BARNES & NOBLE INC - FORM 10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended April 28, 2018

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

For the transition period from to

Commission File No. 1-12302

Barnes & Noble, Inc.

(Exact name of registrant as specified in its Charter)


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

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

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

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


Title of Class		Name of Exchange on which registered
Common Stock, $0.001 par value per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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 ☒ No ☐

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

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

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


Large Accelerated Filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☐

		(Do not check if a 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 ☒

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant was approximately $428,729,814 based upon the closing market price of $7.25 per share of Common Stock on the New York Stock Exchange as of October 28, 2017.

As of May 31, 2018, 72,793,646 shares of Common Stock, par value $0.001 per share, were outstanding, which number includes 140,840 shares of unvested restricted stock that have voting rights and are held by members of the Board of Directors and the Company’s employees.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2018 Annual Meeting of Shareholders are incorporated by reference into Part III.

Portions of the Registrant’s Annual Report to Shareholders for the fiscal year ended April 28, 2018 are incorporated by reference into Parts II and IV.

TABLE OF CONTENTS


		Page
	PART I

Item 1.	Business		4

Item 1A.	Risk Factors		14

Item 1B.	Unresolved Staff Comments		23

Item 2.	Properties		23

Item 3.	Legal Proceedings		24

	PART II

Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		24

Item 6.	Selected Financial Data		25

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		26

Item 8.	Financial Statements and Supplementary Data		26

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		26

Item 9A.	Controls and Procedures		26

Item 9B.	Other Information		27

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance		27

Item 11.	Executive Compensation		28

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		28

Item 13.	Certain Relationships and Related Transactions, and Director Independence		28

Item 14.	Principal Accounting Fees and Services		28

	PART IV

Item 15.	Exhibits and Financial Statement Schedules		29

	Signatures		40

FORWARD-LOOKING STATEMENTS

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

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

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

PART I

ITEM 1. BUSINESS

General

Barnes & Noble, Inc. (Barnes & Noble or the Company), one of the nation’s largest booksellers,¹ provides customers a unique experience across its multi-channel distribution platform. As of April 28, 2018, the Company operates 630 bookstores in 50 states, maintains an eCommerce site, develops digital reading products and operates NOOK, one of the largest digital bookstores. Barnes & Noble is utilizing the strength of its retail footprint in combination with its online and digital businesses to provide an omni-channel experience for its customers, fulfilling its commitment to offer customers any book, anytime, anywhere and in any format.

Barnes & Noble Retail (B&N Retail) operates 630 retail bookstores, primarily under the Barnes & Noble Booksellers^® trade name, and includes the Company’s eCommerce site. B&N Retail also includes Sterling Publishing Co., Inc. (Sterling or Sterling Publishing), a leader in general trade book publishing. The NOOK segment represents the Company’s digital business, offering digital books and magazines for sale and consumption online, NOOK^®² reading devices, co-branded NOOK^® tablets and reading software for iOS, Android and Windows. As of April 28, 2018, the Company employed approximately 23,000 employees (8,000 full-time and 15,000 part-time employees).

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

Barnes & Noble has been experiencing declining sales trends primarily due to lower store traffic. The Company has been able to offset some of the traffic decline through its efforts to increase conversion through higher customer engagement. Additionally, the Company has been able to mitigate the impact of the sales decline on profit levels through cost reductions. While the Company believes it has lost share on its recent sales performance, it sees opportunities in an industry that has become more stable.

To improve its performance, the Company has initiated a strategic turnaround plan. The Company’s long-term strategic plan is focused on strengthening the core business by enhancing the customer value proposition; improving profitability through an aggressive expense management program, which will be used to fund growth initiatives; accelerating execution through simplification; and innovating for the future, which will position the Company for long-term growth.

To strengthen its core business, the Company is enhancing this customer value proposition by improving its merchandise mix, enhancing the overall shopping experience, increasing the value of its Membership Program and improving its omni-channel capabilities. The Company will leverage the strength of its Barnes & Noble brand, knowledgeable booksellers, vast book selection and retail footprint to attract customers to its omni-channel offerings and grow sales.

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

²	Any references to NOOK^® include the Company’s NOOK^® Tablet, Samsung Galaxy Tab^® A NOOK^®,Samsung Galaxy Tab^® S2 NOOK^®,Samsung Galaxy Tab^® E NOOK^® and NOOK GlowLight^TM 3 devices, each of which includes the trademark symbol (^®or ™, as applicable) even if a trademark symbol is not included.

Merchandising initiatives are focused on increasing the impact of promotional activities, narrowing product assortments, improving SKU productivity, improving inventory management processes, testing changes to existing store layouts and remerchandising select business units in stores. Additionally, the Company has created a new business development team, which will introduce new business categories that are complementary to its existing businesses. The Company believes there is opportunity to increase conversion through higher customer engagement and by improving navigation and discovery throughout the store, including a customer friendly and more intuitive organization of books and improved signage for easier browsing within and across sections.

In-store events also drive traffic, reinforcing Barnes & Noble as a destination where customers can meet, browse and discover. The Company is also utilizing social media, where booksellers communicate events, promotions and new product offerings with customers at the local level in order to drive traffic.

The Company’s Membership Program provides the Company with valuable data and insights into its customer base, enabling the Company to better understand and market to its customers. Members are more productive than non-members, as they spend more and visit more often. The Company continues to test programs to grow sales to both members and non-members, increase membership, improve price perception and enhance its overall customer value proposition.

The Company is focused on simplification throughout its organization to create efficiencies and reinvest resources to support sales growth. The Company is also committed to right sizing its cost structure. At B&N Retail, the Company has implemented a new labor model for its stores that has resulted in the elimination of certain store positions. The new model allows stores to adjust staff up or down based on the needs of the business, increase store productivity and streamline store operations. At NOOK, the Company exited non-core businesses and outsourced certain functions. NOOK expects to continue to re-calibrate its cost structure commensurate with sales, further reducing its losses.

In addition to initiatives focused on growing sales through its existing store base, the Company is innovating for the future and is expecting to open smaller, newly designed prototype stores later this year, which it believes could foster sales growth in the future. The Company has also created a Test & Learn pipeline process, through which it is testing a number of new initiatives to improve future performance.

The Company was incorporated in Delaware in 1986.

Segments

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

B&N Retail

This segment includes 630 bookstores as of April 28, 2018, primarily under the Barnes & Noble Booksellers trade name. These Barnes & Noble stores generally offer a comprehensive trade book title base, a café, and departments dedicated to Juvenile, Toys & Games, DVDs, Music & Vinyl, Gift, Magazine, Bargain products and a dedicated NOOK^® area. The stores also offer a calendar of ongoing events, including author appearances and children’s activities. The B&N Retail segment also includes the Company’s eCommerce website, www.barnesandnoble.com, and its publishing operation, Sterling Publishing.

Barnes & Noble stores range in size from 3,000 to 60,000 square feet depending upon market size, with an overall average store size of 26,000 square feet. In fiscal 2018, the Company reduced the Barnes & Noble store base by approximately 135,000 square feet, bringing the total square footage to 16.6 million square feet, a net reduction of 0.8% from fiscal 2017.

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

Proximity to Customers. The Company’s strategy has been to increase its share of the consumer book market, as well as to increase the size of the market through a market clustering strategy. As of April 28, 2018, Barnes & Noble had stores in 161 of the total 210 Designated Market Area markets. In 68 of the 161 markets, the Company has only one Barnes & Noble store. The Company believes its bookstores’ proximity to its customers strengthens its market position and increases the value of its brand. Most Barnes & Noble stores are located in high-traffic areas with convenient access to major commercial thoroughfares and ample parking. Most stores offer extended shopping hours seven days a week.

Extensive Title Selection. Each Barnes & Noble store features an authoritative selection of books, ranging from 19,000 to 143,000 titles. The comprehensive title selection is diverse and reflects local interests and regional titles and authors’ works. Bestsellers typically represent between approximately 4% and 6% of Barnes & Noble store sales. Complementing this extensive on-site selection, all Barnes & Noble stores provide customers with access to the millions of books available to online shoppers at www.barnesandnoble.com by offering an option to have the book sent to the store or shipped directly to the customer. Additionally, the website allows customers to purchase over three million eBooks, newspapers and magazines. The Company believes that its tremendous selection, including many otherwise hard-to-find titles, builds customer loyalty.

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

NOOK^® Demonstrations. The Company has utilized its traditional retail bookstores to promote NOOK^® within the bookstores. Customers have the ability to see, feel, and experiment with NOOK^®, speak to knowledgeable booksellers, and receive pre- and post-sales customer support within the Company’s bookstores. The Company offers NOOK^® owners free NOOK^® support in all of its retail bookstores, as well as free Wi-Ficonnectivity to enjoy the Read In Store™ feature to read NOOK Books™ for free within the store. These acclaimed devices, which provide a fun, easy-to-use and immersive reading experience, include the NOOK^® Tablet, Samsung Galaxy Tab^®A NOOK^®, Samsung Galaxy Tab^®S2 NOOK^®, Samsung Galaxy Tab^®E NOOK^® and NOOK GlowLight™ 3 devices. The NOOK^® devices have also opened up an additional market for NOOK^®-related accessories such as stands, covers, lights, and other items.

Educational Toys & Games Department. The Educational Toys & Games Department at Barnes & Noble offers parents and gift-givers unique, best in class, learning products from around the world. In addition to an exceptional educational assortment, customers can rely on Barnes & Noble for many of the most requested top toys in any season. Whether customers are browsing Science & Tech, Arts & Crafts or Kids’ Games & Puzzles, there is consistently something new to discover. At Barnes & Noble, customers can shop in three distinct ways: by brand, by category and by age. And, by showcasing powerful brands like LEGO, Playmobil and Fisher-Price, along with favorite characters like Thomas the Tank Engine, Hatchimals, Paw Patrol and LOL Dolls, the Company has become a destination for kids and gift-givers across the country.

Games, Puzzles, Trend & Collectibles. Barnes & Noble continues to maintain focus on Games & Puzzles with a thoughtful and deliberate merchandising segmentation. Featuring an assortment of puzzles, family games, strategy games, party games, card games and mind, memory and logic games, Barnes & Noble offers table top gaming products allowing customers to immerse themselves in dynamic game-play. In the ever evolving world of pop culture, Barnes & Noble is proud to offer trend-based merchandise for an array of fans through an inspired collection of products from many of the hottest entertainment properties, featuring many of the latest trends from around the globe and the Company’s most revered book franchises.

Music and Movies & TV Departments. Many of the Barnes & Noble stores have Music and Movies & TV departments, which offer CDs, Vinyl LPs, DVDs and Blu-ray discs. These departments range in size from approximately 300 to 8,000 square feet and typically stock approximately 10,000 titles. The Company’s DVD and Blu-ray selection focuses on current and classic movies, documentaries, fitness and instructional titles, British TV series and movies, and foreign films. The music selection is tailored to the tastes of the Company’s customers, centering on classical music, jazz, pop rock, and show tunes. The Company also offers a strong selection of Vinyl titles, available in all stores, along with turntables.

Discount Pricing. Barnes & Noble stores employ an aggressive nationwide discount pricing strategy and offer special promotions throughout the year. The Barnes & Noble Membership Program offers members greater discounts and other benefits for products and services as well as exclusive offers and promotions via email or direct mail. The Company’s website, www.barnesandnoble.com, also utilizes a competitive model that includes various promotional offerings designed for members and non-members alike and enables the Company to offer better value to its customers. The Barnes & Noble Kids’ Club Program offers free rewards and special offers to participants and invites children to celebrate their birthday within the retail bookstores.

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

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

Merchandising and Marketing. The Company’s merchandising strategy for its Barnes & Noble stores is to be the authoritative community bookstore carrying an extensive selection of titles in all subjects, including an extensive selection of titles from small independent publishers and university presses. Each Barnes & Noble store features an extensive selection of books from 19,000 to 143,000 unique titles, of which approximately 24,000 titles are common to virtually all stores. Each store is tailored to reflect the lifestyles and interests of the area’s customers.

Product Master, the Company’s proprietary inventory management database, has approximately 19.6 million titles. It includes approximately 7.2 million active titles and provides each store with comprehensive title selections. By enhancing the Company’s existing merchandise replenishment systems, Product Master allows the Company to achieve higher in-stock positions and better productivity at the bookstore level through efficiencies in receiving, cashiering and returns processing. Complementing this extensive on-site selection, all Barnes & Noble stores provide customers with access to the millions of books available to online shoppers at www.barnesandnoble.com by offering an option to have the book sent to the store or shipped directly to the customer.

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

The Company has implemented a number of new website features to improve the overall user experience. BN.com is an important component to the Company’s omni-channel strategy, and it believes that, in the long-term, the platform will enable it to be more competitive in the marketplace.

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

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

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

The B&N Retail segment includes 630 bookstores as of April 28, 2018, primarily under the Barnes & Noble Booksellers trade name. The number of Barnes & Noble stores located in each state as of April 28, 2018 is listed below:


STATE	NUMBER OF STORES	STATE	NUMBER OF STORES
Alabama	7	Montana	4
Alaska	2	Nebraska	4
Arizona	15	Nevada	4
Arkansas	5	New Hampshire	4
California	69	New Jersey	23
Colorado	15	New Mexico	3
Connecticut	12	New York	38
Delaware	2	North Carolina	21
Florida	39	North Dakota	3
Georgia	19	Ohio	18
Hawaii	2	Oklahoma	5
Idaho	3	Oregon	7
Illinois	26	Pennsylvania	26
Indiana	12	Rhode Island	3
Iowa	7	South Carolina	10
Kansas	4	South Dakota	1
Kentucky	7	Tennessee	8
Louisiana	7	Texas	52
Maine	1	Utah	10
Maryland	11	Vermont	1
Massachusetts	17	Virginia	25
Michigan	18	Washington	17
Minnesota	16	West Virginia	1
Mississippi	3	Wisconsin	11
Missouri	11	Wyoming	1

Sterling Publishing

Sterling Publishing is a leading publisher of non-fiction trade titles. Founded in 1949, Sterling publishes a wide range of non-fiction and illustrated books and kits across a variety of imprints, in categories such as health & wellness, music & popular culture, food & wine, crafts, puzzles & games and history & current affairs, as well as a large children’s line. Sterling, with a solid backlist and robust value publishing program, has a title base of approximately 15,000 print books and eBooks. In addition, Sterling also distributes approximately 1,300 titles on behalf of client publishers.

Operations

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

During fiscal 2018, the Company implemented a new labor model for its retail stores that resulted in the elimination of certain store positions. The new model allows stores to adjust staff up or down based on the needs of the business, increase store productivity and streamline store operations.

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

Each Barnes & Noble store generally employs a store manager, one assistant store manager, two sales and inventory managers, a café manager and on average 27 booksellers (combination of full-time and part-time). Many Barnes & Noble stores also employ a full-time community business development manager. The large bookseller base provides the Company with experienced employees to fill new manager positions in the Company’s Barnes & Noble stores. The Company anticipates that a significant percentage of the personnel required to manage its stores will continue to come from within its existing operations.

Field management for all of the Company’s bookstores, including regional vice presidents, district managers and store managers, participate in an annual incentive program tied to store sales and profit goals (for regional vice presidents) as well as execution of certain retail initiatives. The Company believes that the compensation of its field management is competitive with that offered by other specialty retailers of comparable size.

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

Purchasing

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

The Company’s B&N Retail segment purchases physical books on a regular basis from over 400 publishers and nearly 40 wholesalers or distributors. Purchases from the top five suppliers (including publishers, wholesalers and distributors) accounted for approximately 67% of the B&N Retail’s book purchases during fiscal 2018, and no single supplier accounted for more than 27% of B&N Retail’s book purchases during this period. Consistent with industry practice, a substantial majority of the physical book purchases are returnable for full credit, a practice which substantially reduces the Company’s risk of inventory obsolescence.

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

Distribution

The Company has invested significant capital in its systems and technology by building new platforms, implementing new software applications and building and maintaining efficient distribution centers. This investment has enabled the Company to source a majority of its inventory through its own

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

As of April 28, 2018, the Company has approximately 1,745,000 square feet of distribution center capacity. The Company has an approximately 1,145,000 square foot distribution center in Monroe Township, New Jersey, which ships merchandise to stores throughout the country and to online customers. The Company also has an approximately 600,000 square foot distribution center in Reno, Nevada, which is used to facilitate distribution to stores and online customers in the western United States.

Information Technologies

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

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

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

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

Competition

The book business is highly competitive in every channel in which the Company operates. The Company competes with mass merchandisers, such as Costco, Target and Wal-Mart. The Company faces competition from many online distributors, notably Amazon.com. The Company also competes with other large bookstores, including Books-A-Million, and smaller format bookstores, including new Amazon retail stores and independent store operators. In addition, the Company faces competition from digital distributors, such as Amazon.com and Apple, including through digital books or “eBooks” and eBook readers. The B&N Retail business’s stores also compete with specialty retail stores that offer books in particular subject areas, variety discounters, drug stores, warehouse clubs, mail-order clubs and other retailers offering books, music, toys, games, gifts and other products in its market segments.

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

Seasonality

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

Employees

The Company cultivates a culture of outgoing, helpful and knowledgeable employees. As of April 28, 2018, the B&N Retail segment had approximately 23,000 employees (8,000 full-time and 15,000 part-time employees). The B&N Retail segment’s employees are not represented by unions.

NOOK

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

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

NOOK currently sells a number of different devices to satisfy customers’ digital needs, including the NOOK^® Tablet, Samsung Galaxy Tab^®A NOOK^®, Samsung Galaxy Tab^®S2 NOOK^®, Samsung Galaxy Tab^®E NOOK^® and NOOK GlowLight™ 3 devices. These devices provide customers access to the millions of books and magazines in the NOOK Store and through Google Play, Android apps and games, songs, movies and TV shows, plus popular Google services like the Chrome™ browser, Gmail™, YouTube™, Google Search™ and Google Maps™. NOOK GlowLight™ 3 provides customers a simple, easy to use, intuitive eReader on an E-Ink display that replicates the experience of reading from physical paper and provides access to the Company’s digital content store. The free NOOK support in any of the B&N Retail bookstores provides customers the ability to interact with a knowledgeable bookseller to receive pre- and post-customer sales support. The bookstores also provide free Wi-Fi connectivity for NOOK^®devices and Read In Store™ access, which allows customers to read NOOK Books™ for free within the store. NOOK^®devices also allow for digital lending of a wide selection of books through its LendMe^®technology.

Operations

The digital products group has knowledgeable product development and operational management teams in the areas of reading software, digital content retailing and mobile device development. Digital product management oversees product concept, software development, engineering, and user

experience. Operational management has historically overseen demand planning, strategic sourcing, manufacturing, return and refurbishment of hardware. The Company expects that digital product management’s role will continue to focus on eReading devices and reading platforms, while also shifting to the management of third-party partner relationships, such as NOOK’s partnership with Samsung and Bahwan CyberTek (BCT), a global software products and services company, in which the Company outsourced certain NOOK functions, including cloud management and development support for NOOK^® software.

Purchasing/Distribution

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

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

Competition

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

Seasonality

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

Employees

As of April 28, 2018, NOOK had 57 employees (combination of full-time and part-time). NOOK employees are not represented by unions, and the Company believes that its relationship with its employees is generally excellent.

Trademarks and Service Marks

The trademarks and service marks owned by the Company and its subsidiaries include, but are not limited to, B&N^®, Barnes & Noble^®, Barnes & Noble.com^®, barnesandnoble.com^®, Barnes & Noble Booksellers^®, Barnsie^®, Noble^®, Espari^®, Discover Great New Writers^®, NOOK^®, NOOK Color^®, NOOK Tablet^®, Reader’s Tablet^®, NOOK Simple Touch^®, GlowLight^®, NOOK GlowLight™, The Simple Touch Reader^®, NOOK Press^®, NOOK Books^®, NOOK Book Enhanced^®, NOOK Developer^®, The NOOK Book Store^®, NOOK Newsstand^®, NOOK Newspaper^®, NOOK Kids^®, Read In Store^®, NOOK Friends^®, LendMe^®, NOOK Boutique^®, NOOK Study^®, ArticleView^®, Daily Shelf^®, Read To Me^®, Punctuate!^®, Wobblio^®, Get Pop-Cultured^®, B-Fest^®, B&N Readouts^®, SparkNotes^®, Borders^®, Borders Books & Music^®, and Waldenbooks^®, some of which are registered or pending with the United States Patent and Trademark Office.

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

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

Available Information

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

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

The Company has adopted Corporate Governance Guidelines, a Code of Business Conduct and Ethics and written charters for the Company’s Audit Committee, Compensation Committee and Corporate Governance & Nominating Committee. Each of the foregoing is available on the Company’s website at www.barnesandnobleinc.com under “Investor Relations” – “Corporate Governance” and in print to any stockholder who requests it, in writing to the Company’s Corporate Secretary, Barnes & Noble, Inc., 122 Fifth Avenue, New York, New York 10011. In accordance with SEC rules, the Company intends to disclose any amendment (other than any technical, administrative, or other non-substantive amendment) to either of the above codes, or any waiver of any provision thereof with respect to any of the executive officers, on the Company’s website within four business days following such amendment or waiver.

ITEM 1A.

Risk Factors

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

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

Intense competition, including from the Internet and other retail sources, may adversely affect the Company’s businesses.

The book business is highly competitive in every channel in which the Company operates. The Company competes with mass merchandisers, such as Costco, Target and Wal-Mart. The Company faces competition from many online distributors, notably Amazon.com. The Company also competes with other large bookstores, including Books-A-Million, and smaller format bookstores, including new Amazon retail stores and independent store operators. In addition, the Company faces competition from digital distributors, such as Amazon.com and Apple, including through digital books or “eBooks” and eBook readers. The Retail business’s stores also compete with specialty retail stores that offer books in particular subject areas, variety discounters, drug stores, warehouse clubs, mail-order clubs and other retailers offering books, music, toys, games, gifts and other products in its market segments.

Some of the Company’s competitors may have greater financial and other resources and different business strategies than the Company does. New and enhanced technologies, including new digital technologies and new web services technologies, may increase the Company’s competition. Competition may also intensify as the Company’s competitors enter into business combinations or alliances or established companies in other market segments expand into its market segments. Increased competition may reduce the Company’s sales and profits.

The Retail business’s stores compete primarily on the quality of the shopping and store experience and the price and availability of products. The importance of price varies depending on the competitor, with some of the Retail business’s competitors engaging in significant discounting and other promotional activities.

Because of shifting consumer preferences and demographic shifts, coupled with the maturity of the market for traditional retail stores, the Company’s sales or net income may decline unless it successfully implements its business strategies.

The Company’s primary business is its operation of the Retail business’s stores across the United States, and it derived a substantial majority of its sales and profits from the Retail business’s stores in its most recent fiscal year. Continued increases in consumer spending via the Internet may significantly affect its ability to generate sales in the Retail business’s stores. Management’s strategies are subject to the risks described herein and elsewhere, and may be subject to other risks that have not yet been identified, and management cannot make assurances that its business strategies will be successful.

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

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

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

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

Substantially all of the Retail business’s stores are located in leased premises. The Retail business’s profitability depends in part on its ability to continue to optimize its store lease portfolio as to the number of retail stores, store locations and lease terms and conditions. Its ability to do so depends on, among other things, general economic and business conditions and general real estate development conditions, which are beyond its control. The Retail business has 321 leases up for renewal by April 30, 2021. If the cost of leasing existing retail stores increases, the Retail business may not be able to maintain its existing store locations as leases expire. In addition, the Retail business may not be able to enter into new leases on acceptable terms, or at all, or it may not be able to locate suitable alternative sites or additional sites for new retail stores in a timely manner. The Retail business’s sales and earnings may decline if it fails to maintain existing store locations, enter into new leases, renew leases or relocate to alternative sites, in each case on attractive terms.

In addition to the bookstores, the Company leases two distribution centers for its B&N Retail operations: one in Monroe Township, New Jersey and the other in Reno, Nevada. The Retail business’s profitability depends in part on its ability to continue to optimize its distribution centers. Its ability to do so depends on, among other things, general economic and business conditions and general real estate development conditions, which are beyond its control. Both distribution centers’ leases are up for renewal in 2020. If the cost of leasing these distribution centers increases, the Retail business may not be able to maintain its existing distribution centers as leases expire. In addition, the Retail business may not be able to enter into new leases on acceptable terms, or at all, or it may not be able to locate suitable alternative sites or in a timely manner. The Retail business’s earnings may decline if it fails to maintain existing distribution centers, enter into new leases, renew leases or relocate to alternative sites, in each case on attractive terms.

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

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

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

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

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

The complexity of the Company’s businesses could place a significant strain on its management, operations, technical performance, financial resources, and internal financial control and reporting functions. The Company operates two different businesses: the Retail business and the Digital business. There can be no assurance that the Company will be able to manage the complexity of its businesses effectively. The Company’s current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage its future operations, especially as it employs personnel in multiple geographic locations. The Company may not be able to hire, train, retain, motivate and manage the required personnel, which may limit its growth. If any of these were to occur, it could damage the Company’s reputation, limit growth, negatively affect operating results and harm its business.

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

The products that the Company sells originate from a wide variety of domestic and international vendors. During fiscal 2018, the Retail business’s five largest suppliers accounted for approximately 67% of the dollar value of merchandise purchased. While the Company believes that its relationships with its suppliers are strong, suppliers may modify the terms of these relationships due to general economic conditions or otherwise. The Company does not have long-term arrangements with most of its suppliers to guarantee availability of merchandise, content, components or services, particular payment terms or the extension of credit limits. If the Company’s current suppliers were to stop selling merchandise, content, components or services to it on acceptable terms, including as a result of one or more supplier bankruptcies due to poor economic conditions, the Company may be unable to procure the same merchandise, content, components or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

The Retail business is dependent on the continued supply of trade books. The publishing industry generally has suffered recently due to, among other things, changing consumer preferences and the economic climate. A significant disruption in this industry generally could adversely impact the Company’s business. A significant unfavorable change in the Company’s relationships with key suppliers could materially adversely affect its sales and profits. In addition, any significant change in the payment terms that the Company has with its key suppliers, including payment terms, return policies, the discount or margin on products or changes to the distribution model could adversely affect its financial condition and liquidity.

The Company has arrangements with third-party manufacturers with respect to digital devices. These manufacturers procure and assemble unfinished parts and components from third-party suppliers based on forecasts provided by the Company. Given production lead times, commitments may be made far in advance of finished product delivery. In addition, certain of our merchandise, including electronic readers, are sourced, directly or indirectly, from outside the United States, including, without limitation, from suppliers in China. Political or financial instability, merchandise quality issues, product safety concerns, trade restrictions, work stoppages, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation, civil unrest, natural disasters, outbreaks of pandemics and other factors relating to foreign trade are beyond our control and could disrupt our supply of foreign-sourced merchandise and/or adversely affect our results of operations.

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

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

The Company’s businesses rely on certain key personnel.

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

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

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

The Company’s sales are generally highest in the third fiscal quarter and lowest in the second and fourth fiscal quarters. Operating results in the Company’s businesses depend significantly upon the holiday selling season in the third fiscal quarter.

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

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

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

The Company may not be able to discover or determine the extent of any unauthorized use of its proprietary rights. The protection of the Company’s intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps it takes to protect its intellectual property may not adequately protect its rights or prevent third parties from infringing or misappropriating its proprietary rights. The Company also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights.

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

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

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

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

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

obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventative measures. A party that is able to circumvent the Company’s security measures could misappropriate the Company’s or its users’ proprietary information and cause interruption in its operations. Any compromise of the Company’s data security could result in a violation of applicable privacy and other laws or standards, significant legal and financial exposure beyond the scope or limits of insurance coverage, increased operating costs associated with remediation, negative publicity, equipment acquisitions or disposal and added personnel, and a loss of confidence in its security measures, which could harm the business or investor confidence. Data security breaches may also result from non-technical means, for example, actions by an employee.

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

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

Leonard Riggio, the Company’s Founder and Chairman, is currently the beneficial owner of an aggregate of approximately 19.3% of the Company’s outstanding capital stock as of April 28, 2018.

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

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

The Retail business and the Digital business collected sales tax on the majority of the products and services that they sold in their respective prior fiscal years that were subject to sales tax, and they generally have continued the same policies for sales tax within the current fiscal year. While management believes that the financial statements included elsewhere herein reflect management’s best current estimate of any potential additional sales tax liability based on current discussions with taxing authorities, there can be no assurance that the outcome of any discussions with any taxing authority will not result in the payment of sales taxes for prior periods or otherwise, or that the amount of any such payments will not be materially in excess of any liability currently recorded. In the future, the Company’s businesses may be subject to claims for not collecting sales tax on the products and services it currently sells for which sales tax is not collected. There is a risk that existing tax credits and tax assets may not be utilized or may expire.

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

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

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

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

Pursuant to the stockholder proposal that was approved at the Company’s 2017 annual meeting of stockholders, the declassification of the Company’s Board of Directors will be phased in, such that the Class II directors will stand for election for a one-year term at the 2018 annual meeting of stockholders, the Class III directors and the Class II directors will stand for election for a one-year term at the 2019 annual meeting of stockholders, and all directors will stand for election for one-year terms at the 2020 annual meeting of stockholders and at each annual meeting of stockholders thereafter. Until declassification is complete, the Company’s classified Board of Directors could serve as an anti-takeover defense. The Company also has other anti-takeover defenses in its certificate of incorporation and by-laws. Each of the Company’s defenses could discourage potential acquisition proposals and could delay or prevent a change in control of the Company. These deterrents could adversely affect the price of the Company’s common stock and make it difficult to remove or replace members of the Board of Directors or management of the Company. The Company’s previous shareholder rights plan expired on November 17, 2012 and was not replaced. The Board may, subject to its fiduciary duties under applicable law, choose to implement a shareholder rights plan in the future.

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

The Company is subject to general business regulations and laws relating to all aspects of its business, including regulations and laws relating to the Internet, online commerce, digital content and products as well as its other lines of business (including governmental investigations and litigation relating to the agency pricing model for digital content distribution). Existing and future laws and regulations and their application and/or enforcement may impede the growth of the Internet, digital content distribution or other online services and impact digital content pricing, including requiring modifications or elimination of related pricing models, including the agency pricing model. Changes in international, federal, state or local laws, rules or regulations, including, but not limited to, laws, rules or regulations related to employment,

wages, data privacy, information security, intellectual property, taxes, products, product safety, health and safety, imports and exports, anti-corruption, and anti-competition could diminish the demand for the Company’s products and services, increase the Company’s costs of doing business, decrease the Company’s margins or otherwise materially adversely impact the Company’s business.

The Company faces additional operating risks through the operation of the Digital business and as an Internet retailer.

The Company faces risks related to the operation of the Digital business. The Digital business’s content sales decreased during fiscal 2018 and may continue to decline in the future, which could affect the Company’s results of operations and liquidity. Also, the sales of digital devices and accessories declined during fiscal 2018, and there is no guarantee that the possible introduction of future NOOK^® digital devices will increase future sales of digital devices or content or the earnings of the Digital business. NOOK^® competes primarily with other tablets and eBook readers on functionality, consumer appeal, availability of digital content and price. The previously announced efforts to rationalize the costs associated with the Digital business also may not be successful, which may adversely impact the Company’s results of operations. The Digital business faces certain risks associated with its business, including protection of digital rights and uncertainties relating to the regulation of digital content.

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

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

NOOK^® and other Company products are manufactured by third-party manufacturers, many of which are located outside the United States. While the Company’s arrangements with these manufacturers may lower costs, they also reduce its direct control over production. It is uncertain what effect such diminished control will have on the quality or quantity of products or services, or the Company’s flexibility to respond to changing conditions. Although arrangements with such manufacturers may contain provisions for warranty expense reimbursement, if reimbursement from such manufacturers is unenforceable or insufficient, the Company may remain responsible to the consumer for warranty service in the event of product defects. Any unanticipated product defect or warranty liability, whether pursuant to arrangements with contract manufacturers or otherwise, could materially adversely affect the Company’s reputation, financial condition and operating results.

The Company, including the Digital business, may be unable to obtain a sufficient supply of components and parts that are free of minerals mined from the Democratic Republic of Congo and adjoining countries (DRC), which could result in a shortage of such components and parts or reputational damages if the Company is unable to certify that its products are free of such minerals. The Company filed its Conflict Minerals Report for the calendar year 2017 with the SEC on May 31, 2018.

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

The Company contracts with certain third parties to offer their digital content, including on NOOK^® and through its eBookstore. Its licensing arrangements with these third parties do not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all. Some third-party content providers currently or in the future may offer competing products and services, and could take action to

make it more difficult or impossible for the Company to license their content in the future. Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the total cost of, such content. If the Company is unable to offer a wide variety of content at reasonable prices with acceptable usage rules, its financial condition and operating results may be materially adversely affected.

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

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

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

All but one of the active Barnes & Noble stores are leased. The leases typically provide for an initial term of 10 or 15 years with one or more renewal options. Most stores are currently in renewal periods. The terms of the Barnes & Noble store leases for its 629 leased stores open as of April 28, 2018 expire as follows:


Lease Terms to Expire During (12 months ending on or about April 30)	Number of Stores^(a)
2019		89
2020		142
2021		90
2022		126
2023		93
2024 and later		87

^(a)	Two Barnes & Noble stores are under month-to-month leases.

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

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

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

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

ITEM 3.

LEGAL PROCEEDINGS

The information included in the Company’s Annual Report to Shareholders for the fiscal year ended April 28, 2018 included as Exhibit 13.1 to this Annual Report on Form 10-K (the Annual Report) under the section entitled “Notes to Consolidated Financial Statements, Note 15. Legal Proceedings” is incorporated herein by reference.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

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


	Fiscal 2018				Fiscal 2017
	High		Low		High		Low
First Quarter	$	8.70	$	6.25	$	13.31	$	10.25
Second Quarter		8.30		6.60		13.63		10.15
Third Quarter		8.00		4.83		13.20		9.40
Fourth Quarter		5.80		4.10		10.95		8.45

Approximate Number of Holders of Common Equity


Title of Class	Approximate Number of Record Holders as of May 31, 2018
Common stock, $0.001 par value		1,648

Dividends

The Company paid dividends to common stockholders in the amount of $43.6 million and $43.9 million during fiscal 2018 and fiscal 2017, respectively.

The following table provides information with respect to purchases by the Company of shares of its common stock during the fourth quarter of fiscal 2018:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
January 28, 2018 – February 24, 2018		—	$	0		—	$	50,000,000
February 25, 2018 – March 31, 2018		—	$	0		—	$	50,000,000
April 1, 2018 – April 28, 2018		—	$	0		—	$	50,000,000

Total		—	$	0		—

On October 20, 2015, the Company’s Board of Directors authorized a stock repurchase program (prior repurchase plan) of up to $50.0 million of its common shares. During fiscal 2016, the Company repurchased 2,763,142 shares at a cost of $26.7 million under the prior repurchase plan. During fiscal 2017, the Company repurchased 2,019,798 shares at a cost of $23.3 million under the prior repurchase plan. On March 15, 2017, subsequent to completing the prior repurchase plan, the Company’s Board of Directors authorized a new stock repurchase program of up to $50.0 million of its common shares. Stock repurchases under this program may be made through open market and privately negotiated transactions from time to time and in such amounts as management deems appropriate. The new stock repurchase program has no expiration date and may be suspended or discontinued at any time. The Company’s repurchase plan is intended to comply with the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company did not repurchase shares under this plan in fiscal 2018 and fiscal 2017. The Company has remaining capacity of $50.0 million under the new repurchase program as of April 28, 2018.

As of April 28, 2018, the Company has repurchased 39,584,907 shares at a cost of approximately $1.09 billion since the inception of the Company’s stock repurchase programs. The repurchased shares are held in treasury.

ITEM 6.

SELECTED FINANCIAL DATA

The information included in the Annual Report under the section entitled “Selected Consolidated Financial Data” is incorporated herein by reference.

ITEM 7.

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

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

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company limits its interest rate risks by investing certain of its excess cash balances in short-term, highly-liquid instruments with an original maturity of one year or less. The Company does not expect any material losses from its invested cash balances and the Company believes that its interest rate exposure is modest. As of April 28, 2018, the Company’s cash and cash equivalents totaled approximately $10.8 million. A 50 basis point increase in annual interest rates would have increased the Company’s interest income by $0.0 million in fiscal 2018. Conversely, a 50 basis point decrease in annual interest rates would have reduced interest income by $0.0 million in fiscal 2018.

Additionally, the Company may from time to time borrow money under its credit facility at various interest rate options based on the Base Rate or LIBO Rate (each term as defined in the amended and restated credit agreement described in the Annual Report under the section titled “Notes to Consolidated Financial Statements”) depending upon certain financial tests. Accordingly, the Company may be exposed to interest rate risk on borrowings under its credit facility. The Company had borrowings under its credit facility of $158.7 million at April 28, 2018 and $64.9 million at April 29, 2017. A 50 basis point increase in annual interest rates would have increased the Company’s interest expense by $0.7 million in fiscal 2018. Conversely, a 50 basis point decrease in annual interest rates would have reduced interest expense by $0.7 million in fiscal 2018.

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

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The management of the Company established and maintains disclosure controls and procedures that are designed to ensure that material information relating to the Company and its subsidiaries required to be disclosed in the reports that are filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. As of the end of the period covered by this report, the Company’s management conducted an evaluation (as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act), under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Based on management’s evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officers, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based upon the Company’s evaluation under this framework, management concluded that the Company’s internal control over financial reporting was effective as of April 28, 2018.

The effectiveness of internal control over financial reporting was audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report included elsewhere herein.

(c) Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the most recent quarter ended April 28, 2018 that have materially affected, or are reasonably likely to affect, internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information with respect to directors, executive officers, the code of ethics and corporate governance of the Company is incorporated herein by reference to the Company’s definitive Proxy Statement relating to the Company’s 2018 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the Company’s fiscal year ended April 28, 2018 (the Proxy Statement).

The information with respect to compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the Proxy Statement.

ITEM 11.

EXECUTIVE COMPENSATION

The information with respect to executive compensation is incorporated herein by reference to the Proxy Statement.

The information with respect to compensation of directors is incorporated herein by reference to the Proxy Statement.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table sets forth equity compensation plan information as of April 28, 2018:


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		175,169		9.95		5,689,643
Equity compensation plans not approved by security holders		—		—		—

Total		175,169		9.95		5,689,643

The information with respect to security ownership of certain beneficial owners and management is incorporated herein by reference to the Proxy Statement.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information with respect to certain relationships and related transactions and director independence is incorporated herein by reference to the Proxy Statement.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information with respect to principal accountant fees and services is incorporated herein by reference to the Proxy Statement.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	1. Consolidated Financial Statements:

(i)

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

(ii)

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

Schedule:

Valuation and Qualifying Accounts.

For the 52 week period ended April 28, 2018, the 52 week period ended April 29, 2017 and the 52 week period ended April 30, 2016 (in thousands):


	Balance at beginning of period		Charge (recovery) to costs and expenses			Write-offs			Balance at end of period
Allowance for Doubtful Accounts
April 28, 2018	$	3,831	$	(392	)	$	(2,487	)	$	952
April 29, 2017	$	4,571	$	464		$	(1,204	)	$	3,831
April 30, 2016	$	3,721	$	1,377		$	(527	)	$	4,571

	Balance at beginning of period		Addition Charged to Costs			Deductions			Balance at end of period
Sales Returns Reserves
April 28, 2018	$	6,145	$	16,385		$	(16,314	)	$	6,216
April 29, 2017	$	5,940	$	18,558		$	(18,353	)	$	6,145
April 30, 2016	$	4,623	$	17,380		$	(16,063	)	$	5,940

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


Exhibit No.		Description

2.1		Stock Purchase Agreement dated as of August 7, 2009 among the Company, Leonard Riggio and Louise Riggio. (8)

2.2		Separation and Distribution Agreement, dated as of July 14, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (incorporated herein by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated July 14, 2015). (24)

3.1		Amended and Restated Certificate of Incorporation of the Company, as amended. (36)

3.2		Amended and Restated By-laws of the Company. (36)

3.3		Form of Certificate of Designation, dated as of November 17, 2009. (9)

4.1		Specimen Common Stock Certificate. (1)(P)

10.1		The Company’s Amended and Restated 1996 Incentive Plan. (2)

10.2		The Company’s 2004 Executive Performance Plan. (3)

10.3		The Company’s 2004 Incentive Plan. (3)

10.4		Form of Option Award Agreement of the Company. (4)

10.5		Form of Restricted Stock Award Agreement of the Company. (4)

10.6		Amendment to the Company’s 2004 Incentive Plan. (5)

10.7		Amendment to the Company’s Amended and Restated 1996 Incentive Plan. (5)


Exhibit No.		Description

10.8		First Amendment to the Company’s 2004 Executive Performance Plan. (6)

10.9		Second Amendment to the Company’s 2004 Incentive Plan. (6)

10.10		The Company’s Amended and Restated Deferred Compensation Plan. (6)

10.11		The Company’s 2009 Executive Performance Plan. (7)

10.12		The Company’s 2009 Incentive Plan. (7)

10.13		Employment Agreement between the Company and Leonard Riggio, dated May 12, 2010. (10)


Exhibit No.		Description

10.14		Form of Performance Unit Award Agreement pursuant to the Company’s 2009 Incentive Plan. (11)

10.15		Form of Indemnification Agreement between the Company and Company’s directors and officers, dated January 5, 2011. (12)

10.16		Investment Agreement between the Company, Morrison Investment Holdings, Inc. and Microsoft Corporation, dated April 27, 2012. (13)

10.17		The Company’s Amended and Restated 2009 Incentive Plan. (14)

10.18		Commercial Agreement dated as of April 27, 2012, between Barnes & Noble, Inc. and Microsoft Corporation. (16)

10.19		Confidential Settlement and Patent License Agreement dated as of April 27, 2012, among Barnes & Noble, Inc., barnesandnoble.com llc, Microsoft Corporation and Microsoft Licensing GP. (16)

10.20		Form of Option Award Agreement pursuant to the Company’s Amended and Restated 2009 Incentive Plan. (15)

10.21		Form of Restricted Stock Award Agreement pursuant to the Company’s Amended and Restated 2009 Incentive Plan. (15)

10.22		Form of Restricted Stock Unit Award Agreement pursuant to the Company’s Amended and Restated 2009 Incentive Plan. (15)


Exhibit No.		Description

10.23		Employment Agreement dated December 23, 2013 between Barnes & Noble, Inc. and Allen W. Lindstrom. (18)

10.24		Amendment No. 1 to the Commercial Agreement, dated as of October 4, 2012, between Barnes & Noble, Inc. and Microsoft Corporation. (19)

10.25		Amendment No. 2 to the Commercial Agreement, dated as of March 10, 2014, between Barnes & Noble, Inc. and Microsoft Corporation. (19)

10.26		Commercial Agreement, dated June 4, 2014, between Samsung Electronics America, Inc. and barnesandnoble.com llc. (20)

10.27		Assignment of lease agreement, dated June 5, 2014, between barnesandnoble.com llc and Google, Inc. (20)

10.28		Commercial Agreement Amendment and Termination Agreement and Patent Agreement Amendment, dated December 4, 2014, between Microsoft Corporation and Barnes & Noble, Inc. (21)

10.29		Commercial Agreement Amendment and Termination Agreement and Patent Agreement Amendment between Microsoft Corporation, Barnes & Noble, Inc., NOOK Media LLC, barnesandnoble.com llc and Microsoft Licensing GP, dated December 3, 2014. (22)

10.30		First Amendment to the Commercial Agreement, dated March 7, 2015, made by and between NOOK DIGITAL, LLC f/k/a barnesandnoble.com llc, and SAMSUNG ELECTRONICS AMERICA, INC. (23)


Exhibit No.		Description

10.31		Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans notice given to directors and executive officers, dated July 23, 2015. (25)

10.32		Transition Services Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (26)

10.33		Tax Matters Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (26)

10.34		Employee Matters Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (26)

10.35		Trademark License Agreement, dated as of August 2, 2015, between Barnes & Noble, Inc. and Barnes & Noble Education, Inc. (26)

10.36		Credit Agreement, dated as of August 3, 2015, by and among Barnes & Noble, Inc., as borrower, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents party thereto. (26)

10.37		Completion of Spin-Off of Barnes & Noble Education, dated August 6, 2015. (27)

10.38		Stock Repurchase Program dated December 7, 2015. (28)

10.39		Agreement with Bahwan CyberTek, dated April 7, 2016. (29)

10.40		Second Amendment to the Commercial Agreement, dated May 18, 2016, made by and between NOOK DIGITAL, LLC f/k/a barnesandnoble.com llc, and SAMSUNG ELECTRONICS AMERICA, INC. (30)

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

10.42		Performance-Based Stock Unit Award Agreement pursuant to the Company’s 2009 Incentive Plan. (31)

10.43		Form of Restricted Stock Unit Award Certificate. (31)

10.44		Form of Performance-Based Stock Unit Award Certificate. (31)

10.45		Letter to David Deason regarding terms and conditions of employment, dated February 11, 2014. (31)


Exhibit No.		Description

10.46		Retention Bonus Agreement, dated March 4, 2014, between the Company and David Deason. (31)

10.47		Offer of Employment to Frederic Argir, dated June 12, 2015. (31)

10.48		Agreement Regarding Certain Terms and Conditions of Employment, dated June 25, 2015, between the Company and Frederic Argir. (31)

10.49		First Amendment to Credit Agreement, dated as of September 30, 2016, by and among Barnes & Noble, Inc., as borrower, the other borrowers, guarantors and lenders party thereto from time to time, Bank of America, N.A., as administrative agent, and the other agents party thereto. (32)

10.50		Employment Agreement between the Company and Demos Parneros, dated November 21, 2016. (33)

10.51		Amendment to Employment Agreement between the Company and Demos Parneros, dated April 27, 2017. (34)

10.52		Retention Bonus Agreement, dated February 7, 2014, between the Company and Mary Amicucci. (35)

10.53		Offer of Employment to Mary Amicucci dated January 7, 2016. (35)

10.54		Barnes & Noble, Inc. 2017 Incentive Compensation Plan, Vice President, Merchandising. (35)

10.55		Consulting Agreement, dated July 18, 2017, between the Company and David Deason. (35)

10.56		Form of Performance-Based Stock Unit Award Agreement pursuant to the Company’s Amended & Restated 2009 Incentive Plan. (35)

10.57		General Release and Waiver Agreement with Mary Amicuccis. (37)

13.1		The sections of the Company’s Annual Report entitled: “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Consolidated Statements of Operations,” “Consolidated Statements of Comprehensive Income (Loss),” “Consolidated Balance Sheets,” “Consolidated Statements of Changes in Shareholders’ Equity,” “Consolidated Statements of Cash Flows,” “Notes to Consolidated Financial Statements” and “The Report of Independent Registered Public Accounting Firm.” (38)

14.1		Code of Business Conduct and Ethics. (38)

16.1		Letter re change in certifying accountant. (17)

21.1		List of Significant Subsidiaries. (38)

23.1		Consent of Ernst & Young, LLP. (38)

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. (38)


Exhibit No.		Description

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. (38)

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. (38)

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. (38)

101.INS		XBRL Instance Document. (38)

101.SCH		XBRL Taxonomy Extension Schema Document. (38)

101.CAL		XBRL Taxonomy Calculation Linkbase Document. (38)

101.DEF		XBRL Taxonomy Definition Linkbase Document. (38)

101.LAB		XBRL Taxonomy Label Linkbase Document. (38)

101.PRE		XBRL Taxonomy Presentation Linkbase Document. (38)

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

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

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

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

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


Exhibit No.		Description

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

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

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

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

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

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

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

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

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


Exhibit No.		Description

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

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

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

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

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

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

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

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

(23)		Previously filed as an exhibit to the Company’s Form 10-Q filed with the SEC on March 10, 2015.


Exhibit No.		Description

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

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

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

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

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

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

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

(31)		Previously filed as an exhibit to the Company’s Form 10-K filed with the SEC on June 23, 2016.

(32)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on October 6, 2016.

(33)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on November 21, 2016.

(34)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on April 27, 2017.

(35)		Previously filed as an exhibit to the Company’s Form 10-Q filed with the SEC on September 7, 2017.

(36)		Previously filed as an exhibit to the Company’s Form 10-Q filed with the SEC on November 30, 2017.

(37)		Previously filed as an exhibit to the Company’s Form 8-K filed with the SEC on September 29, 2017.

(38)		Filed herewith.

(P)		Paper filing.

SIGNATURES

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


BARNES & NOBLE, INC. (Registrant)

By:		/s/ Demos Parneros
		Demos Parneros
		Chief Executive Officer
		June 21, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Name	Title	Date

/s/ Leonard Riggio	Chairman of the Board	June 21, 2018
Leonard Riggio

/s/ Demos Parneros	Chief Executive Officer and Director	June 21, 2018
Demos Parneros	(principal executive officer)

/s/ Allen W. Lindstrom	Chief Financial Officer	June 21, 2018
Allen W. Lindstrom	(principal financial officer)

/s/ Peter M. Herpich	Vice President and Corporate Controller	June 21, 2018
Peter M. Herpich	(principal accounting officer)

/s/ George Campbell, Jr.	Director	June 21, 2018
George Campbell, Jr.

/s/ Mark D. Carleton	Director	June 21, 2018
Mark D. Carleton

/s/ Scott S. Cowen	Director	June 21, 2018
Scott S. Cowen

/s/ Al Ferrara	Director	June 21, 2018
Al Ferrara

/s/ William T. Dillard II	Director	June 21, 2018
William T. Dillard II

/s/ Paul Guenther	Director	June 21, 2018
Paul Guenther

/s/ Patricia L. Higgins	Director	June 21, 2018
Patricia L. Higgins

/s/ Kimberley A. Van Der Zon	Director	June 21, 2018
Kimberley A. Van Der Zon

BARNES & NOBLE INC - FORM 10-K - June 21, 2018

Attached files

BARNES & NOBLE INC Reports