanced digital solutions focused largely on the student, increasing market share with new accounts, and expanding our strategic opportunities through acquisitions and partnerships.

Effective in the fourth quarter of Fiscal 2018, we have three reportable segments: BNC, MBS, and DSS, as described in Note 6. Segment Reporting . Prior to the fourth quarter of Fiscal 2018, BNC and MBS were our only reportable segments.

For additional information related to the strategy and growth drivers for our business, see Part I - Item 1. Business - Overview in our Annual Report on Form 10-K for the year ended April 28, 2018.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

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

On August 3, 2017, we acquired Student Brands, LLC ("Student Brands"). The condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 include the financial results of Student Brands in the DSS segment and the condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 include the financial results of Student Brands in the DSS segment from the acquisition date on August 3, 2017.

On August 21, 2018, we acquired the assets of PaperRater.com ("PaperRater"). The condensed consolidated financial statements for the 13 and 39 weeks ended January 26, 2019 include the financial results of PaperRater in the DSS segment from

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

the date of acquisition on August 21, 2018 and the condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 exclude the financial results of PaperRater. See Note 4. Acquisitions for additional information.

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. Due to the seasonal nature of the business, the results of operations for the 13 and 39 weeks ended January 26, 2019 are not indicative of the results expected for the 52 weeks ending April 27, 2019 (Fiscal 2019).

For certain of our retail operations (BNC and MBS Direct), sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters. Sales attributable to our MBS Wholesale business are generally highest in our first and third quarter, as it sells textbooks and other course materials for retail distribution. Our Digital Student Solutions' sales and operating profit are realized relatively consistently throughout the year.

Use of Estimates

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

Merchandise Inventories

Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory.

Cost is determined primarily by the retail inventory method for our BNC segment and last-in first out, or “LIFO”, method for our MBS segment. Our textbook inventories, for BNC and MBS, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

For the BNC segment, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends.

Textbook Rental Inventories

Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost.

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of our revenue relates to the sales of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated ecommerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Note 5. Revenue.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.

For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis.

We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year.

Service and other revenue

Service and other revenue primarily relates to direct-to-student subscription-based writing service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers.

Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer. The majority of subscriptions sold are one month in duration.

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Cost of Sales

Our cost of sales primarily include costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Selling and Administrative Expenses

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include stock-based compensation and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our direct-to-student subscription-based writing services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Evaluation of Goodwill and Other Long-Lived Assets

As of January 26, 2019 , we had $0 , $49,282 and $4,700 of goodwill on our condensed consolidated balance sheet related to our BNC, MBS and DSS reporting units, respectively. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value.

We completed our annual goodwill impairment test as of the first day of the third quarter of Fiscal 2019. In performing the valuation, we used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions. Based on the results of the step one testing, fair value of the MBS and DSS reporting units exceeded their respective carrying values; therefore, the second step of the impairment test was not required to be performed and no goodwill impairment was recognized.

Our other long-lived assets include property and equipment and amortizable intangibles. As of January 26, 2019, we had $109,414 and $208,439 of property and equipment and amortizable intangible assets, net of depreciation and amortization, respectively, on our condensed consolidated balance sheet. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets .

Income Taxes

As of January 26, 2019, other long-term liabilities includes $40,425 related to the long-term tax payable associated with the LIFO reserve. The LIFO reserve is impacted by changes in the consumer price index ("CPI") and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle. At the end of the most recent tax year, inventory levels within our BNC segment declined as compared to the prior year resulting in approximately $6,183 of the income taxes associated with the LIFO reserve becoming currently payable. Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remaining long-term tax payable associated with the LIFO reserve could become payable within the next twelve months. We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.

Reclassifications

Our condensed consolidated financial statements reflect the following reclassifications for consistency with the current year presentation: 1) Cost of Sales expenses primarily related to facility costs and insurance related to corporate services have been reclassified to Selling and Administrative Expenses; and 2) For our digital rental products, we have reclassified Rental Income to Product Sales and Other, and have reclassified Rental Cost of Sales to Product and Other Cost of Sales, with no impact to Gross Margin. Digital rental revenue and digital rental cost of sales are recognized at the time of delivery and are not deferred over the rental period.

Note 3. Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"), which requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The ASU requires upfront implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract to be amortized to hosting expense over the term of the arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. We are required to adopt this standard in the first quarter of Fiscal 2021 and early adoption is permitted. The guidance may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently evaluating this standard to determine the impact of adoption on our condensed consolidated financial statements.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which requires reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. We are required to adopt this standard in the first quarter of Fiscal 2020 and early adoption is permitted. The guidance will be applied on a modified retrospective basis beginning with the earliest period presented. Although we have not yet completed our evaluation of the guidance, or quantified its impact, we believe the most significant impact will be the recognition of right of use assets and liabilities on our condensed consolidated balance sheet. We expect our lease obligations designated as operating leases will be reported on the consolidated balance sheets upon adoption. We are currently in the process of collecting and validating lease data. In addition, we are assessing practical expedients and policy elections offered by the standard, and are evaluating processes and internal controls to meet the accounting, reporting and disclosure requirements.

Note 4. Acquisitions

On August 21, 2018, we acquired the assets of PaperRater, a leading website that offers students a suite of writing services aimed at improving multiple facets of writing. PaperRater's services include plagiarism detection, grammar feedback, and an AI-based writing score predictor, and are highly complementary to Student Brands' existing writing service offerings. PaperRater adds millions of pieces of content, from essays and dissertations to personal narratives and speeches, to our growing digital content library.

We completed the purchase for cash consideration of $10,000 and the transaction was funded from cash on-hand and availability under our existing Credit Agreement. The final purchase price was allocated primarily as follows: $5,300 intangible assets (primarily content with an estimated useful life of 5 years) and $4,700 goodwill. This acquisition is not material to our condensed consolidated financial statements and therefore, disclosure of pro forma financial information has not been presented. The results of operations reflect the period of ownership of the acquired business.

Note 5. Revenue

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“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 guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required.

We have analyzed the impacts of the guidance across all of our revenue streams and have adopted the standard using the modified retrospective method effective with the first quarter of Fiscal 2019. Financial results for reporting periods beginning after April 28, 2018 are presented in accordance with Topic 606 , while comparative period information continues to reflect our historic accounting under the accounting standards in effect for those periods. There was no cumulative change to retained earnings as a result of adopting the guidance. Along with the additional disclosure requirements required by the new standard, we reclassified the product return asset of $14,080 , and $2,610 from Merchandise Inventories, Net to Prepaid Expenses and Other Current Assets on the condensed consolidated balance sheets for the periods ended January 27, 2018 and April 28, 2018, respectively.

See Note 2. Summary of Significant Accounting Pronouncements for additional information related to our revenue recognition policies and Note 6. Segment Reporting for a description of each segments product and service offerings.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Disaggregation of Revenue

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



	13 weeks ended						39 weeks ended
	January 26, 2019			January 27, 2018			January 26, 2019			January 27, 2018
BNC
Retail Product Sales	$	397,552		$	432,356		$	1,249,284		$	1,334,881
Rental Income	54,894			58,992			131,058			143,915
Service and Other Revenue ^(a)	8,621			9,540			28,770			29,370
BNC Total Sales	$	461,067		$	500,888		$	1,409,112		$	1,508,166
MBS
Retail Product Sales	$	38,285		$	45,128		$	159,180		$	177,126
Wholesale Product Sales	77,021			92,129			203,336			232,174
Rental Income	1,125			1,670			3,193			4,279
MBS Total Sales	$	116,431		$	138,927		$	365,709		$	413,579
DSS Sales ^(b)	$	5,237		$	5,572		$	15,848		$	10,058
Eliminations ^(c)	$	(32,405	)	$	(41,996	)	$	(88,089	)	$	(85,840	)
Total Sales	$	550,330		$	603,391		$	1,702,580		$	1,845,963


(a)	Service and other revenue primarily relates to brand partnerships and other service revenues.


(b)	DSS sales primarily relate to direct-to-student subscription-based revenue.


(c)	The sales eliminations represent the elimination of MBS sales to BNC and the elimination of BNC commissions earned from MBS.

Contract Assets and Contract Liabilities

Contract assets represent the sale of goods or services to a customer before we have the right to obtain consideration from the customer. Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract assets (Unbilled Receivables) were $0 as of January 26, 2019, January 7, 2018 and April 28, 2018 on our condensed consolidated balance sheets.

Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (Deferred Revenue). Deferred revenue primarily consists of advanced payments from customers related to textbook rental and subscription-based performance obligations that have not yet been satisfied, as well as unsatisfied performance obligations associated with partnership marketing services. Deferred revenue is recognized ratably over the terms of the related rental or subscription periods, or when the contracted services are provided to our partnership marketing customers. Deferred revenue of $69,662 , $74,524 , and $20,144 is recorded within Accrued Liabilities on our condensed consolidated balance sheets for the periods ended January 26, 2019, January 27, 2018 and April 28, 2018, respectively.

The following table presents changes in contract liabilities during the nine months ended January 26, 2019:



	39 weeks ended
	January 26, 2019
Deferred revenue at the beginning of period	$	20,144
Additions to deferred revenue during the period	189,832
Reductions to deferred revenue for revenue recognized during the period	(140,314		)
Deferred revenue balance at the end of period	$	69,662

As of January 26, 2019, we expect to recognize $69,546 of the deferred revenue balance within in the next 12 months.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Note 6. Segment Reporting

Prior to the fourth quarter of Fiscal 2018, we had two reportable segments: BNC and MBS. In connection with our focus on developing digital solutions, during the fourth quarter of Fiscal 2018, the Company realigned its business into the following three reportable segments: BNC, MBS and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are presented as “Corporate Services”.

We identified our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. The following summarizes the three segments, with additional information in each respective subsequent segment discussion.

BNC

The BNC Segment is comprised of the operations of BNC which operates 773 physical campus bookstores, the majority of which also have school-branded e-commerce sites operated by BNC and which offers students access to affordable course materials and affinity products, including emblematic apparel and gifts. BNC also offers its First Day™ inclusive access program, in which course materials, including e-content, are offered at a reduced price through a course materials fee, and delivered to students digitally on or before the first day of class. Additionally, the BNC segment offers a suite of digital content, software, and services to colleges and universities, through our LoudCloud platform, such as predictive analytics, a variety of open educational resources courseware, and a competency-based learning platform.

MBS

The MBS Segment is comprised of MBS's two highly integrated businesses: MBS Direct which operates 680 virtual bookstores for college and university campuses, and K-12 schools, and MBS Wholesale which is one of the largest textbook wholesalers in the country. MBS Wholesale's business centrally sources and sells new and used textbooks to more than 3,500 physical college bookstores, including BNC’s 773 campus bookstores. MBS Wholesale sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to over 400 college bookstores.

DSS

The Digital Student Solutions ("DSS") Segment includes direct-to-student products and services to help students study more effectively and improve academic performance. The DSS segment is comprised of the operations of Student Brands, a leading direct-to-student subscription-based writing services business, Bartleby textbook solutions, and expert question and answers. The DSS segment also includes tutoring and test prep services offered through our partnership with The Princeton Review .

In August 2018, we launched Bartleby textbook solutions, our first internally developed product within DSS, on bartleby.com. We expect Bartleby Textbook Solutions to become a central offering in our developing ecosystem of direct-to-student digital products and services, accessible anytime and anywhere, both within our managed bookstore footprint and nationally to students. Additionally, we have recently developed and implemented a question and answer feature on Bartleby, providing further critical services for students to achieve better success throughout their academic journey.

Also in August 2018, we further expanded Student Brands' writing services via an acquisition of PaperRater, a leading website that offers students a suite of writing services aimed at improving multiple facets of writing. PaperRater's services include plagiarism detection, grammar feedback, and an AI-based writing score predictor, and are highly complementary to Student Brands' existing writing service offerings.

We currently offer these digital products and services directly to students, increasingly leveraging our BNC and MBS bookstore footprint.

For additional information about the BNC, MBS and DSS segment operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the year ended April 28, 2018.

Corporate Services

Corporate Services represent unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Intercompany Eliminations

All material intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The eliminations are primarily related to the following intercompany activities:


•	The sales eliminations represent the elimination of MBS sales to BNC and the elimination of BNC commissions earned from MBS.


•	The cost of sales eliminations represent (i) the recognition of intercompany profit for BNC inventory that was purchased from MBS in a prior period that was subsequently sold to external customers during the current period, net of (ii) the elimination of intercompany profit for MBS inventory purchases by BNC that remain in ending inventory at the end of the current period.

•

The gross margin elimination reflects the net impact of the sales eliminations and cost of sales eliminations. The gross margin elimination impact primarily relates to (i) the recognition of intercompany profit for BNC inventory that was purchased from MBS in a prior period that was subsequently sold to external customers during the current period, net of (ii) the elimination of intercompany profit for MBS inventory purchases by BNC that remain in ending inventory at the end of the current period.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Summarized financial information for our reportable segments is reported below:



	13 weeks ended						39 weeks ended
	January 26, 2019			January 27, 2018			January 26, 2019			January 27, 2018
Sales:
BNC	$	461,067		$	500,888		$	1,409,112		$	1,508,166
MBS	116,431			138,927			365,709			413,579
DSS ^(a)	5,237			5,572			15,848			10,058
Elimination	(32,405		)	(41,996		)	(88,089		)	(85,840		)
Total Sales	$	550,330		$	603,391		$	1,702,580		$	1,845,963

Gross Profit
BNC	$	99,946		$	112,380		$	311,344		$	329,127
MBS	29,037			34,949			86,681			95,713
DSS ^(a)	4,969			5,497			15,312			9,841
Elimination	(999		)	(5,827		)	(3,014		)	(5,782		)
Total Gross Profit	$	132,953		$	146,999		$	410,323		$	428,899

Depreciation and Amortization
BNC	$	12,696		$	13,532		$	38,848		$	40,196
MBS	1,569			1,596			4,668			4,849
DSS ^(a)	2,072			1,834			5,698			3,543
Corporate Services	37			45			119			140
Total Depreciation and Amortization	$	16,374		$	17,007		$	49,333		$	48,728

Operating Income (Loss)
BNC ^(b),(c)	$	(5,037	)	$	(306,189	)	$	7,569		$	(292,328	)
MBS	15,962			20,848			46,314			52,954
DSS ^(a)	(678		)	1,233			(627		)	(394		)
Corporate Services ^(d)	(6,234		)	(5,690		)	(17,862		)	(22,358		)
Elimination	(992		)	(5,827		)	(2,966		)	(5,782		)
Total Operating Income (Loss)	$	3,021		$	(295,625	)	$	32,428		$	(267,908	)

The following is a reconciliation of segment Operating Income (Loss) to consolidated Income (Loss) Before Income Taxes:
Total Operating Income (Loss)	$	3,021		$	(295,625	)	$	32,428		$	(267,908	)
Interest Expense, net	(2,546		)	(2,954		)	(7,904		)	(7,828		)
Income (Loss) Before Income Taxes	$	475		$	(298,579	)	$	24,524		$	(275,736	)

(a) On August 3, 2017, we acquired Student Brands, LLC, a leading direct-to-student subscription-based writing services business. The condensed consolidated financial statements for the 13 and 39 weeks ended January 26, 2019 include the financial results of Student Brands in the DSS segment, and the condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 include the financial results of Student Brands from the date of acquisition on August 3, 2017.

On August 21, 2018, we acquired the assets of PaperRater, a leading website that offers students a suite of writing services aimed at improving multiple facets of writing. PaperRater’s services include plagiarism detection, grammar feedback, and an AI-based writing score predictor, and are highly complementary to Student Brands’ existing writing service offerings. The condensed consolidated financial statements for the 13 and 39 weeks ended January 26, 2019 include the financial results of

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

PaperRater in the DSS segment from the date of acquisition and the condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 exclude the financial results of PaperRater.

(b) During the 39 weeks ended January 26, 2019, we recognized restructuring and other charges totaling approximately $2,500 related to the resignation of the President, BNC. For additional information, refer to Note 10. Supplementary Information - Restructuring and Other Charges.


(c)	During the 13 and 39 weeks ended January 27, 2018, we completed our annual goodwill impairment test for fiscal 2018 and determined that the carrying value of the BNC reporting unit exceeded its fair value and recorded a goodwill impairment (non-cash impairment loss) of $313,130 for the BNC segment. For additional information, see Note 2. Summary of Significant Accounting Policies .

(d) During the 39 weeks ended January 27, 2018, we recognized restructuring and other charges totaling approximately $5,361 related to the CEO transition. For additional information, refer to Note 10. Supplementary Information - Restructuring and Other Charges.

Note 7. Equity and Earnings Per Share

Equity

Share Repurchases

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50,000 , in the aggregate, of our outstanding Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the 39 weeks ended January 26, 2019, we did not repurchase shares of our Common Stock under the program and as of January 26, 2019 , approximately $26,669 remains available under the stock repurchase program.

During the 39 weeks ended January 26, 2019, we repurchased 349,765 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. During the 13 and 39 weeks ended January 26, 2019 average shares of 1,412,951 and 752,834 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively. During the 13 and 39 weeks ended January 27, 2018 average shares of 2,844,886 and 2,476,767 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

The following is a reconciliation of the basic and diluted earnings (loss) per share calculation:



	13 weeks ended					39 weeks ended
(shares in thousands)	January 26, 2019		January 27, 2018			January 26, 2019			January 27, 2018
Numerator for basic earnings per share:
Net income (loss)	$	769	$	(283,235	)	$	21,844		$	(269,623	)
Less allocation of earnings to participating securities	—		—			(9		)	—
Net income (loss) available to common shareholders	$	769	$	(283,235	)	$	21,835		$	(269,623	)

Numerator for diluted earnings per share:
Net income (loss) available to common shareholders	$	769	$	(283,235	)	$	21,835		$	(269,623	)
Allocation of earnings to participating securities	—		—			9			—
Less diluted allocation of earnings to participating securities	—		—			(9		)	—
Net income (loss) available to common shareholders	$	769	$	(283,235	)	$	21,835		$	(269,623	)

Denominator for basic earnings per share:
Basic weighted average shares of Common Stock	47,561		46,914			47,220			46,712

Denominator for diluted earnings per share:
Basic weighted average shares of Common Stock	47,561		46,914			47,220			46,712
Average dilutive restricted stock units	178		—			403			—
Average dilutive performance shares	45		—			41			—
Average dilutive restricted shares	3		—			10			—
Average dilutive performance share units	150		—			98			—
Diluted weighted average shares of Common Stock	47,937		46,914			47,772			46,712

Earnings (loss) per share of Common Stock:
Basic	$	0.02	$	(6.04	)	$	0.46		$	(5.77	)
Diluted	$	0.02	$	(6.04	)	$	0.46		$	(5.77	)

Note 8. Fair Values of Financial Instruments

In accordance with ASC No. 820, Fair Value Measurements and Disclosures , the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

These tiers include:

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

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

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

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-term debt approximates its carrying value.

Note 9. Credit Facility

On February 27, 2017, in connection with the acquisition of MBS, we amended the Credit Agreement with our current lenders to add a new $100,000 incremental first in, last out seasonal loan facility (the “FILO Facility”) increasing the maximum availability under the Credit Agreement to $500,000 .

For additional information including interest terms and covenant requirements related to the Credit Facility, refer to Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the year ended April 28, 2018.

On March 1, 2019, we entered an agreement to amend and extend the existing Credit Agreement, along with the FILO Facility, for similar amounts with favorable pricing terms, for a five year period. For additional information, see Note 15. Subsequent Event .

During the 39 weeks ended January 26, 2019 , we borrowed $374,000 and repaid $500,300 under the Credit Agreement. There were $70,100 and $0 outstanding borrowings under the Credit Facility and FILO Facility as of January 26, 2019 , respectively. As of January 26, 2019 , we have issued $4,759 in letters of credit under the Credit Facility. During the 39 weeks ended January 27, 2018 , we borrowed $481,600 and repaid $528,200 under the Credit Agreement. The net total outstanding borrowings of $113,000 as of January 27, 2018 is comprised of outstanding borrowings of $113,000 and $0 under the Credit Facility and FILO Facility, respectively.

Note 10. Supplementary Information

Restructuring and other charges

On December 13, 2018, Mr. Patrick Maloney resigned as Executive Vice President, Operations of the Company and President, Barnes & Noble College, each effective as of April 27, 2019. Pursuant to the terms of the Retirement Letter Agreement, Mr. Maloney will receive an aggregate payment of $1,843 , comprised of salary, bonus and benefits. In addition, the Company will pay Mr. Maloney a one-time cash transition payment of $657 . During the 13 weeks ended January 26, 2019, we recognized expenses totaling $2,500 , which is comprised of the retirement and transition payments. For additional information, see the Form 8-K dated December 13, 2018, filed with the SEC on December 18, 2018.

On July 19, 2017, Mr. Max J. Roberts resigned as Chief Executive Officer of the Company and Mr. Michael P. Huseby was appointed to the combined position of Chief Executive Officer and Chairman of the Board, both effective as of September 19, 2017. Pursuant to the terms of the Retirement Letter Agreement, Mr. Roberts received an aggregate payment of approximately $4,424 , comprised of salary, bonus and benefits. In addition, the Company paid Mr. Roberts and Mr. Huseby a one-time cash transition payment of approximately $562 and $250 , respectively, at the time of the transition. During the 39 weeks ended January 27, 2018, we recognized expenses totaling approximately $5,361 , which is comprised of the severance and transition payments. For additional information, see the Form 8-K dated July 19, 2017, filed with the SEC on July 20, 2017.

Note 11. Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS. MBS maintains a profit sharing plan covering substantially all full-time employees of MBS. For all plans, we are responsible to fund the employer contributions directly. Total employee benefit expense for these plans was $1,509 and $1,525 during the 13 weeks ended January 26, 2019 and January 27, 2018 , respectively and $4,978 and $5,289 during the 39 weeks ended January 26, 2019 and January 27, 2018 , respectively.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

Note 12. Stock-Based Compensation

We recognize compensation expense for awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense based on the number of awards expected to vest using an estimated average forfeiture rate. We calculate the fair value of stock-based awards based on the closing price on the date the award was granted for those awards with only service or performance conditions. For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model.

During the 39 weeks ended January 26, 2019, we granted the following awards:

•

385,171 performance share unit ("PSU") awards to employees that will vest based upon the achievement of pre-established performance goals related to absolute total shareholder returns ("TSR") determined by the Company's common stock price, DSS segment revenue and Company Adjusted EBITDA measured over a two year performance period (Fiscal 2019 - Fiscal 2020) with one additional year of time-based vesting. The number of PSU awards that will vest range from 0%-150% of the target award based on actual performance.


•	1,336,216 restricted stock units ("RSU") awards were granted to employees with a three year vesting period in accordance with the Equity Incentive Plan.


•	107,530 RSU awards and 21,506 restricted stock ("RS") awards were granted to the current Board of Directors ("BOD") members for annual compensation with a one year vesting period in accordance with the Equity Incentive Plan.

We recognized stock-based compensation expense for equity-based awards in selling and administrative expenses as follows:



	13 weeks ended						39 weeks ended
	January 26, 2019			January 27, 2018			January 26, 2019		January 27, 2018
Restricted stock expense	$	30		$	30		$	80	$	90
Restricted stock units expense ^{(a) (b)}	1,860			2,237			6,010		6,277
Performance shares expense ^{(a) (c)}	(72		)	58			42		(275		)
Performance share units expense ^{(a) (c)}	60			(255		)	719		131
Stock-based compensation expense	$	1,878		$	2,070		$	6,851	$	6,223


(a)	For the 13 and 39 weeks ended January 26, 2019, the restricted stock units expense, performance shares expense and performance share units expense reflects a forfeiture adjustment for unvested shares related to the President, BNC retirement announcement.


(b)	For the 39 weeks ended January 27, 2018, the restricted stock units expense reflects a forfeiture adjustment for unvested shares related to the CEO transition (recorded in the first quarter of Fiscal 2018).


(c)	The performance shares and performance share units expense reflect catch-up adjustments for changes in the expected level of achievement of the respective grants for both Fiscal 2019 and Fiscal 2018.

For additional information related to President, BNC retirement and CEO transition, see Note 10. Supplementary Information -Restructuring and Other Charges .

Total unrecognized compensation cost related to unvested awards as of January 26, 2019 was $13,764 and is expected to be recognized over a weighted-average period of 2.0 years. Approximately $1,838 of the unrecognized compensation cost is related to performance shares and performance share units, which is subject to attaining the stated performance metrics.

Note 13. Income Taxes

We recorded an income tax benefit of $(294) on a pre-tax income of $475 during the 13 weeks ended January 26, 2019 , which represented an effective income tax rate of (61.9)% and an income tax benefit of $(15,344) on pre-tax loss of $(298,579) during the 13 weeks ended January 27, 2018 , which represented an effective income tax rate of 5.1% .

We recorded income tax expense of $2,680 on pre-tax income of $24,524 during the 39 weeks ended January 26, 2019 , which represented an effective income tax rate of 10.9% and an income tax benefit of $(6,113) on pre-tax loss of $(275,736) during the 39 weeks ended January 27, 2018 , which represented an effective income tax rate of 2.2% .

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 26, 2019 and January 27, 2018

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

(unaudited)

The effective tax rate for the 13 weeks ended January 26, 2019 is significantly lower as compared to the comparable prior year period due to the reduced federal tax rate because of U.S Tax Reform and the inclusion in the comparable prior year period of an income tax benefit of revaluing deferred tax liabilities, partially offset by permanent differences which relate to the nondeductible portion of the prior year goodwill impairment (see Note 2. Summary of Significant Accounting Policies) . The effective tax rate for the 39 weeks ended January 26, 2019 is significantly higher as compared to the comparable prior year period due to the income tax benefit of revaluing deferred tax liabilities recorded in the prior year period and permanent differences, partially offset by the reduced federal tax rate because of U.S. Tax Reform.

Impact of U.S. Tax Reform

The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, among other provisions. In accordance with SAB 118, “ Income Tax Accounting Implications of the Tax Cuts and Jobs Act ” (SAB 118), during the quarter ended January 27, 2018, we recognized the reasonable estimated effects on our existing deferred tax balances and one-time transition tax. During the quarter ended January 26, 2019, we finalized the accounting for the enactment of the Act. The most significant impact of the legislation for the Company was a $20,425 reduction of the value of our net deferred (which represents future tax liabilities) and long-term tax liabilities as a result of lowering the U.S. corporate income tax rate from 35% to 21% , which was recorded in Fiscal 2018. During the second quarter of Fiscal 2019, we recorded an additional measurement period adjustment to further reduce our net deferred tax liability by $3,815 as a result of accelerating certain deductions as permitted by the U.S. tax code. During the third quarter of Fiscal 2019, we filed our tax return for the tax year ending January 27, 2018 and finalized the accounting for the enactment of the Act by recording an additional $96 reduction to our net deferred tax liability. This measurement period adjustment reduced the Company's effective tax rate by 20.2% and 15.9% during the 13 and 39 weeks ended January 26, 2019, respectively. We also recorded a liability associated with the one-time transition tax. This amount is not material.

Note 14. Legal Proceedings

Note 15. Subsequent Event

On March 1, 2019, we entered an agreement to amend and extend the existing Credit Facility for a five year-term from the date of the amendment. Under the terms of the agreement, we will continue to have an asset-backed revolving credit facility in an aggregate committed principal amount of $400,000 , as well as the $100,000 incremental first in, last out seasonal loan facility.

Under the amendment, we are required to borrow 100% of the aggregate commitments under the FILO Facility on April 1 of each year, and the loans must be repaid in full (including interest and fees) on July 31 of each year. The commitments under the FILO Facility will decrease from $100,000 to $75,000 on August 1, 2019, from $75,000 to $50,000 on August 1, 2020 and from $50,000 to $25,000 on August 1, 2021. We will pay a commitment fee of 0.375% on the daily unused portion of the FILO Facility. Loans under the FILO Facility will bear interest at a rate equal to the LIBOR rate, plus 2.75%. The FILO Facility will be available solely during the draw period each year, from April 1 through July 31.

For additional information, see the Form 8-K dated March 1, 2019, filed with the SEC on March 5, 2019.

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc., a Delaware corporation. References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC, a Delaware corporation. References to “Student Brands” refer to our direct-to-student subscription-based writing services business operated through our subsidiary Student Brands, LLC.

Overview

Description of Business

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States, one of the largest textbook wholesalers and inventory management hardware and software providers, and a leading provider of digital education solutions. Through our Barnes & Noble College (“BNC”) and MBS Textbook Exchange (“MBS”) subsidiaries, we operate 1,453 physical and virtual bookstores and serve more than 6 million students, delivering essential educational content and tools within a dynamic omnichannel retail environment. Additionally, through our Digital Student Solutions (“DSS”) businesses, we offer direct-to-student products and services to help students study more effectively and improve academic performance. We have demonstrated positive leverage of our managed bookstore footprint. We have achieved over 50,000 customers subscribed for the Bartleby textbook solutions in the third quarter of Fiscal 2019 utilizing aggressive marketing and promotional offers. We anticipate scaling our digital offerings with meaningful financial impact over the next 12-18 months as content depth and breadth increases.

For additional information related to our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the year ended April 28, 2018.

Segments

We have three reportable segments: BNC, MBS and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are presented as “Corporate Services”.

BNC Segment

The BNC Segment is comprised of the operations of BNC which operates 773 physical campus bookstores, the majority of which also have school-branded e-commerce sites operated by BNC and which offers students access to affordable course materials and affinity products, including emblematic apparel and gifts. BNC also offers its First Day™ inclusive access program, in which course materials, including e-content, are offered at a reduced price through a course materials fee, and delivered to students digitally on or before the first day of class. Additionally, the BNC segment offers a suite of digital content, software, and services to colleges and universities through our LoudCloud platform, such as predictive analytics, a variety of open educational resources courseware, and a competency-based learning platform.

MBS Segment

DSS Segment

The Digital Student Solutions ("DSS") Segment includes direct-to-student products and services to help students study more effectively and improve academic performance. The DSS segment is comprised of the operations of Student Brands, a leading direct-to-student subscription-based writing services business, Bartleby textbook solutions and expert question and answers. The DSS segment also includes tutoring and test prep services offered through our partnership with The Princeton Review .

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Additionally, we have recently developed and implemented a question and answer feature on Bartleby, providing further critical services for students to achieve better success throughout their academic journey.

We currently offer these digital products and services directly to students, increasingly leveraging our BNC and MBS bookstore footprint. We continue to aggressively expand our ecosystem of products and services through our own continued internal development, as well as by partnering with other companies, to provide a wide range of offerings designed to improve student success and outcomes.

For additional information about the BNC, MBS and DSS segment operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the year ended April 28, 2018.

Seasonality

Trends, Competition and Other Business Conditions Affecting Our Business

The market for educational materials is undergoing unprecedented change. As tuition and other costs rise, colleges and universities face increasing pressure to attract and retain students and provide them with innovative, affordable educational content and tools that support their educational development. Current trends, competition and other factors affecting our business include:


•	Increased Use of Online and Digital Platforms as Companions or Alternatives to Printed Course Materials . Students and faculty can now choose from a wider variety of educational content and tools than ever before, delivered across both print and digital platforms.


•	Distribution Network Evolving . The way course materials are distributed and consumed is changing significantly, a trend that is expected to continue. The market for course materials, including textbooks and supplemental materials, is intensely competitive and subject to rapid change.

•

Disintermediation. We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials. In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, and student-to-student transactions over the Internet.

•

Supply Chain and Inventory. Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon MBS Wholesale’s ability to build its textbook inventory from suppliers in advance of the selling season. Some textbook publishers have begun to supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future. MBS was selected as a national distributor for rental textbooks offered through McGraw-Hill Education's and Pearson Education’s consignment rental program.


•	Price Competition. In addition to the competition in the services we provide to our customers, our textbook and other course materials business faces significant price competition. Students purchase textbooks and other course materials from multiple providers, are highly price sensitive, and can easily shift spending from one provider or format to another.

•

Competition. In addition to the competition we face from alternative distribution sources, we also have competition from other college bookstore operators, textbook wholesalers and educational content providers. Competitors that provide online bookstore solutions to colleges and universities not only compete with our physical bookstore operations, but also compete with MBS Direct's virtual stores. We also compete with other companies that offer college themed and other general merchandise. Our DSS segment faces competition from other digital student solutions providers, including Chegg.

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•	A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced.


•	Outsourcing Trends. We continue to see the trend towards outsourcing in the campus bookstore market, including virtual bookstores and online marketplace websites, and we also continue to see a variety of business models being pursued for the provision of textbooks and other course materials, such as inclusive access and publisher subscription models, and general merchandise.


•	New and Existing Bookstore Contracts. We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business.


•	Overall Economic Environment, College Enrollment and Consumer Spending Patterns. Our business is affected by the overall economic environment, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise.


•	Economic Environment : BNC general merchandise sales are subject to short-term fluctuations driven by the broader retail environment. We expect general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect the changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online.

•

Enrollment Trends. The growth of our business depends on our ability to attract new students and to increase the level of engagement by our current student customers. We continue to see downward enrollment trends and shrinking resources from state and federal government for colleges and universities. Enrollment trends, specifically at community colleges, continue to decline, led primarily by an improved economy and a dip in the United States birth rate resulting in fewer students at the traditional 18-24 year old college age. However, online degree program enrollments continue to grow, even in the face of declining overall higher education enrollment, and consistent with projections from the National Center for Education Statistics, we expect undergraduate enrollment to increase in the long-term.

For additional information related to factors affecting our business and our strategies and product offerings to address these trends, see Part I - Item 1. Business in our Annual Report on Form 10-K for the year ended April 28, 2018.

Elements of Results of Operations

Our condensed consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).

Our sales are primarily derived from the sale of course materials, which include new, used and digital textbooks, and at college and university bookstores which we operate, we sell emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, direct-to-student subscription-based writing services, and other services.

Reclassifications

Prior periods presented reflect the reclassifications. For additional information, see Item 1. Financial Information - Part 1. Financial Statements - Note 2. Summary of Significant Accounting Policies.

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Results of Operations - Summary



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019			January 27, 2018			January 26, 2019			January 27, 2018
Sales:
Product sales and other	$	494,311		$	542,729		$	1,568,329		$	1,697,769
Rental income	56,019			60,662			134,251			148,194
Total sales	$	550,330		$	603,391		$	1,702,580		$	1,845,963

Net income (loss)	$	769		$	(283,235	)	$	21,844		$	(269,623	)

Adjusted Earnings (non-GAAP) ^(a)	$	3,096		$	19,644		$	24,569		$	39,781

Adjusted EBITDA (non-GAAP) ^(a)
BNC	$	10,159		$	20,473		$	48,917		$	60,998
MBS	17,648			22,444			51,099			61,076
DSS	1,394			3,134			5,571			5,079
Corporate Services	(6,197		)	(5,663		)	(17,706		)	(16,824		)
Elimination	(992		)	(5,827		)	(2,966		)	(5,782		)
Total Adjusted EBITDA (non-GAAP)	$	22,012		$	34,561		$	84,915		$	104,547


(a)	Adjusted Earnings and Adjusted EBITDA are non-GAAP financial measures. See Adjusted Earnings (non-GAAP) and Adjusted EBITDA (non-GAAP) discussion below.

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



	13 weeks ended				39 weeks ended
	January 26, 2019		January 27, 2018		January 26, 2019		January 27, 2018
Sales:
Product sales and other	89.8	%	89.9	%	92.1	%	92.0	%
Rental income	10.2		10.1		7.9		8.0
Total sales	100.0		100.0		100.0		100.0
Cost of sales:
Product and other cost of sales ^(a)	77.7		77.5		77.3		78.2
Rental cost of sales ^(a)	59.1		59.2		59.8		59.9
Total cost of sales	75.8		75.6		75.9		76.8
Gross margin	24.2		24.4		24.1		23.2
Selling and administrative expenses	20.2		18.6		19.1		17.7
Depreciation and amortization expense	3.0		2.8		2.9		2.6
Impairment loss (non-cash)	—		51.9		—		17.0
Restructuring and other charges	0.5		—		0.1		0.3
Transaction costs	—		—		—		0.1
Operating income (loss)	0.5	%	(48.9	)%	2.0	%	(14.5	)%


(a)	Represents the percentage these costs bear to the related sales, instead of total sales.

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Store Count

The following is a store count summary for BNC physical stores and MBS virtual stores:



	13 weeks ended				39 weeks ended
	January 26, 2019		January 27, 2018		January 26, 2019		January 27, 2018
Number of Stores:	BNC	MBS Direct	BNC	MBS Direct	BNC	MBS Direct	BNC	MBS Direct
Number of stores at beginning of period	773	677	777	705	768	676	769	712
Opened	1	6	6	6	35	32	30	19
Closed	1	3	1	13	30	28	17	33
Number of stores at end of period	773	680	782	698	773	680	782	698

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Results of Operations - 13 and 39 weeks ended January 26, 2019 compared with the 13 and 39 weeks ended January 27, 2018



	13 weeks ended, January 26, 2019 ^(a)
Dollars in thousands	BNC			MBS		DSS ^(a)			Corporate Services			Eliminations			Total
Sales:
Product sales and other	$	406,173		$	115,306	$	5,237		$	—		$	(32,405	)	$	494,311
Rental income	54,894			1,125		—			—			—			56,019
Total sales	461,067			116,431		5,237			—			(32,405		)	550,330
Cost of sales:
Product and other cost of sales	328,603			86,810		268			—			(31,406		)	384,275
Rental cost of sales	32,518			584		—			—			—			33,102
Total cost of sales	361,121			87,394		268			—			(31,406		)	417,377
Gross profit	99,946			29,037		4,969			—			(999		)	132,953
Selling and administrative expenses	89,787			11,389		3,575			6,197			(7		)	110,941
Depreciation and amortization expense	12,696			1,569		2,072			37			—			16,374
Sub-Total:	$	(2,537	)	$	16,079	$	(678	)	$	(6,234	)	$	(992	)	5,638
Impairment loss (non-cash)															—
Restructuring and other charges															2,500
Transaction costs															117
Operating income															$	3,021



	13 weeks ended, January 27, 2018 ^(a)
Dollars in thousands	BNC		MBS		DSS ^(a)		Corporate Services			Eliminations			Total
Sales:
Product sales and other	$	441,896	$	137,257	$	5,572	$	—		$	(41,996	)	$	542,729
Rental income	58,992		1,670		—		—			—			60,662
Total sales	500,888		138,927		5,572		—			(41,996		)	603,391
Cost of sales:
Product and other cost of sales	353,525		103,068		75		—			(36,169		)	420,499
Rental cost of sales	34,983		910		—		—			—			35,893
Total cost of sales	388,508		103,978		75		—			(36,169		)	456,392
Gross profit	112,380		34,949		5,497		—			(5,827		)	146,999
Selling and administrative expenses	91,907		12,505		2,363		5,663			—			112,438
Depreciation and amortization expense	13,532		1,596		1,834		45			—			17,007
Sub-Total:	$	6,941	$	20,848	$	1,300	$	(5,708	)	$	(5,827	)	17,554
Impairment loss (non-cash)													313,130
Restructuring and other charges													—
Transaction costs													49
Operating income (loss)													$	(295,625	)

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	39 weeks ended, January 26, 2019 ^(a)
Dollars in thousands	BNC		MBS		DSS ^(a)			Corporate Services			Eliminations			Total
Sales:
Product sales and other	$	1,278,054	$	362,516	$	15,848		$	—		$	(88,089	)	$	1,568,329
Rental income	131,058		3,193		—			—			—			134,251
Total sales	1,409,112		365,709		15,848			—			(88,089		)	1,702,580
Cost of sales:
Product and other cost of sales	1,019,208		277,329		536			—			(85,075		)	1,211,998
Rental cost of sales	78,560		1,699		—			—			—			80,259
Total cost of sales	1,097,768		279,028		536			—			(85,075		)	1,292,257
Gross profit	311,344		86,681		15,312			—			(3,014		)	410,323
Selling and administrative expenses	262,427		35,582		9,741			17,706			(48		)	325,408
Depreciation and amortization expense	38,848		4,668		5,698			119			—			49,333
Sub-Total:	$	10,069	$	46,431	$	(127	)	$	(17,825	)	$	(2,966	)	35,582
Impairment loss (non-cash)														—
Restructuring and other charges														2,500
Transaction costs														654
Operating income														$	32,428



	39 weeks ended, January 27, 2018 ^(a)
Dollars in thousands	BNC		MBS		DSS ^(a)		Corporate Services			Eliminations			Total
Sales:
Product sales and other	$	1,364,251	$	409,300	$	10,058	$	—		$	(85,840	)	$	1,697,769
Rental income	143,915		4,279		—		—			—			148,194
Total sales	1,508,166		413,579		10,058		—			(85,840		)	1,845,963
Cost of sales:
Product and other cost of sales	1,092,671		315,523		217		—			(80,058		)	1,328,353
Rental cost of sales	86,368		2,343		—		—			—			88,711
Total cost of sales	1,179,039		317,866		217		—			(80,058		)	1,417,064
Gross profit	329,127		95,713		9,841		—			(5,782		)	428,899
Selling and administrative expenses	268,129		37,910		4,762		16,824			—			327,625
Depreciation and amortization expense	40,196		4,849		3,543		140			—			48,728
Sub-Total:	$	20,802	$	52,954	$	1,536	$	(16,964	)	$	(5,782	)	52,546
Impairment loss (non-cash)													313,130
Restructuring and other charges													5,429
Transaction costs													1,895
Operating income (loss)													$	(267,908	)

(a)

On August 3, 2017, we acquired Student Brands. The condensed consolidated financial statements for the 13 and 39 weeks ended January 26, 2019 include the financial results of Student Brands in the DSS segment and the condensed cons olidated financial statements for the 13 and 39 weeks ended January 27, 2018 include the financial results of Student Brands from the date of acquisition on August 3, 2017 .

On August 21, 2018, we acquired the assets of PaperRater. The condensed consolidated financial statements for the 13 and 39 weeks ended January 26, 2019 include the financial results of PaperRater in the DSS segment from the date of acquisition and the condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 exclude the financial results of PaperRater.

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Sales

The following table summarizes our sales for the 13 and 39 weeks ended January 26, 2019 and January 27, 2018 :



	13 weeks ended					39 weeks ended
Dollars in thousands	January 26, 2019		January 27, 2018		%	January 26, 2019		January 27, 2018		%
Product sales and other	$	494,311	$	542,729	(8.9)%	$	1,568,329	$	1,697,769	(7.6)%
Rental income	56,019		60,662		(7.7)%	134,251		148,194		(9.4)%
Total Sales	$	550,330	$	603,391	(8.8)%	$	1,702,580	$	1,845,963	(7.8)%

Our sales decreased by $53.1 million, or 8.8%, to $550.3 million during the 13 weeks ended January 26, 2019 from $603.4 million during the 13 weeks ended January 27, 2018 .

Our sales decreased by $143.4 million, or 7.8%, to $1,702.6 million during the 39 weeks ended January 26, 2019 from $1,846.0 million during the 39 weeks ended January 27, 2018 .

The components of the variances for the 13 and 39 week periods are reflected in the table below.



Sales variances	13 weeks ended						39 weeks ended
Dollars in millions	January 26, 2019			January 27, 2018			January 26, 2019			January 27, 2018
BNC Sales
New stores	$	17.1		$	14.1		$	41.9		$	55.8
Closed stores	(21.0		)	(2.2		)	(61.4		)	(9.7		)
Comparable stores	(37.2		)	(31.3		)	(83.4		)	(69.9		)
Textbook rental deferral	4.9			2.6			8.5			6.2
Service revenue ^(a)	(1.0		)	1.1			(0.7		)	3.0
Other ^(b)	(2.7		)	(5.1		)	(4.0		)	(8.8		)
BNC sales subtotal:	$	(39.9	)	$	(20.8	)	$	(99.1	)	$	(23.4	)
MBS Sales ^(c)
Wholesale	$	(15.1	)	$	92.2		$	(28.8	)	$	232.2
Direct	(7.4		)	46.7			(19.1		)	181.4
MBS sales subtotal:	$	(22.5	)	$	138.9		$	(47.9	)	$	413.6
DSS Sales ^(d)	$	(0.3	)	$	5.6		$	5.8		$	10.1
Eliminations ^(e)	$	9.6		$	(42.0	)	$	(2.2	)	$	(85.9	)
Total sales variance:	$	(53.1	)	$	81.7		$	(143.4	)	$	314.4


(a)	Service revenue includes Promoversity, brand partnerships, shipping and handling, LoudCloud digital content, software, and services, and revenue from other programs.


(b)	Other includes inventory liquidation sales to third parties, and certain accounting adjusting items related to return reserves, agency sales and other deferred items.


(c)	The variance for the MBS segment for the 13 and 39 weeks ended January 27, 2018 represents the sales activity for MBS which we acquired on February 27, 2017 (the fourth quarter of Fiscal 2017).

(d)

DSS revenue includes Student Brands subscription-based writing services business, which we acquired on August 3, 2017. The condensed consolidated financial statements for the 13 and 39 weeks ended January 26, 2019 include the financial results of Student Brands in the DSS segment and the condensed cons olidated financial statements for the 13 and 39 weeks ended January 27, 2018 include the financial results of Student Brands from the date of acquisition on August 3, 2017 .

DSS revenue includes PaperRater which we acquired on August 21, 2018. The condensed consolidated financial statements for the 13 and 39 weeks ended January 26, 2019 include the financial results of PaperRater in the DSS segment from the date of acquisition and the condensed consolidated financial statements for the 13 and 39 weeks ended January 27, 2018 exclude the financial results of PaperRater.


(e)	Eliminates MBS sales to BNC and BNC commissions earned from MBS. See discussion of intercompany activities and eliminations below.

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BNC

BNC sales decreased $39.9 million, or 8.0%, to $461.0 million during the 13 weeks ended January 26, 2019 from $500.9 million during the 13 weeks ended January 27, 2018. BNC sales decreased $99.1 million, or 6.6%, to $1,409.1 million during the 39 weeks ended January 26, 2019 from $1,508.2 million during the 39 weeks ended January 27, 2018. BNC added 35 new stores and closed 30 stores during the 39 weeks ended January 26, 2019, ending the period with a total of 773 stores. Sales were impacted by the timing of the spring back-to-school rush season which extended past the close of our fiscal third quarter.

Product and other sales for BNC for the 13 and 39 weeks ended January 26, 2019 decreased by $35.7 million, or 8.1% and $86.2 million or 6.3%, respectively. Product and other sales are impacted by comparable store sales (as noted in the chart below), new store openings and store closings. Textbook (Course Materials) revenue for BNC for the 13 and 39 weeks ended January 26, 2019 decreased primarily due to lower new and used textbook and other course materials sales, while digital and eTextbook revenue increased. General merchandise sales for BNC increased for the 13 and 39 weeks ended January 26, 2019 primarily due to higher emblematic apparel, graduation, and computer products sales.

Rental income for BNC for the 13 weeks ended January 26, 2019 decreased by $4.1 million, or 6.9% to $54.9 million from $59.0 million. Rental income for BNC for the 39 weeks ended January 26, 2019 decreased by $12.9 million, or 8.9% to $131.1 million from $143.9 million. Rental income is impacted by comparable store sales, new store openings and store closings. The decrease in rental income for the 13 and 39 weeks ended January 27, 2018 is due to decreased rental activity impacted by increased digital offerings.

Comparable store sales for BNC decreased for the 13 and 39 week sales periods. Comparable store sales were impacted primarily by a shift to lower cost options and more affordable solutions, including digital offerings, increased consumer purchases directly from publishers and other online providers, and lower student enrollment, specifically in two-year community colleges. Comparable store sales were also impacted by the timing of the spring back-to-school rush season which extended past the close of our fiscal third quarter. These decreases were partially offset by improved general merchandise sales. Comparable store sales variances for BNC by category for the 13 and 39 week periods are as follows:



Comparable Store Sales variances - BNC	13 weeks ended										39 weeks ended
Dollars in millions	January 26, 2019					January 27, 2018					January 26, 2019				January 27, 2018
Textbooks (Course Materials)	$	(38.6	)	(11.2	)%	$	(26.3	)	(7.2	)%	$	(87.1	)	(8.9)%	$	(62.8	)	(6.1)%
General Merchandise	1.9			1.6	%	(3.5		)	(2.8	)%	6.3			1.5%	(3.3		)	(0.8)%
Trade Books	(0.5		)	(4.4	)%	(1.5		)	(11.9	)%	(2.6		)	(7.3)%	(3.8		)	(9.7)%
Total Comparable Store Sales	$	(37.2	)	(7.7	)%	$	(31.3	)	(6.2	)%	$	(83.4	)	(5.8)%	$	(69.9	)	(4.7)%

MBS

MBS total sales decreased by $22.5 million, or 16.2%, to $116.4 million during the 13 weeks ended January 26, 2019 from $138.9 million during the 13 weeks ended January 27, 2018. MBS total sales decreased by $47.9 million, or 11.6%, to $365.7 million during the 39 weeks ended January 26, 2019 from $413.6 million during the 39 weeks ended January 27, 2018.

MBS Wholesale net sales decreased by $15.1 million, or 16.4%, to $77.0 million during the 13 weeks ended January 26, 2019 from $92.1 million during the 13 weeks ended January 27, 2018. MBS Wholesale net sales decreased by $28.8 million, or 12.4%, to $203.3 million during the 39 weeks ended January 26, 2019 from $232.2 million during the 39 weeks ended January 27, 2018. For the 39 weeks ended January 26, 2019 MBS Wholesale gross sales decreased due to lower demand along with increased return reserves.

MBS Direct sales decreased by $7.4 million, or 15.8%, to $39.4 million during the 13 weeks ended January 26, 2019 from $46.8 million during the 13 weeks ended January 27, 2018. MBS Direct sales decreased by $19.1 million, or 10.5%, to $162.4 million during the 39 weeks ended January 26, 2019 from $181.4 million during the 39 weeks ended January 27, 2018. The decreases were primarily due to lower comparable store sales and decreases related to closed stores, partially offset by increases in new stores sales.

DSS

DSS total sales decreased by $0.3 million or 6.0% to $5.2 million during the 13 weeks ended January 26, 2019 from $5.5 million during the 13 weeks ended January 27, 2018 primarily due to lower Student Brands sales overall, partially offset by growth in certain English and foreign language properties. DSS total sales increased by $5.8 million to $15.8 million during the 39 weeks ended January 26, 2019 from $10.0 million during the 39 weeks ended January 27, 2018, primarily due to the acquisition of Student Brands on August 3, 2017 and PaperRater on August 21, 2018.

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Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 75.8% during the 13 weeks ended January 26, 2019 compared to 75.6% during the 13 weeks ended January 27, 2018 . Our gross margin decreased by $14.0 million, or 9.6%, to $133.0 million, or 24.2% of sales, during the 13 weeks ended January 26, 2019 from $147.0 million, or 24.4% of sales during the 13 weeks ended January 27, 2018 .

Our cost of sales decreased as a percentage of sales to 75.9% during the 39 weeks ended January 26, 2019 compared to 76.8% (or 76.6% excluding inventory valuation adjustment discussed below) during the 39 weeks ended January 27, 2018. Our gross margin decreased by $18.6 million, or 4.3%, to $410.3 million, or 24.1% of sales, during the 39 weeks ended January 26, 2019 from $428.9 million, or 23.2% of sales (or 23.4% excluding inventory valuation adjustment discussed below), during the 39 weeks ended January 27, 2018. During the 39 weeks ended January 26, 2019 , gross margin as a percentage of sales increased to 24.1% from 23.4% (excluding inventory valuation adjustment discussed below) or 70 basis points primarily due to the items discussed below for each segment.

BNC

The following table summarizes the BNC cost of sales for the 13 and 39 weeks ended January 26, 2019 and January 27, 2018 :



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales
Product and other cost of sales	$	328,603	80.9%	$	353,525	80.0%	$	1,019,208	79.7%	$	1,092,671	80.1%
Rental cost of sales	32,518		59.2%	34,983		59.3%	78,560		59.9%	86,368		60.0%
Total Cost of Sales	$	361,121	78.3%	$	388,508	77.6%	$	1,097,768	77.9%	$	1,179,039	78.2%

The following table summarizes the BNC gross margin for the 13 and 39 weeks ended January 26, 2019 and January 27, 2018 :



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales
Product and other gross margin	$	77,570	19.1%	$	88,371	20.0%	$	258,846	20.3%	$	271,580	19.9%
Rental gross margin	22,376		40.8%	24,009		40.7%	52,498		40.1%	57,547		40.0%
Gross Margin	$	99,946	21.7%	$	112,380	22.4%	$	311,344	22.1%	$	329,127	21.8%

For the 13 weeks ended January 26, 2019, the BNC gross margin as a percentage of sales decreased as discussed below:


•	Product and other gross margin decreased (90 basis points), driven primarily by lower margin rates (185 basis points) due to higher markdowns compared to the prior year and higher costs related to our college and university contracts (15 basis points) resulting from contract renewals and new store contracts, partially offset by a favorable sales mix (110 basis points).


•	Rental gross margin increased (10 basis points), driven primarily by higher rental margin rates (255 basis points), partially offset by higher costs related to our college and university contracts (230 basis points) resulting from contract renewals and new store contracts and unfavorable rental mix (15 basis points).

For the 39 weeks ended January 26, 2019, the BNC gross margin as a percentage of sales increased as discussed below:


•	Product and other gross margin increased (35 basis points), driven primarily by a favorable sales mix (80 basis points), partially offset by higher costs related to our college and university contracts (45 basis points) resulting from contract renewals and new store contracts.


•	Rental gross margin increased (10 basis points), driven primarily by higher rental margin rates (110 basis points) and favorable rental mix (15 basis points), partially offset by higher costs related to our college and university contracts (115 basis points) resulting from contract renewals and new store contracts.

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MBS

The following table summarizes the MBS cost of sales for the 13 and 39 weeks ended January 26, 2019 and January 27, 2018:



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales
Product and other cost of sales	$	86,810	75.3%	$	103,068	75.1%	$	277,329	76.5%	$	315,523	77.1%
Rental cost of sales	584		52.0%	910		54.4%	1,699		53.2%	2,343		54.7%
Total Cost of Sales	$	87,394	75.1%	$	103,978	74.8%	$	279,028	76.3%	$	317,866	76.9%

The following table summarizes the MBS gross margin for the 13 and 39 weeks ended January 26, 2019 and January 27, 2018:



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales	January 26, 2019		% of Related Sales	January 27, 2018		% of Related Sales
Product and other gross margin	$	28,496	24.7%	$	34,189	24.9%	$	85,187	23.5%	$	93,777	22.9%
Rental gross margin	541		48.0%	760		45.6%	1,494		46.8%	1,936		45.3%
Gross Margin	$	29,037	24.9%	$	34,949	25.2%	$	86,681	23.7%	$	95,713	23.1%

The cost of sales and gross margin for MBS were $87.4 million, or 75.1% of sales, and $29.0 million, or 24.9% of sales, respectively, during the 13 weeks ended January 26, 2019. The cost of sales and gross margin for MBS was $104.0 million or 74.8% of sales and $34.9 million or 25.2% of sales, respectively, during the 13 weeks ended January 27, 2018. The gross margin decreased to 24.9% during the 13 weeks ended January 26, 2019 from 25.2% during the 13 weeks ended January 27, 2018 primarily due to an unfavorable sales mix for MBS Direct due to the shift from physical textbooks to digital products which have lower margins, partially offset by higher MBS Wholesale margins.

The cost of sales and gross margin for MBS were $279.0 million, or 76.3% of sales, and $86.7 million, or 23.7% of sales, respectively, during the 39 weeks ended January 26, 2019. The cost of sales and gross margin for MBS were $317.9 million, or 76.9% of sales, and $95.7 million or 23.1% of sales, respectively, during the 39 weeks ended January 27, 2018. For the 39 weeks ended January 27, 2018, the margin was impacted by incremental cost of sales of $3.3 million related to recording MBS inventory at fair value as of the acquisition date. Excluding the $3.3 million inventory fair value amortization, cost of sales and gross margin for MBS was $314.6 million or 76.1% of sales and $99.0 million or 23.9% of sales, respectively, during the 39 weeks ended January 27, 2018. The gross margin decreased to 23.7% during the 39 weeks ended January 26, 2019 from 23.9% (excluding the $3.3 million inventory fair value amortization) during the 39 weeks ended January 27, 2018. The decrease was primarily due to an unfavorable sales mix for MBS Direct due to the shift from physical textbooks to digital products which have lower margins, partially offset by higher MBS Wholesale margins.

DSS

The gross margin for the DSS segment was $5.0 million, or 94.9% of sales, during the 13 weeks ended January 26, 2019 and $5.5 million, or 96.8% of sales, during the 13 weeks ended January 27, 2018. The gross margin for the DSS segment was $15.3 million, or 96.6% of sales, during the 39 weeks ended January 26, 2019 and $9.8 million, or 97.8% of sales, during the 39 weeks ended January 27, 2018. The increase during the 39 weeks ended January 26, 2019 was driven primarily by high margin Student Brands and PaperRater subscription service revenue earned.

See discussion above under Sales - DSS for a discussion of acquisitions.

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Intercompany Eliminations

During the 13 weeks ended January 26, 2019 and January 27, 2018, our sales eliminations were $(32.4) million and $(42.0) million, respectively. During the 39 weeks ended January 26, 2019 and January 27, 2018, sales eliminations were $(88.1) million and $(85.8) million, respectively. These sales eliminations represent the elimination of MBS sales to BNC and the elimination of BNC commissions earned from MBS.

During the 13 weeks ended January 26, 2019 and January 27, 2018, the cost of sales eliminations were $(31.4) million and $(36.2) million, respectively. During the 39 weeks ended January 26, 2019 and January 27, 2018, the cost of sales eliminations were $(85.1) million and $(80.1) million, respectively. These cost of sales eliminations represent (i) the recognition of intercompany profit for BNC inventory that was purchased from MBS in a prior period that was subsequently sold to external customers during the current period, net of (ii) the elimination of intercompany profit for MBS inventory purchases by BNC that remain in ending inventory at the end of the current period.

During the 13 weeks ended January 26, 2019 and January 27, 2018, the gross margin eliminations were $(1.0) million and $(5.8) million, respectively. During the 39 weeks ended January 26, 2019 and January 27, 2018, the gross margin eliminations were $(3.0) million and $(5.8) million, respectively. The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.

Selling and Administrative Expenses



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019		% of Sales	January 27, 2018		% of Sales	January 26, 2019		% of Sales	January 27, 2018		% of Sales
Total Selling and Administrative Expenses	$	110,941	20.2%	$	112,438	18.6%	$	325,408	19.1%	$	327,625	17.7%

During the 13 weeks ended January 26, 2019, selling and administrative expenses decreased by $1.5 million, or 1.3%, to $110.9 million from $112.4 million during the 13 weeks ended January 27, 2018. During the 39 weeks ended January 26, 2019, selling and administrative expenses decreased by $2.2 million, or 0.7%, to $325.4 million from $327.6 million during the 39 weeks ended January 27, 2018. The variances by segment are as follows:

BNC

During the 13 weeks ended January 26, 2019, BNC selling and administrative expenses decreased by $2.1 million, or 2.3%, to $89.8 million from $91.9 million during the 13 weeks ended January 27, 2018. This decrease was primarily due to a $1.7 million decrease in stores payroll and operating expenses including comparable stores and new/closed stores payroll and operating expenses, a decrease of $1.1 million in LoudCloud digital operations and a decrease of $0.6 million due to lower stock-based compensation primarily due to forfeiture of stock-based compensation resulting from the BNC President retirement in the current year, partially offset by an increase of $1.3 million in corporate payroll and infrastructure costs. See Restructuring and Other Charges discussion below.

During the 39 weeks ended January 26, 2019, BNC selling and administrative expenses decreased by $5.7 million, or 2.1% to $262.4 million from $268.1 million during the 39 weeks ended January 27, 2018. The decrease was primarily due to a decrease of $5.2 million in stores payroll and operating expenses including comparable stores and new/closed stores payroll and operating expenses, a decrease of $3.5 million in LoudCloud digital operations and a decrease of $0.4 million due to lower stock-based compensation primarily due to due to forfeiture of stock-based compensation resulting from the BNC President retirement in the current year, partially offset by an increase of $3.4 million in corporate payroll and infrastructure costs. See Restructuring and Other Charges discussion below.

MBS

During the 13 weeks ended January 26, 2019, MBS selling and administrative expenses decreased by $1.1 million or 8.9% to $11.4 million from $12.5 million during the 13 weeks ended January 27, 2018. During the 39 weeks ended January 26, 2019, MBS selling and administrative expenses decreased by $2.3 million or 6.1% to $35.6 million from $37.9 million during the 39 weeks ended January 27, 2018. The decrease in selling and administrative expenses was primarily driven by lower expenses related to payroll, professional fees, and click and affiliate marketing fees, partially offset by higher medical benefit expenses.

DSS

During the 13 weeks ended January 26, 2019, DSS selling and administrative expenses increased by $1.2 million to $3.6 million from $2.4 million during the 13 weeks ended January 27, 2018. The increase in costs was primarily driven by increased payroll, advertising and professional fees related to developing, marketing and selling our student success hub on bartleby.com .

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During the 39 weeks ended January 26, 2019, DSS selling and administrative expenses increased by $5.0 million to $9.8 million from $4.8 million during the 39 weeks ended January 27, 2018. The increase in costs was primarily due to the acquisition of Student Brands on August 3, 2017 and increased payroll, advertising and professional fees related to developing our student success hub on bartleby.com .

Corporate Services

During the 13 weeks ended January 26, 2019, Corporate Services' selling and administrative expenses increased by $0.5 million or 9.4% to $6.2 million from $5.7 million during the 13 weeks ended January 27, 2018. The increase was primarily due to higher stock-based compensation expenses and professional fees, partially offset by lower bonus expense and insurance expense. For additional details on the performance and market conditions related to the stock-based compensation grants, see Part I - Item 1. Financial Statements - Note 12. Stock-Based Compensation in this Form 10-Q.

During the 39 weeks ended January 26, 2019, Corporate Services' selling and administrative expenses increased by $0.9 million, or 5.2%, to $17.7 million during the 39 weeks ended January 26, 2019 from $16.8 million during the 39 weeks ended January 27, 2018. The increase was primarily due to higher payroll and stock-based compensation expenses compared to prior year (which included lower bonus expense and forfeitures of stock-based compensation resulting from the CEO resignation in the prior year), and higher professional fees, partially offset by lower expenses related to legal and insurance. See Restructuring and Other Charges discussion below.

Depreciation and Amortization Expense



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019		% of Sales	January 27, 2018		% of Sales	January 26, 2019		% of Sales	January 27, 2018		% of Sales
Total Depreciation and Amortization Expense	$	16,374	3.0%	$	17,007	2.8%	$	49,333	2.9%	$	48,728	2.6%

Depreciation and amortization expense decreased by $0.6 million, or 3.7%, to $16.4 million during the 13 weeks ended January 26, 2019 from $17.0 million during the 13 weeks ended January 27, 2018 . This decrease was primarily attributable to lower depreciation related to closed stores, offset by incremental depreciation and amortization expense resulting from the acquisition of PaperRater on August 21, 2018 associated with the identified intangibles recorded at fair value as of the acquisition date and additional capital expenditures.

Depreciation and amortization expense increased by $0.6 million, or 1.2%, to $49.3 million during the 39 weeks ended January 26, 2019 from $48.7 million during the 39 weeks ended January 27, 2018 . This increase was primarily attributable to incremental depreciation and amortization expense associated with the property and equipment and identified intangibles recorded at fair value as of the acquisition date for Student Brands (August 3, 2017), incremental amortization expense resulting from the acquisition of identified intangibles recorded at fair value as of the acquisition date for PaperRater (August 21, 2018), and additional capital expenditures, offset by lower depreciation related to closed stores.

Impairment loss (non-cash)

During the 13 and 39 weeks ended January 26, 2019, we completed our annual goodwill impairment test for Fiscal 2019 and concluded that no goodwill impairment was to be recognized as the fair values of each of our reporting units exceeded their respective carrying values.

During the 13 and 39 weeks ended January 27, 2018, we completed our annual goodwill impairment test for Fiscal 2018 and concluded that the carrying value of the BNC reporting unit exceeded its fair value and we recorded a goodwill impairment (non-cash impairment loss) of $313.1 million. For information, see Part I - Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies in this Form 10-Q.

Restructuring and other charges

On December 13, 2018, Mr. Patrick Maloney resigned as Executive Vice President, Operations of the Company and President, BNC effective as of April 27, 2019. During the 13 and 39 weeks ended January 26, 2019, we recognized restructuring and other charges of approximately $2.5 million, which is comprised of the severance and transition payments. For additional information, see the Form 8-K dated December 13, 2018, filed with the SEC on December 18, 2018.

On July 19, 2017, Mr. Max J. Roberts resigned as Chief Executive Officer of the Company and Mr. Michael P. Huseby was appointed to the combined position of Chief Executive Officer and Chairman of the Board, both effective as of September 19, 2017. During the 39 weeks ended July 29, 2017, we recognized expenses totaling approximately $5.4 million, which is comprised of the severance and transition payments, as well as related expenses. For additional information, see the Form 8-K dated July 19, 2017, filed with the SEC on July 20, 2017.

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Transaction Costs

Transaction costs were $0.7 million and $1.9 million during the 39 weeks ended January 26, 2019 and January 27, 2018 , respectively. We incur transaction costs for business development and acquisitions.

Operating Income (Loss)



	13 weeks ended							39 weeks ended
Dollars in thousands	January 26, 2019		% of Sales	January 27, 2018			% of Sales	January 26, 2019		% of Sales	January 27, 2018			% of Sales
Total Operating Income (Loss)	$	3,021	0.5%	$	(295,625	)	(48.9)%	$	32,428	2.0%	$	(267,908	)	(14.5)%

Our operating income was $3.0 million during the 13 weeks ended January 26, 2019, compared to operating loss of $(295.6) million during the 13 weeks ended January 27, 2018. The decrease is due to the matters discussed above. For the 13 weeks ended January 26, 2019, excluding the $2.5 million of restructuring and other charges and transaction costs of $0.1 million, discussed above, operating income was $5.6 million (or 1.0% of sales). For the 13 weeks ended January 27, 2018, excluding the $313.1 million of goodwill impairment and transaction costs of $0.05 million, operating income was $17.6 million (or 2.9% of sales).

Our operating income was $32.4 million during the 39 weeks ended January 27, 2018, compared to operating loss of $(267.9) million during the 39 weeks ended January 27, 2018. The increase is due to the matters discussed above. For the 39 weeks ended January 26, 2019, excluding the $2.5 million of restructuring and other charges and transaction costs of $0.7 million, discussed above, operating income was $35.6 million (or 2.1% of sales). For the 39 weeks ended January 27, 2018, excluding the $313.1 million of goodwill impairment, the $3.3 million of incremental cost of sales related to amortization of the MBS inventory fair value adjustment, the restructuring and other charges of $5.4 million and transaction costs of $1.9 million, all discussed above, operating income was $55.8 million (or 3.0% of sales).

Interest Expense, Net



	13 weeks ended				39 weeks ended
Dollars in thousands	January 26, 2019		January 27, 2018		January 26, 2019		January 27, 2018
Interest Expense, Net	$	2,546	$	2,954	$	7,904	$	7,828

Net interest expense decreased by $0.4 million to $2.5 million during the 13 weeks ended January 26, 2019 from $2.9 million during the 13 weeks ended January 27, 2018 due to lower borrowings. Net interest expense increased by $0.1 million to $7.9 million during the 39 weeks ended January 26, 2019 from $7.8 million during the 39 weeks ended January 27, 2018 due to higher borrowings.

Income Tax (Benefit) Expense



	13 weeks ended								39 weeks ended
Dollars in thousands	January 26, 2019			Effective Rate	January 27, 2018			Effective Rate	January 26, 2019		Effective Rate	January 27, 2018			Effective Rate
Income Tax (Benefit) Expense	$	(294	)	(61.9)%	$	(15,344	)	5.1%	$	2,680	10.9%	$	(6,113	)	2.2%

We recorded an income tax benefit of $(0.3) million on a pre-tax income of $0.5 million of during the 13 weeks ended January 26, 2019 , which represented an effective income tax rate of (61.9)% and we recorded an income tax benefit of $(15.3) million on pre-tax loss of $(298.6) million during the 13 weeks ended January 27, 2018 , which represented an effective income tax rate of 5.1%.

We recorded income tax expense of $2.7 million on a pre-tax income of $24.5 million during the 39 weeks ended January 26, 2019 , which represented an effective income tax rate of 10.9% and we recorded an income tax benefit of $(6.1) million on pre-tax loss of $(275.7) million during the 39 weeks ended January 27, 2018 , which represented an effective income tax rate of 2.2%.

The effective tax rate for the 13 weeks ended January 26, 2019 is significantly lower as compared to the comparable prior year period due to the reduced federal tax rate because of U.S Tax Reform and the inclusion in the comparable prior year period of an income tax benefit of revaluing deferred tax liabilities, partially offset by permanent differences which relate to the nondeductible portion of the prior year goodwill impairment (see Part I - Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies in this Form 10-Q. The effective tax rate for the 39 weeks ended January 26, 2019 is significantly higher as compared to the comparable prior year period due to the income tax benefit of revaluing deferred tax liabilities recorded in the prior year period and permanent differences, partially offset by the reduced federal tax rate because of U.S. Tax Reform.

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Impact of U.S. Tax Reform

The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, among other provisions. In accordance with SAB 118, “ Income Tax Accounting Implications of the Tax Cuts and Jobs Act ” (SAB 118), during the quarter ended January 27, 2018, we recognized the reasonable estimated effects on our existing deferred tax balances and one-time transition tax. During the quarter ended January 26, 2019, we finalized the accounting for the enactment of the Act. The most significant impact of the legislation for the Company was a $20.4 million reduction of the value of our net deferred (which represents future tax liabilities) and long-term tax liabilities as a result of lowering the U.S. corporate income tax rate from 35% to 21%, which was recorded in Fiscal 2018. During the second quarter of Fiscal 2019, we recorded an additional measurement period adjustment to further reduce our net deferred tax liability by $3.8 million as a result of accelerating certain deductions as permitted by the U.S. tax code. During the third quarter of Fiscal 2019, we filed our tax return for the tax year ending January 27, 2018 and finalized the accounting for the enactment of the Act by recording an additional $0.1 million reduction to our net deferred tax liability. This measurement period adjustment reduced the Company's effective tax rate by 20.2% and 15.9% during the 13 and 39 weeks ended January 26, 2019, respectively. We also recorded a liability associated with the one-time transition tax. This amount is not material.

Net Income (Loss)



	13 weeks ended					39 weeks ended
Dollars in thousands	January 26, 2019		January 27, 2018			January 26, 2019		January 27, 2018
Net income (loss)	$	769	$	(283,235	)	$	21,844	$	(269,623	)

As a result of the factors discussed above, net income was $0.8 million during the 13 weeks ended January 26, 2019 , compared with net loss of $(283.2) million during the 13 weeks ended January 27, 2018 and net income of $21.8 million during the 39 weeks ended January 26, 2019 , compared with net loss of $(269.6) million during the 39 weeks ended January 27, 2018 .

Adjusted Earnings (non-GAAP) is $3.1 million during the 13 weeks ended January 26, 2019 , compared with $19.6 million during the 13 weeks ended January 27, 2018 and Adjusted Earnings (non-GAAP) is $24.6 million during the 39 weeks ended January 26, 2019 , compared with $39.8 million during the 39 weeks ended January 27, 2018 . See Adjusted Earnings (non-GAAP) discussion below.

Use of Non-GAAP Measures - Adjusted Earnings and Adjusted EBITDA

To supplement our results prepared in accordance with GAAP, we use the measure of Adjusted Earnings and Adjusted EBITDA, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations. We define Adjusted Earnings as net income as adjusted for items that are subtracted from or added to net income. We define Adjusted EBITDA as net income plus (1) depreciation and amortization; (2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or added to net income.

To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements included elsewhere in this Form 10-K, the reconciliation of Adjusted Earnings to net income and the reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance.

These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, our use of these non-GAAP financial measures may be different from similarly named measures used by other companies, limiting their usefulness for comparison purposes.

We review these non-GAAP financial measures as internal measures to evaluate our performance and manage our operations. We believe that these measures are useful performance measures which are used by us to facilitate a comparison of our on-going operating performance on a consistent basis from period-to-period. We believe that these non-GAAP financial measures provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone, as they exclude certain items that do not reflect the ordinary earnings of our operations. Our Board of Directors and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure for performance incentive plans. We believe that the inclusion of Adjusted Earnings and Adjusted EBITDA results provides investors useful and important information regarding our operating results.

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Adjusted Earnings (non-GAAP)



	13 weeks ended					39 weeks ended
Dollars in thousands	January 26, 2019		January 27, 2018			January 26, 2019		January 27, 2018
Net income (loss)	$	769	$	(283,235	)	$	21,844	$	(269,623	)
Reconciling items, after-tax (below)	2,327		302,879			2,725		309,404
Adjusted Earnings (non-GAAP)	$	3,096	$	19,644		$	24,569	$	39,781

Reconciling items, pre-tax
Impairment loss (non-cash) ^(a)	$	—	$	313,130		$	—	$	313,130
Inventory valuation amortization (MBS) (non-cash) ^(a)	—		—			—		3,273
Restructuring and other charges ^(a)	2,500		—			2,500		5,429
Transaction costs ^(a)	117		49			654		1,895
Reconciling items, pre-tax	2,617		313,179			3,154		323,727
Less: Pro forma income tax impact ^(b)	290		10,300			429		14,323
Reconciling items, after-tax	$	2,327	$	302,879		$	2,725	$	309,404


(a)	See Management Discussion and Analysis - Results of Operations discussion above.


(b)	Represents the income tax effects of the non-GAAP items.

Adjusted EBITDA (non-GAAP)



	13 weeks ended						39 weeks ended
Dollars in thousands	January 26, 2019			January 27, 2018			January 26, 2019		January 27, 2018
Net income (loss)	$	769		$	(283,235	)	$	21,844	$	(269,623	)
Add:
Depreciation and amortization expense	16,374			17,007			49,333		48,728
Interest expense, net	2,546			2,954			7,904		7,828
Income tax (benefit) expense	(294		)	(15,344		)	2,680		(6,113		)
Impairment loss (non-cash) ^(a)	—			313,130			—		313,130
Inventory valuation amortization (MBS) (non-cash) ^(a)	—			—			—		3,273
Restructuring and other charges ^(a)	2,500			—			2,500		5,429
Transaction costs ^(a)	117			49			654		1,895
Adjusted EBITDA (non-GAAP) ^(a)	$	22,012		$	34,561		$	84,915	$	104,547


(a)	See Management Discussion and Analysis - Results of Operations discussion above.

The following is Adjusted EBITDA by segment for the 13 and 39 weeks ended January 26, 2019 and January 27, 2018 .



Adjusted EBITDA - by Segment	13 weeks ended, January 26, 2019
Dollars in thousands	BNC		MBS		DSS		Corporate Services			Elimination ^(a)			Total
Sales	$	461,067	$	116,431	$	5,237	$	—		$	(32,405	)	$	550,330
Cost of sales	361,121		87,394		268		—			(31,406		)	417,377
Gross profit	99,946		29,037		4,969		—			(999		)	132,953
Selling and administrative expenses	89,787		11,389		3,575		6,197			(7		)	110,941
Adjusted EBITDA (non-GAAP)	$	10,159	$	17,648	$	1,394	$	(6,197	)	$	(992	)	$	22,012

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Adjusted EBITDA - by Segment	13 weeks ended, January 27, 2018
Dollars in thousands	BNC		MBS		DSS		Corporate Services			Elimination ^(a)			Total
Sales	$	500,888	$	138,927	$	5,572	$	—		$	(41,996	)	$	603,391
Cost of sales	388,508		103,978		75		—			(36,169		)	456,392
Gross profit	112,380		34,949		5,497		—			(5,827		)	146,999
Selling and administrative expenses	91,907		12,505		2,363		5,663			—			112,438
Adjusted EBITDA (non-GAAP)	$	20,473	$	22,444	$	3,134	$	(5,663	)	$	(5,827	)	$	34,561



Adjusted EBITDA - by Segment	39 weeks ended, January 26, 2019
Dollars in thousands	BNC		MBS		DSS		Corporate Services			Elimination (a)			Total
Sales	$	1,409,112	$	365,709	$	15,848	$	—		$	(88,089	)	$	1,702,580
Cost of sales	1,097,768		279,028		536		—			(85,075		)	1,292,257
Gross profit	311,344		86,681		15,312		—			(3,014		)	410,323
Selling and administrative expenses	262,427		35,582		9,741		17,706			(48		)	325,408
Adjusted EBITDA (non-GAAP)	$	48,917	$	51,099	$	5,571	$	(17,706	)	$	(2,966	)	$	84,915



Adjusted EBITDA - by Segment	39 weeks ended, January 27, 2018
Dollars in thousands	BNC		MBS		DSS		Corporate Services			Elimination (a)			Total
Sales	$	1,508,166	$	413,579	$	10,058	$	—		$	(85,840	)	$	1,845,963
Cost of sales (MBS excludes $3,273 related to inventory fair value amortization) ^(a)	1,179,039		314,593		217		—			(80,058		)	1,413,791
Gross profit	329,127		98,986		9,841		—			(5,782		)	432,172
Selling and administrative expenses	268,129		37,910		4,762		16,824			—			327,625
Adjusted EBITDA (non-GAAP)	$	60,998	$	61,076	$	5,079	$	(16,824	)	$	(5,782	)	$	104,547

(a) See Management Discussion and Analysis - Results of Operations discussion above.

Liquidity and Capital Resources

Our primary sources of cash are net cash flows from operating activities, funds available under our credit agreement and short-term vendor financing. As of January 26, 2019 , we had $70.1 million of borrowings under the Credit Agreement.

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Sources and Uses of Cash Flow



	39 weeks ended
Dollars in thousands	January 26, 2019			January 27, 2018
Cash, cash equivalents, and restricted cash at beginning of period	$	16,869		$	21,697
Net cash flows provided by operating activities	175,862			140,365
Net cash flows used in investing activities	(41,668		)	(88,764		)
Net cash flows used in financing activities	(128,271		)	(48,230		)
Cash, cash equivalents, and restricted cash at end of period	$	22,792		$	25,068

Cash Flow from Operating Activities

Our business is highly seasonal. For our retail operations (BNC and MBS Direct), cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the upcoming semesters based on the typical academic semester. For MBS Wholesale, cash flows from operating activities are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter selling season when they sell textbooks and other course materials for retail distribution. For both BNC and MBS, cash flows from operating activities are typically a use of cash in the fourth fiscal quarter, when sales volumes are materially lower than the other quarters. For our DSS segment, cash flows are not seasonal as cash flows from operating activities are typically consistent throughout the year. Our quarterly cash flows also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods.

Cash flows provided by operating activities during the 39 weeks ended January 26, 2019 were $175.9 million compared to $140.4 million during the 39 weeks ended January 27, 2018 . This increase of $35.5 million was primarily due to higher net income and changes in deferred taxes and working capital.

Cash Flow from Investing Activities

Cash flows used in investing activities during the 39 weeks ended January 26, 2019 were $41.7 million compared to $88.8 million during the 39 weeks ended January 27, 2018 . The decrease is primarily due to lower payments to acquire businesses, offset by higher capital expenditures and contractual capital investments associated with DSS content, renewing existing contracts and new store construction for BNC.

Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives and enhancements to internal systems and our website. Capital expenditures totaled $31.7 million and $30.1 million during the 39 weeks ended January 26, 2019 and January 27, 2018 , respectively.

Cash Flow from Financing Activities

Cash flows used in financing activities during the 39 weeks ended January 26, 2019 were $128.3 million compared $48.2 million during the 39 weeks ended January 27, 2018 . This net change of $80.1 million is primarily due to decreased net borrowings under the credit agreement.

Financing Arrangements

On August 3, 2015, we and certain of our subsidiaries, entered into a credit agreement (the “Credit Agreement”) under which the lenders committed to provide a five-year asset-backed revolving credit facility in an aggregate committed principal amount of $400.0 million (the “Credit Facility”). The Company has the option to request an increase in commitments under the Credit Facility of up to $100.0 million, subject to certain restrictions. On February 27, 2017, in connection with the acquisition of MBS, we amended our existing Credit Agreement to add a new $100.0 million incremental first in, last out seasonal loan facility (the “FILO Facility”).

During the 39 weeks ended January 26, 2019 , we borrowed $374.0 million and repaid $500.3 million under the Credit Agreement, with $70.1 million of outstanding borrowings as of January 26, 2019 , comprised entirely of outstanding borrowings under the Credit Facility. As of January 26, 2019 , we have issued $4.8 million in letters of credit under the facility. During the 39 weeks ended January 27, 2018, we borrowed $481.6 million and repaid $528.2 million under the Credit Agreement, for a net total of $113.0 million of outstanding borrowings as of January 27, 2018, comprised entirely of outstanding borrowings under the Credit Facility.

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For additional information including interest terms and covenant requirements related to the Credit Facility and FILO Facility, refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the year ended April 28, 2018.

On March 1, 2019, we entered an agreement to amend and extend the existing Credit Facility for a five year-term from the date of the amendment. Under the terms of the agreement, we will continue to have an asset-backed revolving credit facility in an aggregate committed principal amount of $400.0 million, as well as the $100.0 million incremental first in, last out seasonal loan facility. We have the option to request an increase in commitments under the Credit Facility of up to $100.0 million subject to certain restrictions.

Under the amendment, we are required to borrow 100% of the aggregate commitments under the FILO Facility on April 1 of each year, and the loans must be repaid in full (including interest and fees) on July 31 of each year. The commitments under the FILO Facility will decrease from $100 million to $75 million on August 1, 2019, from $75 million to $50 million on August 1, 2020 and from $50 million to $25 million on August 1, 2021. We will pay a commitment fee of 0.375% on the daily unused portion of the FILO Facility. Loans under the FILO Facility will bear interest at a rate equal to the LIBOR rate, plus 2.75%. The FILO Facility will be available solely during the draw period each year, from April 1 through July 31.

We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-term vendor financing will provide adequate resources to fund our operating and financing needs for the foreseeable future. Our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store openings, and any potential acquisitions of other brands or companies including digital properties. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity. Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy. There can be no assurances that we will have access to capital markets on acceptable terms.

Income Tax Implications on Liquidity

As of January 26, 2019 , other long-term liabilities includes $40.4 million related to the long-term tax payable associated with the LIFO reserve. The LIFO reserve is impacted by changes in the consumer price index ("CPI") and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle. At the end of the most recent tax year, inventory levels within our BNC segment declined as compared to the prior year resulting in approximately $6.2 million of the income taxes associated with the LIFO reserve becoming currently payable. Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remaining long-term tax payable associated with the LIFO reserve could become payable within the next twelve months. We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.

Share Repurchases

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of our outstanding Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the 39 weeks ended January 26, 2019 , we did not repurchase any of our Common Stock under the stock repurchase program. As of January 26, 2019 , approximately $26.7 million remains available under the stock repurchase program.

During the 39 weeks ended January 26, 2019 , we repurchased 349,765 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

Our projected contractual obligations are consistent with amounts disclosed in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the year ended April 28, 2018.

Off-Balance Sheet Arrangements

As of January 26, 2019 , we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

Our policies regarding the use of estimates and other critical accounting policies are consistent with the disclosures in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended April 28, 2018.

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Recent Accounting Pronouncements

See Item 1. Financial Statements — Note 3. Recent Accounting Pronouncements of this Form 10-Q for information related to new accounting pronouncements.

Disclosure Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and information relating to us and our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and similar expressions, as they relate to us or our management, identify forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others:


•	general competitive conditions, including actions our competitors and content providers may take to grow their businesses;


•	a decline in college enrollment or decreased funding available for students;


•	decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores;


•	implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability;


•	risk that digital sales growth does not exceed the rate of investment spend;


•	the performance of our online, digital and other initiatives, integration of and deployment of, additional products and services including new digital channels, and enhancements to higher education digital products, and the inability to achieve the expected cost savings;


•	the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin;


•	the general economic environment and consumer spending patterns;


•	decreased consumer demand for our products, low growth or declining sales;


•	the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various acquisitions, including MBS Textbook Exchange, LLC and Student Brands, LLC, may not be fully realized or may take longer than expected;


•	the integration of the operations of various acquisitions, including MBS Textbook Exchange, LLC and Student Brands, LLC, into our own may also increase the risk of our internal controls being found ineffective;


•	changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers;


•	our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute upon additional acquisitions and strategic investments;


•	risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold to college bookstore customers;


•	technological changes;


•	risks associated with counterfeit and piracy of digital and print materials;


•	our international operations could result in additional risks;


•	our ability to attract and retain employees;


•	risks associated with data privacy, information security and intellectual property;


•	trends and challenges to our business and in the locations in which we have stores;


•	non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings;


•	disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations;

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•	disruption of or interference with third party web service providers and our own proprietary technology;


•	work stoppages or increases in labor costs;


•	possible increases in shipping rates or interruptions in shipping service;


•	product shortages, including risks associated with merchandise sourced indirectly from outside the United States;


•	changes in domestic and international laws or regulations, including U.S. tax reform, changes in tax rates, laws and regulations, as well as related guidance;


•	enactment of laws which may restrict or prohibit our use of emails or similar marketing activities;


•	the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing;


•	our ability to satisfy future capital and liquidity requirements;


•	our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;


•	adverse results from litigation, governmental investigations, tax-related proceedings, or audits;


•	changes in accounting standards; and


•	the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A in our Annual Report on Form 10-K for the year ended April 28, 2018.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Form 10-Q.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the items discussed in Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended April 28, 2018.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation (as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act) was performed under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation 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) as of the end of the period covered by this report. 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 upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Management has not identified any changes in the Company’s internal control over financial reporting that occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, personal injuries and other matters. We record a liability when we believe that it is both probable that a loss has been incurred and the amount of loss can be reasonably estimated. Based on our current knowledge, we do not believe that there is a reasonable possibility that the final outcome of any pending or threatened legal proceedings to which we or any of our subsidiaries are a party, either individually or in the aggregate, will have a material adverse effect on our future financial results. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect our business, financial condition, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes during the 39 weeks ended January 26, 2019 to the risk factors discussed in Part I - Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended April 28, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information as of January 26, 2019 with respect to shares of Common Stock we purchased during the third quarter of Fiscal 2019:



Period	Total Number of Shares Purchased	Average Price Paid per Share (a)		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
October 28, 2018 - November 24, 2018	—	$	—	—	$	26,669,324
November 25, 2018 - December 29, 2018	—	$	—	—	$	26,669,324
December 30, 2018 - January 26, 2019	—	$	—	—	$	26,669,324
	—	$	—	—


(a)	This amount represents the average price paid per common share. This price includes a per share commission paid for all repurchases.

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of our outstanding Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the 39 weeks ended January 26, 2019, we did not repurchase any shares of our Common Stock under the program.

Item 5. Other Information

On February 28, 2019, the Company awarded Mr. Michael C. Miller, Executive Vice President, Corporate Strategy and General Counsel, a retention bonus pursuant to a retention agreement (the “Retention Agreement”), which was approved by the Compensation Committee of the Board of Directors.

Pursuant to the Retention Agreement, Mr. Miller will be paid a lump sum cash payment of $200,000 on March 1, 2019. If Mr. Miller’s employment is terminated by the Company for “Cause” or by Mr. Miller other than for “Good Reason” (as such terms are defined in the letter agreement between Mr. Miller and the Company dated as of April 12, 2017), in either case prior to March 1, 2020, Mr. Miller will be required to repay to the Company an amount equal to the retention bonus less any amounts withheld by the Company for income and employment taxes.

A copy of the Retention Agreement is attached as an exhibit to this Form 10-Q.

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Item 6. Exhibits



10.1		Retirement Letter Agreement, dated December 13, 2018, between Barnes & Noble Education, Inc., Barnes & Noble College Booksellers, LLC and Patrick Maloney, filed as Exhibit 10.1 to the Report on Form 8-K filed with the SEC on December 18, 2018, and incorporated herein by reference.

10.2		Employment Letter, dated July 22, 2015, between Barnes & Noble Education, Inc. and Kanuj Malhotra.

10.3		Employment Letter, dated April 13, 2017, between Barnes & Noble Education Inc., Barnes & Noble College Booksellers, LLC and Michael C. Miller.

10.4		Retention Letter, dated February 28, 2019, between Barnes & Noble Education, Inc. and Michael C. Miller.

10.5		Employment Letter, dated January 3, 2019, between Barnes & Noble Education, Inc. and Thomas D. Donohue.

10.6		Employment Letter, dated January 3, 2019, between Barnes & Noble Education, Inc. and Barry Brover.

10.7		Second Amendment, dated as of March 1, 2019, among Barnes & Noble Education, Inc., as the lead borrower, the other borrowers party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent for the lenders, to the Credit Agreement, dated as of August 3, 2015, filed as Exhibit 10.1 to the Report on Form 8-K filed with the SEC on March 5, 2019.

31.1		Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements 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 EDUCATION, INC.
(Registrant)

By:		/ S / THOMAS D. DONOHUE
		Thomas D. Donohue
		Chief Financial Officer
		(principal financial officer)

By:		/ S / SEEMA PAUL
		Seema Paul
		Chief Accounting Officer
		(principal accounting officer)

March 5, 2019

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EXHIBIT INDEX



10.1		Retirement Letter Agreement, dated December 13, 2018, between Barnes & Noble Education, Inc., Barnes & Noble College Booksellers, LLC and Patrick Maloney, filed as Exhibit 10.1 to the Report on Form 8-K filed with the SEC on December 18, 2018, and incorporated herein by reference.

10.2		Employment Letter, dated July 22, 2015, between Barnes & Noble Education, Inc. and Kanuj Malhotra.

10.3		Employment Letter, dated April 13, 2017, between Barnes & Noble Education Inc., Barnes & Noble College Booksellers, LLC and Michael C. Miller.

10.4		Retention Letter, dated February 28, 2019, between Barnes & Noble Education, Inc. and Michael C. Miller.

10.5		Employment Letter, dated January 3, 2019, between Barnes & Noble Education, Inc. and Thomas D. Donohue.

10.6		Employment Letter, dated January 3, 2019, between Barnes & Noble Education, Inc. and Barry Brover.

10.7		Second Amendment, dated as of March 1, 2019, among Barnes & Noble Education, Inc., as the lead borrower, the other borrowers party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent for the lenders, to the Credit Agreement, dated as of August 3, 2015, filed as Exhibit 10.1 to the Report on Form 8-K filed with the SEC on March 5, 2019.

31.1		Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

July 22, 2015

Kanuj Malhotra

[____________]

Dear Kanuj,

It’s my pleasure to confirm our offer of employment with Barnes & Noble Education, Inc. The following represents the key elements of our offer:


Position:	Chief Strategy and Development Officer


Reports to:	Michael Huseby, Executive Chairman and Max Roberts, Chief Executive Officer


Transfer Date:	Upon the effectiveness of the spin-off of Barnes & Noble Education, Inc. from Barnes & Noble, Inc.


Base Salary:	$515,000 annually


Incentive Compensation:	Eligible to participate in our FY16 Incentive Compensation Plan. The target level annual bonus for your position is 70% 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 .


Equity:	Subject to approval by the Compensation Committee, you will be eligible to participate in our annual long-term incentive program. Given your role and responsibilities, your target long-term incentive grant value is expected to be $200,000 - $300,000, subject to a 3-year vesting schedule. Additional details will be shared after approval.


Benefits:	Eligible to participate in the Company’s health and welfare programs.

Indemnification/D&O


Liability Insurance:	Shall be indemnified and advanced expenses for third party claims and covered under D&O insurance policies on the same terms and conditions as are provided to other executive officers.

Severance Benefits:

Should your employment terminate for any reason including “Good Reason” as defined below, but excluding your voluntary termination, death or disability or termination for “Cause” as defined below, you will receive a severance package that will be equal to one (1) times the sum of (a) one year’s salary; (b) the average of the last three year’s bonus payments and; (c) aggregate benefit costs, payable in a lump sum, less applicable taxes and withholdings.

The severance payment will be made no later than the 60th day following your termination of employment, subject to your prior execution and non-revocation of the release described below.

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.

Change of Control:

If at any time during your employment there is (i) a Change of Control and (ii) your employment is terminated by the Company without Cause or you voluntarily terminate your employment for Good Reason, in either case, within two years following the Change of Control, then the Company shall pay you an amount equal to two-times the sum of (a) your then annual base salary, (b) the average of the annual bonuses actually paid to you with respect to the three completed years preceding the date of your termination of employment and (c) the aggregate annual dollar amount of the payments made or to be made by the Company for purposes of providing you with the Benefits (set forth above), less all applicable withholding and other applicable taxes and deductions (“Change of Control Amount”). The Change of Control Amount shall be paid to you in cash in a single lump sum within 30 days after the date your employment terminates. In the event that it is determined that the aggregate amount of the payments and benefits that could be considered “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (collectively, with the regulations and other guidance promulgated thereunder, the “Code”; and such payments and benefits, (the “Parachute Payments”) that, but for this section would be payable to you under this letter or any other plan, policy or arrangement of the Company, exceeds the greatest amount of Parachute Payments that could be paid to you without giving rise to any liability for any excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the aggregate amount of Parachute Payments payable to you shall not exceed the amount that produces the greatest after-tax benefit to you after taking into account any Excise Tax to be payable by you. Any reduction in Parachute Payments pursuant to the immediately preceding sentence shall be made in the following order: (1) cash payments that do not constitute deferred compensation within the meaning of Section 409A of the Code, (2) welfare or in-kind benefits, (3) equity compensation awards and (4) cash payments that do constitute deferred compensation, in each case, such reductions shall be made in the manner that maximizes the present value to you of all such payments. The amounts payable to you under the event specified above shall be in lieu of any Severance Benefits payable to you above.

For purposes of this letter, “Change of Control” shall mean the occurrence of one or more of the following events after the distribution by Barnes & Noble, Inc. to its stockholders of all shares of common stock of Barnes & Noble Education, Inc., and the indirect ownership of all membership interests in the Company

(the “Separation”): (i) any person, entity or “group” as identified in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “1934 Act”), other than you becomes a beneficial owner (as such term is defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of Barnes & Noble Education, Inc. representing 40% or more of the total number of votes that may be cast for the election of directors of Barnes & Noble Education, Inc.; (ii) within two years after a merger, consolidation, liquidation or sale of assets involving Barnes & Noble Education, Inc., or a contested election of a Barnes & Noble Education, Inc. director, or any combination of the foregoing, the individuals who were directors of Barnes & Noble Education, Inc. immediately prior thereto shall cease to constitute a majority of the board of Barnes & Noble Education, Inc.; or (iii) within two years after a tender offer or exchange offer for voting securities of Barnes & Noble Education, Inc., the individuals who were directors of Barnes & Noble Education, Inc. immediately prior thereto shall cease to constitute a majority of the board of Barnes & Noble Education, Inc.

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. For purposes of this letter, "Good Reason" shall mean the occurrence of one or more of the following events: (A) there shall have been a material diminution of your duties; (B) there shall have been a material diminution in the authority, duties or responsibilities of the supervisor to whom you are required to report; (C) there shall have been a material reduction in the annual base salary you receive from the Company; or (D) the principal executive offices of the Company shall be relocated to a location more than 50 miles from both Basking Ridge, NJ and New York, NY. For purposes of this letter, the term "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.

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 the Company 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.

If you wish to accept this offer of employment as set forth in this document, please sign and return the enclosed agreement along with an original signed copy of your offer letter to JoAnn Magill at Barnes & Noble College – 120 Mountain View Boulevard Basking Ridge, NJ 07920 or scan a copy to jmagill@bncollege.com by July 24, 2015. If this offer is not received by this date, the Company’s offer of employment shall be deemed to be rescinded and without effect. If you have any questions, please call me at your convenience at 908-991-2150.

I look forward to hearing from you after you have had a chance to review this offer.

Sincerely,

/s/ Michael P. Huseby

Michael Huseby

Executive Chairman

Enclosure

Agreed and Accepted:



/s/Kanuj Malhotra		7/22/2015
Kanuj Malhotra		Date

EXHIBIT A

GENERAL RELEASE AND WAIVER

1. Kanuj Malhotra (“Employee”) hereby acknowledges and agrees Employee’s employment with Barnes and Noble Education, LLC, a subsidiary of Barnes & Noble Education, Inc. (the “Company”) terminated on __________, 20__ (the “Termination Date”).

2. Employee acknowledges and agrees that Employee’s executing this General Release and Waiver (“Release”) is a condition precedent to the Company’s obligation to pay (and the Employee’s right to retain) the Severance Amount as defined in the offer letter dated as of XXXX, including the attached Agreement, between Employee and the Company (such agreement referred to collectively herein as the “Employment Agreement” and such payments and benefits collectively referred to herein as the “Separation Benefit”), that the Separation Benefit is adequate consideration for this Release, and that any monetary or other benefits that, prior to the execution of this Release, Employee may have earned or accrued, or to which Employee may have been entitled, have been paid or such payments or benefits have been released, waived or settled by Releasor (as defined below) except as expressly provided in this Release.

3. (a) THIS SECTION PROVIDES A COMPLETE RELEASE AND WAIVER OF ALL EXISTING AND POTENTIAL CLAIMS EMPLOYEE MAY HAVE AGAINST EVERY PERSON AND ENTITY INCLUDED WITHIN THE DESCRIPTION BELOW OF “RELEASEE.” BEFORE EMPLOYEE SIGNS THIS RELEASE, EMPLOYEE MUST READ THIS SECTION CAREFULLY, AND MAKE SURE THAT EMPLOYEE UNDERSTANDS IT FULLY.

(b) In consideration of Employee’s receipt and acceptance of the Separation Benefit from the Company, and on behalf of the Company and each Releasee (as defined below), Employee, on Employee’s behalf and on behalf of Employee’s heirs, executors, administrators, successors and assigns (collectively, “Releasor”), hereby irrevocably, unconditionally and generally releases the Company, its current and former officers, directors, shareholders, trustees, parents, members, managers, affiliates, subsidiaries, branches, divisions, benefit plans, agents, attorneys, advisors, counselors and employees, and the current and former officers, directors, shareholders, agents, attorneys, advisors, counselors and employees of any such parent, affiliate, subsidiary, branch or division of the Company and the heirs, executors, administrators, receivers, successors and assigns of all of the foregoing (each, a “Releasee”), from or in connection with, and hereby waives and/or settles, except as provided in Section 3(c) herein, any and all actions, causes of action, suits, debts, dues, sums of money, accounts, controversies, agreements, promises, damages, judgments, executions, or any liability, claims or demands, known or unknown and of any nature whatsoever, whether or not related to employment, and which Releasor ever had, now has or hereafter can, shall or may have as of the date of this Release, including, without limitation, (i) any rights and/or claims arising under any contract, express or implied, written or oral, including, without limitation, the Employment Agreement; (ii) any rights and/or claims arising under any applicable foreign, federal, state, local or other statutes, orders, laws, ordinances, regulations or the like, or case law, that relate to employment or employment practices, including, without limitation, family and medical, and/or, specifically, that prohibit discrimination based upon age, race, religion, sex, color, creed, national origin, sexual orientation, marital status, disability, medical condition, pregnancy, veteran status or any other unlawful bases, including, without limitation, the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, as amended, the Civil Rights Acts of 1866 and 1871, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Older Workers Benefit Protection Act, the Immigration Reform and Control Act, the Fair Credit Reporting Act, the Consumer Credit Protection Act, the Fair Labor Standards Act, the National Labor Relations Act, the Uniform Services Employment and Reemployment Rights Act of 1994, the Genetic Information Nondiscrimination Act, the Occupational Safety and Health Act, the Patient Protection and Affordable Care Act, the Drug-Free Workplace Act, the Equal Pay Act, the Americans with Disabilities Act of 1990, as amended, the Family Medical Leave Act of 1993, as amended, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended, the Worker Adjustment and Retraining Notification Act of 1988, as amended, and any similar applicable statutes, orders, laws, ordinances, regulations or the like, or case law, of the State of New Jersey and the State of New York and any state in which any Releasee is subject to jurisdiction, or any political subdivision thereof, including, without limitation, the New York State Human Rights Law, the New York State Labor Law, the New York City Human Rights Law, the New Jersey Law Against Discrimination, the New Jersey Conscientious Employee Protection Act, and

the New Jersey Wage and Hour Law, and all applicable rules and regulations promulgated pursuant to or concerning any of the foregoing statutes, orders, laws, ordinances, regulations or the like; (iii) any waivable rights and/or claims relating to wages and hours, including under state or local labor or wage payment laws; (iv) any rights and/or claims to benefits that Employee may have or become entitled to receive under any severance, termination, change of control, bonus or similar policy, plan, program, agreement or similar or related arrangements, including, without limitation, any offer letter, letter agreement or employment agreement between Employee and the Company; (v) any rights and/or claims that Employee may have to receive any equity in the Company (whether restricted or unrestricted) in the future; and (vi) and any rights and/or claims for attorneys’ fees. Employee agrees not to challenge or contest the reasonableness, validity, or enforceability of this Release.

(c) Notwithstanding the foregoing, Employee does not release any Releasee from any of the following rights and/or claims: (i) any rights and/or claims Employee may have that arise after the date Employee signs this Release; (ii) any rights and/or claims that by law cannot be waived by private agreement; (iii) Employee’s right to file a charge or report with, or participate in, any investigation or proceeding conducted by the U.S. Equal Employment Opportunity Commission (“EEOC”) or other government agency; provided that even though Employee can file a charge or report or participate in an investigation or proceeding conducted by the EEOC or other government agency, by executing this Release, Employee is waiving his/her ability to obtain relief of any kind from any Releasee to the extent permitted by law (but Employee does not waive the right to any recovery authorized under Section 21F of the Securities Exchange Act of 1934); (iv) Employee’s non-forfeitable rights to accrued benefits (within the meaning of Sections 203 and 204 of ERISA); or (v) any rights and/or claims to insurance coverage under any directors’ and officers’ personal liability insurance or fiduciary insurance policy.

4. Nothing in or about this Release is intended to, and shall not, prohibit Employee from engaging in the following activities, and the limitations in Section 3 of the Agreement shall not apply to the disclosure of Confidential Information under the following circumstances: (i) filing and, as provided for under Section 21F of the Securities Exchange Act of 1934, maintaining the confidentiality of a claim with a government agency that is responsible for enforcing a law; (ii) providing Confidential Information (as defined in Section 3 of the Agreement) to the extent required by law or legal process or permitted by Section 21F of the Securities Exchange Act of 1934; or (iii) cooperating with or participating or assisting in any government or regulatory entity investigation or proceeding. With respect to each of these three scenarios, however, Employee agrees to take all reasonable steps to prevent the disclosure of Confidential Information beyond the allowable parameters described in this Section 4.

5. Employee represents and warrants that Employee has not filed or commenced any complaints, claims, actions, or proceedings of any kind against any Releasee with any federal, state, or local court or any administrative, regulatory or arbitration agency or body except those that Employee has listed with specificity next to Employee’s name in the signature block below; provided, however, that Employee is not required to disclose any complaint or other disclosures that are required or protected under the Sarbanes-Oxley Act of 2002, the Securities Exchange Act of 1934, 18 U.S.C. §1513(e), or any other law, rule, or regulation that is subject to the jurisdiction of the Securities and Exchange Commission.

Employee hereby waives any right to, and agrees not to, seek reinstatement or employment of any kind with any Releasee and, without waiver by any Releasee of the foregoing, the existence of this Release shall be a valid, nondiscriminatory basis for rejecting any such application or, in the event Employee obtains such employment, for terminating such employment. This Release and the Separation Benefit are not intended to be, shall not be construed as, and are not an admission or concession by any Releasee of any wrongdoing or illegal or actionable acts or omissions.

6. (a).Employee hereby represents and agrees that, except as shall be required by law or as permitted under Section 3(c)(iii) or Section 4 of this Release, Employee shall (i) keep confidential and not disclose orally or in writing, to any person, except as may be required by law, any and all information concerning the existence or terms of this Release and the amount of any payments made hereunder and (ii) keep confidential and not disclose orally or in writing, directly or indirectly, to any person (except Employee’s immediate family, attorneys and accountant), any and all information concerning any potential claims or causes of action that are being released in this Release, or allegations or facts that would support such claims or causes of action.

(b) If Employee is requested or required (by oral questions, interrogatories, requests for information, or documents, subpoena, civil investigative demand or similar process) to disclose any information covered by Section 6(a) herein, Employee shall promptly notify the Company of such request or requirement so that the Company may seek to avoid or minimize the required disclosure and/or to obtain an appropriate protective order or other appropriate relief to ensure that any information so disclosed is maintained in confidence to the maximum extent possible by the agency or other person receiving the disclosure, or, in the discretion of the Company, to waive compliance with the provisions of this Release. Employee shall use reasonable efforts, in cooperation with the Company or otherwise, to avoid or minimize the required disclosure and/or to obtain such protective order or other relief. If, in the absence of a protective order or the receipt of a waiver hereunder, Employee is compelled to disclose such information or else stand liable for contempt or suffer other sanction, censure, or penalty, Employee shall disclose only so much of such information to the party compelling disclosure as he/she believes in good faith on the basis of advice of counsel is required by law, and Employee shall give the Company prior notice of such information he believes he is required to disclose.

7. (a) Except as shall be required by law or as permitted under Section 3(c)(iii) or Section 4 of this Release, Employee shall not make, either directly or by or through another person, any oral or written negative, disparaging or adverse statements or representations of or concerning any Releasee.

(b) Without limitation to the survival of any other terms of the Employment Agreement subsequent to the end of Employee’s employment, the expiration or termination of the Employment Agreement, and/or the execution and effectiveness of this Release, Employee and the Company expressly acknowledge that the terms of Sections 3 through 6 of the Agreement survive and shall be in full force and effect as provided in the Agreement.

8. The covenants, representations, and acknowledgments made by Employee in this Release shall continue to have full force and effect after the execution and effectiveness of this Release and the delivery of the Separation Benefit, and this Release shall inure to the benefit of each Releasee, and the successors and assigns of each of them, to the extent necessary to preserve the intended benefits of such provisions. If any section of this Release is determined to be void, voidable, or unenforceable, it shall have no effect on the remainder of this Release, which shall remain in full force and effect, and the provisions so held invalid or unenforceable shall be deemed modified as to give such provisions the maximum effect permitted by applicable law. The Company shall be excused and released from any obligation to make payment of the Separation Benefit, and Employee shall be obligated to return to the Company the Separation Benefit, in the event that Employee is found to have (a) made a material misstatement in any term, condition, covenant, representation, or acknowledgment in this Release, or (b) Employee is found to have committed or commits a material breach of any term, condition, or covenant in this Release.

9. This Release and the Employment Agreement constitute the sole and complete agreement between the parties with respect to the matters set forth therein and supersedes all prior agreements, understandings, and arrangements, oral or written, between Employee and the Company with respect to the subject matter thereof. This Release may not be amended or modified except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party may, by an instrument in writing, waive compliance by the other party with any term or provision of this Release to be performed or complied with by such other party.

10. With respect to any claims or disputes under or in connection with this Release or any claims released under Section 3 of this Release, Employee and the Company hereby acknowledge and agree that Section 9 of the Agreement shall govern. Employee acknowledges that a breach or threatened breach of the provisions of this Release may give rise to losses or damages for which the Company cannot be reasonably or adequately compensated in an action at law, and that such violation may result in irreparable and continuing harm to the Company. Accordingly, Employee agrees that, in addition to any other remedy that the Company may have at law or in equity, the Company shall be entitled to seek equitable relief, including, without limitation, injunction and specific performance and Employee hereby waives any requirements for security or posting of any bond in connection with such relief. No specification in this Release of any particular remedy shall be construed as a waiver or prohibition of any other remedies (including claims for damages) in the event of a breach or threatened breach of this Release.

11. Employee agrees and acknowledges that (a) Employee has had an adequate opportunity to review this Release and all of its terms, (b) Employee understands all of the terms of this Release, which are fair, reasonable, and are not the result of any fraud, duress, coercion, pressure, or undue influence exercised by or on behalf of any Releasee, and (c) Employee has agreed to and/or entered into this Release and all of the terms hereof, knowingly, freely, and voluntarily.

12. By executing this Release, Releasor acknowledges that (a) Employee has been advised by the Company to consult with an attorney before executing this Release; (b) Employee was provided and has adequate time (that is, 21 days) to review this Release and to consider whether to sign this Release, (c) Employee has been advised that Employee has 7 days following execution to revoke this Release (“Revocation Period”), (d) the Release is written in a manner calculated to be understood by Employee, (e) the Release represents Employee’s knowing and voluntary release of any and all claims that he/she might have up through the date this Release is signed, including, but not limited to, any claims arising under the Age Discrimination in Employment Act, (f) Employee has not been asked to release, nor has he/she released, any claim that may arise after the date of this Release, and (g) the consideration that Employee will receive in exchange for signing this Release (that is, the Separation Benefit) is something of value to which he/she was not already entitled. Notwithstanding anything to the contrary contained herein or in the Employment Agreement, this Release shall not be effective or enforceable, and the Separation Benefit is not payable and shall not be delivered or paid by the Company, until the Revocation Period has expired (that is, the 8th day after the Employee signs the Release) and provided that Employee has not revoked this Release. Employee agrees that any revocation shall be made in writing and delivered to JoAnn Magill, VP, Chief Human Resources Officer, 120 Mountain View Boulevard, Basking Ridge, NJ 07920 in a manner such that it is delivered before the expiration of the Revocation Period. Employee acknowledges that revocation of this Release shall result in the Company’s not having an obligation to pay the Separation Benefit.

Signature: ___________________________________________ Date: __________________________________

April 13, 2017

Michael C. Miller

[____________]

Dear Michael,

It is my pleasure to confirm our offer of employment with Barnes & Noble College Booksellers, LLC, a subsidiary of Barnes & Noble Education, Inc. (“BNED” or “Company”). The following represents the key elements of our offer:


Job Title :	Chief Legal Officer & VP, Corporate Affairs


Department/Location:	Legal Department – Basking Ridge, NJ & NYC


Reports to:	Max Roberts – CEO

Dotted Line to Kanuj Malhotra – COO, Digital Education


Starting Date:	April 24, 2017


Base Salary:	$475,000 annualized

Your position is exempt, which means that you will not be eligible for overtime pay for hours worked in excess of 40 hours in a given week.

Incentive Compensation:

Eligible to participate in our FY18 Incentive Compensation Plan. The bonus target level for your position is 50% of your base salary. Payments under that 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 . Guarantee of at least 100% of target bonus to be paid 1 ^st year. Specific details to follow.


Sign-On Bonus:	You will receive a one-time bonus of $50,000 (less applicable taxes) to be paid within 30 days of your commencement of employment. In the event that you terminate your employment without Good Reason or you are terminated for Cause before April 24, 2018, the Company will have the right to seek reimbursement of the Sign-On Bonus, plus reasonable associated expenses .


Equity:	Subject to approval by the Compensation Committee, you will be eligible to receive an equity grant under our long-term incentive program (LTIP) as part of the annual grant process in September 2017 in the amount of $350,000. In the event the company is restricted from making this award in September, the $350,000 value would be delivered in an alternate form.

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665


Benefits:	You are eligible to participate in the BNED Plan after sixty (60) days of continuous employment. You will need to enroll via HR Access (refer to Benefits in Brief) prior to your 60th day of employment. The company will pay for the cost of your COBRA coverage until you are eligible under the Barnes & Noble Education, Inc. plan. Please submit your COBRA invoices to me.


401(k) Savings Plan:	You are eligible to contribute and to receive company matching contributions after completing 1000 hours of service in a year (i.e., after approximately 6 months of continuous full-time employment). You will receive enrollment information from Fidelity Investments in the mail once eligible to join.

Vacation/Personal Time:

You are eligible for 4 weeks of vacation and three (3) personal days during your first anniversary of employment. Your anniversary year begins on the first day of the month in which you were hired and ends one year later. Vacation time is earned proportionately during an anniversary year and you may be permitted to take the time for which you are eligible before it is earned. During your first six months of employment, vacation time is not earned but may be taken.


Performance Review:	You will be eligible to participate in the FY18 performance review cycle.

Severance:

In the event (a) your employment is terminated by the Company without Cause or (b) you voluntarily terminate your employment for Good Reason, the Company shall pay you an amount equal to your then annual Base Salary, less all applicable withholding and other applicable taxes and deductions (“Severance Amount”); provided that (x) 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”) and (y) you have not materially breached as of the date of such termination any provisions of this offer letter or the attached Agreement Regarding Certain Terms and Conditions of Employment (“Agreement”) and do not materially breach such provisions at any time during the Relevant Period (as defined in the Agreement). The Company’s obligation to make such payment shall be cancelled upon the occurrence of any such material breach and, in the event such payment has already been made, you shall repay to the Company such payment within 30 days after demand therefor; provided, however, such repayment shall not be required if the Company shall have materially breached this offer letter or the attached Agreement prior to the time of your breach. The Severance Amount shall be paid in cash in a single lump sum on the later of (1) the first day of the month following the month in which such termination occurs and (2) the date the Revocation Period (as defined in the Release) has expired. Notwithstanding anything in this paragraph to the contrary, if a Release is not executed and delivered to the Company within 60 days of such termination of employment (or if such Release is revoked in accordance with its terms), the Severance Amount shall not be paid.

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Change of Control:

(a) If at any time during your employment (i) there is a Change of Control (as defined below) and (ii) your employment is terminated by the Company without Cause or you voluntarily terminate your employment for Good Reason, in either case, within the greater of two years following the Change of Control or the remainder of the Initial Term or any Renewal Term, as applicable, then the Company shall pay you an amount equal to two times the sum of (a) your then Annual Base Salary, (b) the average of the annual bonuses actually paid to you with respect to the three completed years preceding the date of your termination of employment (or, if less, the number of years following your commencement of employment for which you were paid bonuses) and (c) an amount equal to twelve (12) months of payments under the Consolidated Omnibus Budget Reconciliation Act of 1985, less all applicable withholding and other applicable taxes and deductions (“Change of Control Amount”). The Change of Control Amount shall be paid to you in cash in a single lump sum within 30 days after the date your employment terminates. In the event that it is determined that the aggregate amount of the payments and benefits that could be considered “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (collectively, with the regulations and other guidance promulgated thereunder, the “Code”; and such payments and benefits, the “Parachute Payments”) that, but for this Section 3(g) would be payable to you under this Agreement or any other plan, policy, or arrangement of the Company or Barnes & Noble Education, Inc., exceeds the greatest amount of Parachute Payments that could be paid to you without giving rise to any liability for any excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the aggregate amount of Parachute Payments payable to you shall not exceed the amount that produces the greatest after-tax benefit to you after taking into account any Excise Tax to be payable by you. Any reduction in Parachute Payments pursuant to the immediately preceding sentence shall be made in the following order: (1) cash payments that do not constitute deferred compensation within the meaning of Section 409A of the Code, (2) welfare or in-kind benefits, (3) equity compensation awards and (4) cash payments that do constitute deferred compensation; in each case, such reductions shall be made in the manner that maximizes the present value to you of all such payments. For the avoidance of doubt, the amounts payable to you under this paragraph shall be in lieu of any amounts payable to you under the previous paragraph (Severance) and this paragraph applies only during your employment and not thereafter.

(b) As used herein, “Change of Control” shall mean the occurrence of one or more of the following events:

(i) after the Effective Date, any person, entity or “group” as identified in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “1934 Act”), other than you or any of your affiliates, becomes a beneficial owner (as such term is defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of Barnes & Noble Education, Inc. representing 40% or more of the total number of votes that may be cast for the election of directors of Barnes & Noble Education, Inc.; or

(ii) within two years after a merger, consolidation, liquidation, or sale of assets involving Barnes & Noble Education, Inc., or a contested election of a Barnes &

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Noble Education, Inc. director, or any combination of the foregoing, the individuals who were directors of Barnes & Noble Education, Inc. immediately prior thereto shall cease to constitute a majority of the board of Barnes & Noble Education, Inc.; or

(iii) within two years after a tender offer or exchange offer for voting securities of Barnes & Noble Education, Inc., the individuals who were directors of Barnes & Noble Education, Inc. immediately prior thereto shall cease to constitute a majority of the board of Barnes & Noble Education, Inc.

For purposes of this letter, "Cause" means (A) your engaging in intentional misconduct or gross negligence that, in either case, is injurious to Company; (B) your indictment, entry of a plea of nolo contendere, 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 any felony (or equivalent crime in a non-U.S. jurisdiction); (C) any gross negligence, intentional acts or intentional omissions by you in the performance of your duties; (D) fraud, dishonesty, embezzlement, or misappropriation in connection with the performance of the your employment duties and responsibilities; (E) your engaging in any act of intentional misconduct or moral turpitude reasonably likely to adversely affect the Company or its business; (F) your abuse of or dependency on alcohol or drugs (illicit or otherwise) that adversely affects your job performance; (G) your willful failure or refusal to properly perform the duties, responsibilities, or obligations of your employment for reasons other than Disability or authorized leave, or to properly perform or follow any lawful direction by the Company (with the exception of a willful failure or refusal to properly perform based in good faith on the advice of professional consultants, such as attorneys and accountants); or (H) your material breach of this offer letter, the Agreement or of any other contractual duty to, written policy of, or written agreement with the Company (with the exception of a material breach based in good faith on the advice of professional consultants, such as attorneys and accountants).

For purposes of this letter, "Good Reason" shall mean the occurrence of one or more of the following events without your written consent: (A) there shall have been a material diminution of your duties; (B) there shall have been a material diminution in the authority, duties or responsibilities of the supervisor to whom you are required to report; or (C) there shall have been a material reduction in the annual Base Salary you receive from the Company.

For purposes of this letter, the term "Disability" shall mean a written determination by a majority of three physicians (one of which shall be your most recent primary care provider) mutually agreeable to the Company and you (or, in the event of your total physical or mental disability, your legal representative) that you are physically or mentally unable to perform your duties as CLO & VP, Corporate Affairs of the Company under this Agreement and that such disability can reasonably be expected to continue for a period of six (6) consecutive months or for shorter period aggregating 180 days in any 12 month period.

As stated above, this offer is contingent upon review and verification of the following:

•

Your identity and your ability to be legally employed by the Company in the United States. In order for the Company to hire you, you must provide written proof to the Company of your legal ability to work in the United States. Additionally, your continued employment with the Company is contingent upon you retaining and renewing (if needed) the legal ability to work in the United States. In the event at any time during your employment with the Company you do not have proper work authorization to legally be employed in the United States, you must immediately inform the Company and your employment will be terminated. If you are so terminated and then later obtain the required authorization and desire to be employed by the Company, you will be required to apply for any open positions with the Company should you wish to be rehired.

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665


•	Satisfactory references and verification of your employment record, academic credentials, and any certifications represented on your employment application and/or résumé or CV.


•	A pre-employment background check pursuant to and in accordance with the Fair Credit Reporting Act. A “Consumer Report” and/or “Investigative Consumer Report” will be obtained for employment purposes. A separate email with instructions and other details will be sent to your personal email.

You have represented, and hereby confirm, 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 the Company 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. For the avoidance of doubt, and notwithstanding any statements in this letter, the Confidentiality Agreement between the Company and you dated April 13, 2017 shall remain in full force and effect.

In the event you meet all conditions listed above and begin employment with the Company, and notwithstanding any statement in this letter, you will be an “at-will” employee, which means either you or we can terminate your employment at any time and for any reason, with or without cause.

If you wish to accept this offer of employment as set forth in this document, please sign and return the enclosed agreement along with an original signed copy of your offer letter to JoAnn Magill at Barnes & Noble Education, Inc. – 120 Mountain View Boulevard Basking Ridge, NJ 07920 or scan a copy to jmagill@bncollege.com. If this offer is not returned, the Company’s offer of employment shall be deemed to be rescinded and without effect. If you have any questions, please call me at 908-991-2603. Your first day will be in Basking Ridge, NJ so you can fill out all of the necessary New Hire Paperwork and have a short orientation. Details to follow.

We are eager to have you join the Company. The challenge, opportunity, and rewards that lie ahead are unique and incredibly exciting. I look forward to hearing from you after you have had a chance to review this offer.

Sincerely,

/s/ JoAnn Magill

JoAnn Magill

Chief Human Resources Officer

Agreed and Accepted:



Michael C. Miller
/s/ Michael C. Miller		4/13/2017
Signature		Date

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

EXHIBIT A

GENERAL RELEASE AND WAIVER

1. Michael C. Miller (“Employee”) hereby acknowledges and agrees Employee’s employment with Barnes and Noble Education, LLC, a subsidiary of Barnes & Noble Education, Inc. (the “Company”) terminated on __________, 20__ (the “Termination Date”).

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Signature: ___________________________________________ Date: __________________________________

Barnes & Noble Education, Inc.

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

BARNES & NOBLE EDUCATION, INC.
120 Mountainview Boulevard
Basking Ridge, New Jersey 07920

February 28, 2019

Michael C. Miller
c/o
Barnes & Noble Education, Inc.
750 Third Avenue, 6 ^th Floor
New York, NY 10017

Dear Michael:

Barnes & Noble Education, Inc. (the “Company”) and Barnes & Noble College Booksellers, LLC, a wholly-owned subsidiary of the Company, are pleased to offer you the cash retention bonus described in this letter.

Subject to your execution of this letter, the Company will pay you a cash bonus of $200,000, net of applicable tax and other legally-required withholdings (the “Retention Bonus”). The Retention Bonus will be paid to you on March 1, 2019 (subject to your continued employment through that date). For the avoidance of doubt, the Retention Bonus is in addition to (and not in lieu of) any other compensation that may be payable to you.

As a condition to receiving the Retention Bonus, you hereby agree that if your employment is terminated by the Company with “Cause” (as defined in the letter agreement between you and the Company dated as of April 12, 2017) or you resign other than for “Good Reason” (as defined in that letter agreement), in either case prior to March 1, 2020, you will immediately repay the Retention Bonus.

Thank you for your valued service to the Company, and we look forward to your continued critical contributions to our success.

Very truly yours,

BARNES & NOBLE EDUCATION, INC.



By:	/s/ JoAnn Magill
Name:	JoAnn Magill
Date:	2/28/2019

Accepted and Agreed to:

MICHAEL C. MILLER



By:	/s/ Michael C. Miller
Date:	2/28/2019

January 3, 2019

Thomas Donohue

[____________]

Dear Tom,

Congratulations on your promotion! The following represents the key elements of your new position:


Effective Date of Change:	January 1, 2019


Job Title :	EVP, Chief Financial Officer, Barnes & Noble Education, Inc. and its affiliates (the “Company”)


Reports to:	Mike Huseby, Chairman & CEO


Salary:	$500,000/Annualized (effective 12-23-18)


Annual Incentive Plan:	The bonus target for your position is 60 % of your base salary. Your bonus percentage will be subject to proration between the time spent in your current role and your new role through the end of the fiscal year.


Equity:	Subject to approval by the Compensation Committee, you will be eligible to receive an equity grant under our annual long-term incentive program as part of the annual process. Additional details will be shared after approval.

Severance:

In the event (a) your employment is terminated by the Company without Cause or (b) you voluntarily terminate your employment for Good Reason, the Company shall pay you an amount equal to your then annual Base Salary, less all applicable withholding and other applicable taxes and deductions (“Severance Amount”); provided that (x) 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”) and (y) you have not materially breached as of the date of such termination any provisions of this letter or the attached Agreement Regarding Certain Terms and Conditions of Employment, dated as of June 25, 2015 (the “Agreement”) and do not materially breach such provisions at any time during the Relevant Period (as defined in the Agreement). The Company’s obligation to make such payment shall be cancelled upon the occurrence of any such material breach and, in the event such payment has already been made, you shall repay to the Company such payment within 30 days after demand therefor; provided, however, such repayment shall not be required if the Company shall have materially breached this offer letter or the attached Agreement prior to the time of your breach. The Severance Amount shall be paid in cash in a single lump sum on the later of (1) the first day of the month following the month in which such termination occurs and (2) the date the Revocation Period (as defined in the Release) has expired. Notwithstanding anything in this paragraph to the contrary, if a Release is not executed and delivered to the Company within 60 days of such termination of employment (or if such Release is revoked in accordance with its terms), the Severance Amount shall not be paid.

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Change of Control:

(a) If at any time during your employment (i) there is a Change of Control (as defined below) and (ii) your employment is terminated by the Company without Cause or you voluntarily terminate your employment for Good Reason, in either case, within the greater of two years following the Change of Control, then the Company shall pay you an amount equal to two times the sum of (a) your then Annual Base Salary, (b) the average of the annual bonuses actually paid to you with respect to the three completed years preceding the date of your termination of employment (or, if less, the number of years following your commencement of employment for which you were paid bonuses) and (c) an amount equal to twelve (12) months of payments under the Consolidated Omnibus Budget Reconciliation Act of 1985, less all applicable withholding and other applicable taxes and deductions (“Change of Control Amount”). The Change of Control Amount shall be paid to you in cash in a single lump sum within 30 days after the date your employment terminates. In the event that it is determined that the aggregate amount of the payments and benefits that could be considered “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (collectively, with the regulations and other guidance promulgated thereunder, the “Code”; and such payments and benefits, the “Parachute Payments”) that, but for this Section 3(g) would be payable to you under this Agreement or any other plan, policy, or arrangement of the Company or Barnes & Noble Education, Inc., exceeds the greatest amount of Parachute Payments that could be paid to you without giving rise to any liability for any excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the aggregate amount of Parachute Payments payable to you shall not exceed the amount that produces the greatest after-tax benefit to you after taking into account any Excise Tax to be payable by you. Any reduction in Parachute Payments pursuant to the immediately preceding sentence shall be made in the following order: (1) cash payments that do not constitute deferred compensation within the meaning of Section 409A of the Code, (2) welfare or in-kind benefits, (3) equity compensation awards and (4) cash payments that do constitute deferred compensation; in each case, such reductions shall be made in the manner that maximizes the present value to you of all such payments. For the avoidance of doubt, the amounts payable to you under this paragraph shall be in lieu of any amounts payable to you under the previous paragraph (Severance) and this paragraph applies only during your employment and not thereafter.


(b)	As used herein, “Change of Control” shall mean the occurrence of one or more

of the following events:

(i) after the Effective Date, any person, entity or “group” as identified in Section

13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “1934 Act”), other than you or any of your affiliates, becomes a beneficial owner (as such term is defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of Barnes & Noble Education, Inc. representing 40% or more of the total number of votes that may be cast for the election of directors of Barnes& Noble Education, Inc.; or

(ii)

within two years after a merger, consolidation, liquidation, or sale of assets involving Barnes & Noble Education, Inc., or a contested election of a Barnes & Noble Education, Inc. director, or any combination of the foregoing, the individuals who were directors of Barnes & Noble Education, Inc. immediately prior thereto shall cease to constitute a majority of the board of Barnes & Noble Education, Inc.; or

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665


(iii)	within two years after a tender offer or exchange offer for voting securities of Barnes & Noble Education, Inc., the individuals who were directors of Barnes & Noble Education, Inc. immediately prior thereto shall cease to constitute a majority of the board of Barnes & Noble Education, Inc.

For purposes of this letter, the term "Disability" shall mean a written determination by a majority of three physicians (one of which shall be your most recent primary care provider) mutually agreeable to the Company and you (or, in the event of your total physical or mental disability, your legal representative) that you are physically or mentally unable to perform your duties as EVP, Chief Financial Officer of the Company under this letter and that such disability can reasonably be expected to continue for a period of six (6) consecutive months or for shorter period aggregating 180 days in any 12 month period.

This letter shall not be deemed to be a contract of employment for a specific period of time and nothing contained herein shall alter your status as an at-will employee. This letter supersedes and replaces the prior letter agreement between you and the Company, dated as of June 25, 2015. Notwithstanding the foregoing, the Agreement between you and the Company shall remain in full force and effect.

Please sign this letter to acknowledge receipt and acceptance of the terms. Please return a signed copy to me and keep a copy for your records.

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Please contact me with any questions.

Sincerely,

/s/ JoAnn Magill

JoAnn Magill

SVP, Human Resources



AGREED AND ACCEPTED:		DATE
/s/ Thomas Donohue		1/4/2019
Thomas Donohue

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

EXHIBIT A

GENERAL RELEASE AND WAIVER

1. Thomas Donohue (“Employee”) hereby acknowledges and agrees Employee’s employment with Barnes and Noble Education, LLC, a subsidiary of Barnes & Noble Education, Inc. (the “Company”) terminated on __________, 20__ (the “Termination Date”).

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

including under state or local labor or wage payment laws; (iv) any rights and/or claims to benefits that Employee may have or become entitled to receive under any severance, termination, change of control, bonus or similar policy, plan, program, agreement or similar or related arrangements, including, without limitation, any offer letter, letter agreement or employment agreement between Employee and the Company; (v) any rights and/or claims that Employee may have to receive any equity in the Company (whether restricted or unrestricted) in the future; and (vi) and any rights and/or claims for attorneys’ fees. Employee agrees not to challenge or contest the reasonableness, validity, or enforceability of this Release.

6. (a) Employee hereby represents and agrees that, except as shall be required by law or as permitted under Section 3(c)(iii) or Section 4 of this Release, Employee shall (i) keep confidential and not disclose orally or in writing, to any person, except as may be required by law, any and all information concerning the existence or terms of this Release and the amount of any payments made hereunder and (ii) keep confidential and not disclose orally or in writing, directly or indirectly, to any person (except Employee’s immediate family, attorneys and accountant), any and all information concerning any potential claims or causes of action that are being released in this Release, or allegations or facts that would support such claims or causes of action.

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

ensure that any information so disclosed is maintained in confidence to the maximum extent possible by the agency or other person receiving the disclosure, or, in the discretion of the Company, to waive compliance with the provisions of this Release. Employee shall use reasonable efforts, in cooperation with the Company or otherwise, to avoid or minimize the required disclosure and/or to obtain such protective order or other relief. If, in the absence of a protective order or the receipt of a waiver hereunder, Employee is compelled to disclose such information or else stand liable for contempt or suffer other sanction, censure, or penalty, Employee shall disclose only so much of such information to the party compelling disclosure as he/she believes in good faith on the basis of advice of counsel is required by law, and Employee shall give the Company prior notice of such information he believes he is required to disclose.

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

12. By executing this Release, Releasor acknowledges that (a) Employee has been advised by the Company to consult with an attorney before executing this Release; (b) Employee was provided and has adequate time (that is, 21 days) to review this Release and to consider whether to sign this Release, (c) Employee has been advised that Employee has 7 days following execution to revoke this Release (“Revocation Period”), (d) the Release is written in a manner calculated to be understood by Employee, (e) the Release represents Employee’s knowing and voluntary release of any and all claims that he/she might have up through the date this Release is signed, including, but not limited to, any claims arising under the Age Discrimination in Employment Act, (f) Employee has not been asked to release, nor has he/she released, any claim that may arise after the date of this Release, and (g) the consideration that Employee will receive in exchange for signing this Release (that is, the Separation Benefit) is something of value to which he/she was not already entitled. Notwithstanding anything to the contrary contained herein or in the Employment Agreement, this Release shall not be effective or enforceable, and the Separation Benefit is not payable and shall not be delivered or paid by the Company, until the Revocation Period has expired (that is, the 8th day after the Employee signs the Release) and provided that Employee has not revoked this Release. Employee agrees that any revocation shall be made in writing and delivered to JoAnn Magill, SVP, Human Resources Officer, 120 Mountain View Boulevard, Basking Ridge, NJ 07920 in a manner such that it is delivered before the expiration of the Revocation Period. Employee acknowledges that revocation of this Release shall result in the Company’s not having an obligation to pay the Separation Benefit.

Signature: _________________________________________ Date: ______________________________

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

January 3, 2019

Barry Brover

[____________]

Dear Barry,

Congratulations! The following represents the key elements of your new position:


Effective Date of Change:	January 1, 2019


Job Title :	EVP, Operations—Barnes & Noble Education, Inc. (the “Company”)

EVP, Barnes & Noble College Booksellers, LLC


Reports to:	Mike Huseby, Chairman & CEO


Salary:	$610,000/Annualized (effective 12-23-18)


Annual Incentive Plan:	The bonus target for your position is 100 % of your base salary. Your bonus percentage will be subject to proration between the time spent in your current role and your new role through the end of the fiscal year.


Equity:	Subject to approval by the Compensation Committee, you will be eligible to receive an equity grant under our annual long-term incentive program as part of the annual process. Additional details will be shared after approval.

Severance Benefits:

In the event (a) your employment is terminated by the Company without Cause or (b) you voluntarily terminate your employment for Good Reason, the Company shall pay you an amount equal to one times the sum of (1) your then annual Base Salary, (ii) the average of the annual bonuses actually paid to you with respect to the three completed years preceding the date of your termination of employment and (iii) the aggregate annual dollar amount of the payments made or to be made to you on your behalf for purposes of providing you with benefits, less all applicable withholding and other applicable taxes and deductions (“Severance Amount”); provided that (x) 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”) and (y) you have not materially breached as of the date of such termination any provisions of this letter or the Employment Agreement (as defined below)and do not materially breach such provisions at any time during the relevant period. The Company’s obligation to make such payment shall be cancelled upon the occurrence of any such material breach and, in the event such payment has already been made, you shall repay to the Company such payment within 30 days after demand therefore; provided, however, such repayment shall not be required if the Company shall have materially breached its obligations. The Severance Amount shall be paid in cash in a single lump sum on the later of (1) the first day of the month following the month in which such termination occurs and (2) the date the Revocation Period (as defined in the Release) has expired. Notwithstanding anything in this paragraph to the contrary, if a Release is not executed and delivered to the Company within 60 days of such termination of employment (or if such Release is revoked in accordance with its terms), the Severance Amount shall not be paid.

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Change of Control:

(a) If at any time during your employment (i) there is a Change of Control (as defined below) and (ii) your employment is terminated by the Company without Cause or you voluntarily terminate your employment for Good Reason, in either case, within the greater of two years following the Change of Control or the remainder of the current Renewal Term (as defined in the Employment Agreement), as applicable, then the Company shall pay you an amount equal to two times the sum of (a) your then Annual Base Salary, (b) the average of the annual bonuses actually paid to you with respect to the three completed years preceding the date of your termination of employment (or, if less, the number of years following your commencement of employment for which you were paid bonuses) and (c) an amount equal to twelve (12) months of payments under the Consolidated Omnibus Budget Reconciliation Act of 1985, less all applicable withholding and other applicable taxes and deductions (“Change of Control Amount”). The Change of Control Amount shall be paid to you in cash in a single lump sum within 30 days after the date your employment terminates. In the event that it is determined that the aggregate amount of the payments and benefits that could be considered “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (collectively, with the regulations and other guidance promulgated thereunder, the “Code”; and such payments and benefits, the “Parachute Payments”) that, but for this Section 3(g) would be payable to you under this Agreement or any other plan, policy, or arrangement of the Company or Barnes & Noble Education, Inc., exceeds the greatest amount of Parachute Payments that could be paid to you without giving rise to any liability for any excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the aggregate amount of Parachute Payments payable to you shall not exceed the amount that produces the greatest after-tax benefit to you after taking into account any Excise Tax to be payable by you. Any reduction in Parachute Payments pursuant to the immediately preceding sentence shall be made in the following order: (1) cash payments that do not constitute deferred compensation within the meaning of Section 409A of the Code, (2) welfare or in-kind benefits, (3) equity compensation awards and (4) cash payments that do constitute deferred compensation; in each case, such reductions shall be made in the manner that maximizes the present value to you of all such payments. For the avoidance of doubt, the amounts payable to you under this paragraph shall be in lieu of any amounts payable to you under the previous paragraph (Severance) and this paragraph applies only during your employment and not thereafter.

(b) As used herein, “Change of Control” shall mean the occurrence of one or more

of the following events:

(i) after the Effective Date, any person, entity or “group” as identified in Section

(ii)

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665


(iii)	within two years after a tender offer or exchange offer for voting securities of Barnes & Noble Education, Inc., the individuals who were directors of Barnes & Noble Education, Inc. immediately prior thereto shall cease to constitute a majority of the board of Barnes & Noble Education, Inc.

For purposes of this letter, "Good Reason" shall mean the occurrence of one or more of the following events without your written consent: (A) there shall have been a material diminution of your authority, duties or responsibilities; (B) there shall have been a greater than 10% reduction in your then current annual base salary; (C) the principal executive offices of the Company shall be relocated to a location more than 50 miles from both New York City, NY and Basking Ridge, NJ; or (D) the Company fails to make material payments to you as required by this letter.

For purposes of this letter, the term "Disability" shall mean a written determination by a majority of three physicians (one of which shall be your most recent primary care provider) mutually agreeable to the Company and you (or, in the event of your total physical or mental disability, your legal representative) that you are physically or mentally unable to perform your duties under this letter and that such disability can reasonably be expected to continue for a period of six (6) consecutive months or for shorter period aggregating 180 days in any 12 month period.

Reference is hereby made to the employment agreement, dated as of June 23, 2015 (the “Employment Agreement”), between you and the Company. Pursuant to Section 2(a) of the Employment Agreement, the Company hereby provides written notice of non-renewal of the Employment Agreement. Following the expiration of the current Renewal Term, your employment with the Company will be “at-will” as contemplated by the terms of the Employment Agreement and will be governed this letter. Notwithstanding the foregoing, Section 4 of the Employment Agreement will remain in full force and effect. Except as specifically set forth in this letter, the terms of this letter shall govern in the event of any conflict between this letter and the Employment Agreement.

For as long as you remain employed by the Company, the Company shall obtain in your name and pay all associated premiums for (a) a life insurance policy providing for a death benefit of U.S. $1,000,000.00 payable to any beneficiary or beneficiaries named by you and (b) a disability insurance policy providing for monthly payments to you of at least U.S. $12,800.00 during the period of any Disability until the earlier of your attaining age 65 or death; provided that the term “disability” in any such disability insurance policy shall be defined in a manner consistent with the definition contained in this letter.

This letter shall not be deemed to be a contract of employment for a specific period of time and nothing contained herein shall alter your status as an at-will employee following the expiration of the Renewal Term.

Please sign this letter to acknowledge receipt and acceptance of the terms. Please return a signed copy to me and keep a copy for your records.

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Please contact me with any questions.

Sincerely,

/s/ JoAnn Magill

JoAnn Magill

SVP, Human Resources



AGREED AND ACCEPTED:		DATE
/s/ Barry Brover		2/26/2019
Barry Brover

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

EXHIBIT A

GENERAL RELEASE AND WAIVER

1. Barry Brover (“Employee”) hereby acknowledges and agrees Employee’s employment with Barnes and Noble Education, LLC, a subsidiary of Barnes & Noble Education, Inc. (the “Company”) terminated on __________, 20__ (the “Termination Date”).

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

days) to review this Release and to consider whether to sign this Release, (c) Employee has been advised that Employee has 7 days following execution to revoke this Release (“Revocation Period”), (d) the Release is written in a manner calculated to be understood by Employee, (e) the Release represents Employee’s knowing and voluntary release of any and all claims that he/she might have up through the date this Release is signed, including, but not limited to, any claims arising under the Age Discrimination in Employment Act, (f) Employee has not been asked to release, nor has he/she released, any claim that may arise after the date of this Release, and (g) the consideration that Employee will receive in exchange for signing this Release (that is, the Separation Benefit) is something of value to which he/she was not already entitled. Notwithstanding anything to the contrary contained herein or in the Employment Agreement, this Release shall not be effective or enforceable, and the Separation Benefit is not payable and shall not be delivered or paid by the Company, until the Revocation Period has expired (that is, the 8th day after the Employee signs the Release) and provided that Employee has not revoked this Release. Employee agrees that any revocation shall be made in writing and delivered to JoAnn Magill, SVP, Human Resources Officer, 120 Mountain View Boulevard, Basking Ridge, NJ 07920 in a manner such that it is delivered before the expiration of the Revocation Period. Employee acknowledges that revocation of this Release shall result in the Company’s not having an obligation to pay the Separation Benefit.

Signature: _________________________________________ Date: ______________________________

Barnes & Noble Education

120 Mountain View Boulevard

Basking Ridge, New Jersey 07920

(908) 991-2665

Exhibit 31.1

CERTIFICATION BY THE

CHIEF EXECUTIVE OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael P. Huseby, certify that:


1.	I have reviewed this report on Form 10-Q for the quarterly period ended January 26, 2019 of Barnes & Noble Education, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	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;


b.	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;


c.	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


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	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


b.	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: March 5, 2019



	By:		/s/ Michael P. Huseby
			Michael P. Huseby
			Chairman and Chief Executive Officer
			Barnes & Noble Education, Inc.

Exhibit 31.2

CERTIFICATION BY THE

CHIEF FINANCIAL OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas D. Donohue, certify that:


1.	I have reviewed this report on Form 10-Q for the quarterly period ended January 26, 2019 of Barnes & Noble Education, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	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;


b.	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;


c.	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


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	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


b.	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: March 5, 2019



	By:		/s/ Thomas D. Donohue
			Thomas D. Donohue
			Chief Financial Officer
			Barnes & Noble Education, Inc.

Exhibit 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

In connection with the quarterly report of Barnes & Noble Education, Inc. (the “Company”) on Form 10-Q for the period ended January 26, 2019 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P. Huseby, Chairman and Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Michael P. Huseby
	Michael P. Huseby
	Chairman and Chief Executive Officer Barnes & Noble Education, Inc.

	March 5, 2019

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 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

In connection with the quarterly report of Barnes & Noble Education, Inc. (the “Company”) on Form 10-Q for the period ended January 26, 2019 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas D. Donohue, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Thomas D. Donohue
	Thomas D. Donohue
	Chief Financial Officer Barnes & Noble Education, Inc.

	March 5, 2019