Note 5. Equity and Earnings Per Share

Equity

On February 26, 2015, Barnes & Noble announced plans to Spin-Off its 100% equity interest in our Company by distributing all of its equity interest in us, consisting of all of the outstanding shares of our Common Stock, to Barnes & Noble’s stockholders on a pro rata basis (the “Distribution”).

On July 14, 2015, Barnes & Noble approved the final distribution ratio and declared a pro rata dividend of the outstanding shares of our common stock to Barnes & Noble’s existing stockholders. The pro-rata dividend was made on August 2, 2015 to the Barnes & Noble stockholders of record (as of July 27, 2015). Each Barnes & Noble stockholder of record received a distribution of 0.632 shares of our common stock for each share of Barnes & Noble common stock held on the record date. On August 2, 2015, we completed the legal separation from Barnes & Noble, at which time we began to operate as an independent publicly-traded company. Following the Spin-Off, Barnes & Noble does not own any equity interest in us.

Following the Spin-Off on August 2, 2015, our authorized capital stock consisted of 200,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share. As of August 2, 2015, 48,186,900 shares of our Common Stock and 0 shares of our preferred stock were issued and outstanding. Our Common Stock began to trade on a “when-issued” basis on the NYSE under the symbol “BNED WI” beginning on July 23, 2015. On August 3, 2015, when-issued trading of our Common Stock ended, and our Common Stock began “regular-way” trading under the symbol “BNED.”

We do not intend to pay dividends on our Common Stock in the foreseeable future. The holders of our Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Holders of shares of our Common Stock do not have cumulative voting rights in the election of directors. The holders of our Common Stock will be entitled to share ratably in our assets legally available for distribution to our stockholders, subject to subject to the prior distribution rights of preferred stock, if any, then outstanding. The holders of our Common Stock do not have preemptive rights or preferential rights to subscribe for shares of our capital stock.

During the quarter, 2,409,345 shares of Common Stock were reserved for future grants, in accordance with the Barnes & Noble Education Inc. Equity Incentive Plan. See Note 11. Stock-Based Compensation.

Earnings Per Share

For periods prior to the Spin-Off from Barnes & Noble on August 2, 2015, basic earnings per share and weighted-average basic shares outstanding are based on the number of shares of Barnes & Noble common stock outstanding as of the end of the period, adjusted for the distribution ratio of 0.632 shares of our Common Stock for every one share of Barnes & Noble common stock held on the record date for the Spin-Off.

For periods prior to the Spin-Off, diluted earnings per share and weighted-average diluted shares outstanding reflect potential common shares from Barnes & Noble equity plans in which our employees participated. Certain of our employees held restricted stock units and stock options granted by Barnes & Noble which were considered participating securities.

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. During the 13 and 26 weeks ended October 31, 2015 and November 1, 2014, no shares were excluded from the diluted earnings per share calculation using the two-class method as they were not antidilutive.

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



	13 weeks ended						26 weeks ended
	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Numerator for basic earnings per share:
Net income	$	33,401		$	36,951		$	6,483		$	10,738
Accretion of dividends on preferred stock	—			(443		)	—			(885		)
Less allocation of earnings and dividends to participating securities	(22		)	(944		)	(26		)	(255		)
Net income available to common shareholders	$	33,379		$	35,564		$	6,457		$	9,598

Numerator for diluted earnings per share:
Net income available to common shareholders	$	33,379		$	35,564		$	6,457		$	9,598
Accretion of dividends on preferred stock ^(a)	—			—			—			—
Allocation of earnings and dividends to participating securities	22			944			26			255
Less diluted allocation of earnings and dividends to participating securities	(22		)	(943		)	(26		)	(255		)
Net income available to common shareholders	$	33,379		$	35,565		$	6,457		$	9,598

Denominator for basic earnings per share:
Basic weighted average shares of Common Stock	48,207			37,505			44,816			37,471

Denominator for diluted earnings per share:
Basic weighted average shares of Common Stock	48,207			37,505			44,816			37,471
Average dilutive restricted stock units	355			—			178			—
Average dilutive options	—			39			29			33
Diluted weighted average shares of Common Stock	48,562			37,544			45,023			37,504

Earnings per share of Common Stock:
Basic	$	0.69		$	0.95		$	0.14		$	0.26
Diluted	$	0.69		$	0.95		$	0.14		$	0.26


(a)	Although the Company was in a net income position for the 13 and 26 weeks ended November 1, 2014, the dilutive effect of the accretion of preferred membership interests were excluded from the calculation of earnings per share using the two-class method because the effect would be antidilutive.