CURRENT ASSETS:

Cash and cash equivalents

Receivables, net

Inventories

Recoverable income taxes

Deferred income taxes

Prepaid expenses and other assets

 

Total current assets

 

PROPERTY AND EQUIPMENT, net of depreciation & amortization

 

GOODWILL

 

CUSTOMER RELATIONSHIPS, net of amortization

 

TRADENAME

 

OTHER IDENTIFIABLE INTANGIBLES, net of amortization

 

DEBT ISSUE COSTS, net of amortization

 

OTHER ASSETS

 

 

 

 

 

 

CURRENT LIABILITIES:

Accounts payable

Accrued employee compensation and benefits

Accrued interest

Accrued incentives

Accrued expenses

Deferred revenue

Current maturities of long-term debt

Current maturities of capital lease obligations

Revolving credit facility

 

Total current liabilities

 

LONG-TERM DEBT, net of current maturities

 

CAPITAL LEASE OBLIGATIONS, net of current maturities

 

OTHER LONG-TERM LIABILITIES

 

DEFERRED INCOME TAXES

 

COMMITMENTS (Note 5)

 

REDEEMABLE PREFERRED STOCK

 

Series A redeemable preferred stock, $.01 par value, 20,000 shares authorized, 10,000 shares issued and outstanding at December 31, 2009 and March 31, 2009 and no shares authorized and outstanding at December 31, 2008, at redemption value

 

STOCKHOLDERS’ EQUITY:

Common stock, voting, authorized 5,000,000 shares of $.01 par value; issued and outstanding 554,094 shares

Additional paid-in capital

Note receivable from stockholder

Retained earnings (deficit)

 

Total stockholders’ equity

 

 

 

 

 

REVENUES, net of returns

 

COSTS OF SALES (exclusive of depreciation shown below)

 

 

Gross profit

 

OPERATING EXPENSES:

Selling, general and administrative

Depreciation

Amortization

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

OTHER EXPENSES:

Interest expense

Interest income

Loss on early extinguishment of debt

Loss on derivative financial instrument

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

INCOME TAX BENEFIT

 

 

NET LOSS

 

 

LOSS PER SHARE:

Basic

 

 

Diluted

 

 

WEIGHTED-AVERAGE SHARES OUTSTANDING:

Basic

 

 

Diluted

 

 

BALANCE, April 1, 2008

 

Payment on stockholder note

 

Interest accrued on stockholder note

 

Share-based compensation attributable to stock options

 

Net loss

 

Other comprehensive income, net of taxes:

 

Unrealized gain on interest rate swap agreement, net of taxes of $473,000

 

 

BALANCE, December 31, 2008

 

 

BALANCE, April 1, 2009

 

Interest accrued on stockholder note

 

Share-based compensation attributable to stock options

 

Cumulative preferred dividend

 

Net loss

 

 

BALANCE, December 31, 2009

 

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

Adjustments to reconcile net loss to net cash flows from operating activities:

Share-based compensation

Provision for losses on receivables

Depreciation

Amortization

Loss on early extinguishment of debt

Amortization of bond discount

Loss on derivative financial instrument

Loss on disposal of assets

Deferred income taxes

Changes in operating assets and liabilities, net of effect of acquisitions:

Receivables

Inventories

Recoverable income taxes

Prepaid expenses and other assets

Other assets

Accounts payable

Accrued employee compensation and benefits

Accrued interest

Accrued incentives

Accrued expenses

Income taxes payable

Deferred revenue

Other long-term liabilities

 

Net cash flows from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

Acquisitions, net of cash acquired

Proceeds from sale of property and equipment

Software development costs

 

Net cash flows from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt

Payment of financing costs

Principal payments on long-term debt

Principal payments on capital lease obligations

Net increase in revolving credit facility

Proceeds from payment on note receivable from stockholder

 

Net cash flows from financing activities

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, Beginning of period

 

 

CASH AND CASH EQUIVALENTS, End of period

 

 

Cash paid during the period for:

Interest

Income taxes

Noncash investing and financing activities:

Accumulated other comprehensive income:

Unrealized gain on interest rate swap agreement, net of income taxes

Deferred taxes resulting from unrealized gain on interest rate swap agreement

Unpaid consideration associated with bookstore acquisitions

Basis of Presentation — The condensed consolidated balance sheet of NBC Acquisition Corp. (the “Company”) and its wholly-owned subsidiary, Nebraska Book Company, Inc. (“NBC”), at March 31, 2009 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company and the results of its operations and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All intercompany balances and transactions are eliminated in consolidation. Because of the seasonal nature of the Company’s operations, results of operations of any single reporting period should not be considered as indicative of results for a full fiscal year.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2009 included in the Company’s Annual Report on Form 10-K. A description of our significant accounting policies is included in our 2009 Annual Report on Form 10-K. References in this Quarterly Report on Form 10-Q to the terms “we,” “our,” “ours,” and “us” refer collectively to the Company and its subsidiaries, including NBC, except where otherwise indicated. We do not conduct significant activities apart from our investment in NBC. Operational matters discussed in this report, including the acquisition of college bookstores and other related businesses, refer to operations of NBC.

In June 2009, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”) became the single source of authoritative accounting principles generally accepted in the United States (“GAAP”). The Codification did not create any additional GAAP standards but incorporated existing accounting and reporting standards into a new topical structure with a new referencing system to identify authoritative accounting standards, replacing the prior references to Statement of Financial Accounting Standards (“SFAS”), Emerging Issues Task Force, FASB Staff Position, etc. Authoritative standards included in the Codification are designated by their Accounting Standards Codification (“ASC”) topical reference, and new standards are designated as Accounting Standards Updates with a year and assigned sequence number. References to prior standards have been updated in this interim report for the third quarter of fiscal year 2010 to reflect the new referencing system.

We have evaluated subsequent events through February 12, 2010 the filing date of this Form 10-Q and address such subsequent events in this Form 10-Q where applicable.

Earnings Per Share — Basic earnings (loss) per share data is computed by dividing earnings (loss) after the deduction of preferred stock dividends by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share data is calculated by dividing earnings (loss) after the deduction of preferred stock dividends by the weighted-average number of common shares outstanding and potential common shares including stock options, if any, with a dilutive effect. The information used to compute basic and dilutive earnings (loss) per share on income (loss) from continuing operations is as follows:

Net Loss

Less: preferred stock dividends

 

Net loss available to common shareholders

 

 

Weighted-average common shares outstanding — basic

 

Effect of dilutive securities:

 

Potential shares of common stock, attributable to stock options

 

Weighted-average common shares outstanding — diluted

Inventories — Inventories are summarized as follows:

Bookstore Division

Textbook Division

Complementary Services Division

 

 

 

Goodwill and Other Identifiable Intangibles — During the nine months ended December 31, 2009, ten bookstore locations were acquired in eight separate transactions. The total purchase price, net of cash acquired, of such acquisitions was $2.3 million, of which $0.1 million was assigned to tax deductible goodwill, $0.1 million was assigned to non-tax deductible covenants not to compete with an amortization period of two years, and $0.2 million was assigned to contract-managed acquisition costs with amortization periods of up to nine years. As of December 31, 2009, $0.5 million of the $2.3 million purchase price remained to be paid. During the nine months ended December 31, 2009, we paid $0.1 million of previously accrued consideration for bookstore acquisitions and contract-managed acquisition costs occurring in prior periods.

Goodwill assigned to corporate administration represents the goodwill that arose when Weston Presidio gained a controlling interest in us on March 4, 2004 (the “March 4, 2004 Transaction”), as all goodwill was assigned to corporate administration. As is the case with a portion of our assets, such goodwill is not allocated between our reportable segments when management makes operating decisions and assesses performance. We have identified the Textbook Division, Bookstore Division and Complementary Services Division as our reporting units. Such goodwill is allocated to our reporting units for purposes of testing goodwill for impairment and calculating any gain or loss on the disposal of all or, where applicable, a portion of a reporting unit.

The changes in the carrying amount of goodwill, in total, by reportable segment and assigned to corporate administration, are as follows:

Balance, April 1, 2008

Additions to goodwill:

Bookstore acquisitions

 

Balance, December 31, 2008

 

 

Balance, April 1, 2009

Impairment Loss

 

 

Additions to goodwill:

Bookstore acquisitions

 

Balance, December 31, 2009

 

Customer relationships

Developed technology

Covenants not to compete

Contract-managed acquisition costs

Other

 

 

 

Customer relationships

Developed technology

Covenants not to compete

Contract-managed acquisition costs

Other

 

 

 

Customer relationships

Developed technology

Covenants not to compete

Contract-managed acquisition costs

Other

 

 

 

 

Quarter ended December 31, 2009

Quarter ended December 31, 2008

Nine months ended December 31, 2009

Nine months ended December 31, 2008

 

Estimated amortization expense for the fiscal years ending March 31:

2010

2011

2012

2013

2014

Long-Term Debt — Indebtedness at December 31, 2009 includes an amended and restated bank-administered credit agreement (the “ABL Credit Agreement”), which provides for a $75.0 million asset-based revolving credit facility (the “ABL Facility”), of which $23.1 million was outstanding at December 31, 2009; $200.0 million of 10.0% senior secured notes (the “Senior Secured Notes”) issued by NBC at a discount of $1.0 million with unamortized bond discount of $0.9 million at December 31, 2009 (effective rate of 10.14%); $175.0 million of 8.625% senior subordinated notes (the “Senior Subordinated Notes”) issued by NBC; $77.0 million of 11.0% senior discount notes (the “Senior Discount Notes”) issued at a discount of $27.0 million; $0.3 million of other indebtedness; and $3.4 million of capital leases. The ABL Facility is scheduled to expire on the earlier of October 2, 2012 or the date that is 91 days prior to the earliest maturity of the Senior Secured Notes (due December 1, 2011), the Senior Subordinated Notes (due March 15, 2012), the Senior Discount Notes (due March 15, 2013), or any refinancing thereof.

On October 2, 2009, in conjunction with the completion of NBC’s offering of the Senior Secured Notes, we entered into the ABL Credit Agreement, which provides for the ABL Facility mentioned previously. Borrowings under the ABL Facility are subject to the Eurodollar interest rate, not to be less than 1.5%, plus an applicable margin ranging from 4.25% to 4.75% or a base interest rate. The base interest rate is the greater of a) the prime rate, b) the federal funds rate plus 0.5%, or c) the one-month Eurodollar loan rate plus 1.0%, not to be less than 2.5%, plus an applicable margin ranging from 3.25% to 3.75%. In addition, the applicable margin will increase 1.5% during the time periods from April 15 to June 29 and from December 1 to January 29 of each year. The interest rate as of December 31, 2009 was 8.25%. There also is a commitment fee for the average daily unused amount of the ABL Facility ranging from 0.75% to 1.0% of such unused amount.

The Senior Secured Notes pay cash interest semi-annually and mature on December 1, 2011. The Senior Subordinated Notes pay cash interest semi-annually and mature on March 15, 2012. The Senior Discount Notes, which became fully-accreted on March 15, 2008 and began to pay cash interest semi-annually on September 15, 2008, mature on March 15, 2013.

Prior to entering into the ABL Credit Agreement and issuing the Senior Secured Notes on October 2, 2009, indebtedness included an amended and restated bank-administered senior credit facility (the “Senior Credit Facility”) provided to NBC through a syndicate of lenders, which consisted of a term loan (the “Term Loan”) and a revolving credit facility (the “Revolving Credit Facility”). Borrowings on the Term Loan and Revolving Credit Facility were subject to the Eurodollar interest rate or the base interest rate. The Eurodollar interest rate was not to be less than 3.25% plus the applicable margin of 6.0%. The base interest rate was the greater of a) the prime rate, b) the federal funds rate plus 0.5%, or c) the one-month Eurodollar loan rate plus 1.0%, not to be less than 4.25% plus the applicable margin of 5.0%. Accrued interest on the Term Loan and Revolving Credit Facility was due quarterly. Additionally, there was a 0.75% commitment fee for the average daily unused amount of the Revolving Credit Facility.

The Senior Credit Facility also stipulated that excess cash flows, as defined therein, should be applied towards prepayment of the Term Loan. An excess cash flow payment of $6.0 million was paid in September of 2009 for fiscal year ended March 31, 2009. There was no excess cash flow obligation for the fiscal year ended March 31, 2008.

A loss from early extinguishment of debt totaling $3.1 million was recorded in the third quarter of fiscal year 2010 related to the write-off of debt issue costs as a result of the termination of the Term Loan and Revolving Credit Facility under the Senior Credit Facility.

The ABL Credit Agreement requires us to maintain certain financial ratios and contains a number of other covenants that among other things, restricts our ability to incur additional indebtedness, dispose of assets, make capital expenditures, investments, acquisitions, loans or advances and pay dividends, except that, among other things, NBC may pay dividends to us (i) in an amount not to exceed the amount of interest required to be paid on the Senior Discount Notes and (ii) to pay corporate overhead expenses not to exceed $250,000 per fiscal year and any taxes owed by us. In addition, under the ABL Facility, if availability, as defined in the ABL Credit Agreement, is less than the greater of 20% of the total revolving credit commitments and $15.0 million, we will be required to maintain a fixed charge coverage ratio of at least 1.10x measured for the last twelve-month period on a pro forma basis in order to maintain access to the funds under that facility. The calculated borrowing base as of December 31, 2009 was $75.0 million, of which $23.1 million was outstanding under revolving lines of credit, $1.0 million was outstanding under a letter of credit and $50.9 million was unused. At December 31, 2009, our pro forma fixed charge coverage ratio was 1.50x.

The indenture governing the Senior Discount Notes restricts our ability and the ability of certain of our subsidiaries to pay dividends or make certain other payments, subject to certain exceptions, unless certain conditions are met, including (i) no default under the indenture has occurred, (ii) we and our subsidiaries maintain a consolidated coverage ratio of 2.0 to 1.0 on a pro forma basis and (iii) the amount of the dividend or payment may not exceed 50% of aggregate income from January 1, 2004 to the end of the most recent fiscal quarter plus cash proceeds received from the issuance of stock less the aggregate of payments made under this restriction. If we do not meet the preceding conditions, we may still pay dividends or make certain other payments up to $15.0 million in the aggregate. At December 31, 2009, our pro forma consolidated coverage ratio was 1.5 to 1.0 and the amount distributable was $15.0 million.

The indentures governing the Senior Subordinated Notes and the Senior Secured Notes contain similar restrictions on the ability of NBC and certain of its subsidiaries to pay dividends or make certain other payments. In addition, under the indentures to the Senior Subordinated Notes and the Senior Secured Notes, if there is no availability under the restricted payment calculation mentioned above, but NBC maintains the 2.0 to 1.0 consolidated coverage ratio on a pro forma basis, NBC may make dividends to us to meet the interest payments on the Senior Discount Notes. If NBC does not maintain the 2.0 to 1.0 ratio on a pro forma basis, it may still make payments, including dividends to us, up to $15.0 million in the aggregate. At December 31, 2009, NBC’s pro forma consolidated coverage ratio calculated under the indenture to the Senior Subordinated Notes was 1.9 to 1.0 and the ratio calculated under the indenture to the Senior Secured Notes was 2.0 to 1.0. The pro forma consolidated coverage ratio calculated under the indenture to the Senior Subordinated Notes differs from the ratio calculated under the indenture to the Senior Secured Notes because the indenture to the Senior Subordinated Notes excludes debt issue cost amortization for all debt instruments outstanding at the March 4, 2004 Transaction date from the calculation and the indenture to the Senior Secured Notes excludes only debt issue cost amortization for the Senior Secured Notes and the ABL Facility from the same calculation. At December 31, 2009, the amount distributable by NBC under the most restrictive indenture was $15.0 million. Such restrictions are not expected to affect our ability to meet our cash obligations for the next twelve months.

At December 31, 2009, we were in compliance with all of our debt covenants.

Redeemable Preferred Stock — At December 31, 2009, we had 10,000 shares of Series A Redeemable Preferred Stock (“Preferred Stock”). Each share of the Preferred Stock has a par value of $1,000 and accrues dividends annually at 15.0% of the liquidation preference, which is equal to $1,000 per share, as adjusted. The Preferred Stock may be redeemed at the option of the holders of a majority of the Preferred Stock, on the occurrence of a change of control, as defined in our First Amended and Restated Certificate of Incorporation, at a redemption price per share equal to the liquidation preference plus accrued and unpaid dividends; provided that any redemption shall be subject to the restrictions limiting or prohibiting any redemptions contained in any credit agreement. If we are unable to redeem all shares outstanding, the holders of the remaining outstanding shares shall have the right to accrue dividends at the rate of 17.5% per annum.

Due to the nature of the redemption feature, we have classified the Preferred Stock as temporary equity and have measured the Preferred Stock at redemption value. As of December 31, 2009, there have been no changes in circumstance that would require the redemption of the Preferred Stock or permit the payment of cumulative preferred dividends. As of December 31, 2009, unpaid accumulated dividends were $1.4 million and are included in the redemption value of the Preferred Stock.

Derivative Financial Instruments —The Derivatives and Hedging Topic of the FASB ASC requires that all derivative instruments be recorded in the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income (loss), based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. Until NBC’s interest rate swap agreement expired on September 30, 2008, we utilized derivative financial instruments to manage the risk that changes in interest rates would affect the amount of our future interest payments on portions of our variable rate debt.

Our primary market risk exposure was fluctuation in variable interest rates on the Term Loan. Exposure to interest rate fluctuations was managed by maintaining fixed interest rate debt (primarily the Senior Subordinated Notes and Senior Discount Notes); and, historically, by entering into interest rate swap agreements that qualified as cash flow hedging instruments to convert certain variable rate debt into fixed rate debt. We had a three-year amortizing interest rate swap agreement whereby a portion of the variable rate Term Loan was effectively converted into debt with a fixed rate of 6.844% (4.344% plus an applicable margin as defined by the Senior Credit Facility). This agreement expired on September 30, 2008. Notional amounts under the agreement were reduced periodically until reaching $130.0 million.

Effective September 30, 2005, the interest rate swap agreement qualified as a cash flow hedge instrument as the following criteria were met:

Formal documentation of the hedging relationship and NBC’s risk management objective and strategy for undertaking the hedge were in place.

The interest rate swap agreement was expected to be highly effective in offsetting the change in the value of the hedged portion of the interest payments attributable to the Term Loan.

Portion of Agreement Subsequent to September 30, 2005 Hedge Designation:

Increase in fair value of swap agreement:

Quarter ended December 31, 2008

Nine months ended December 31, 2008

Year ended March 31, 2009

 

Portion of Agreement Prior to September 30, 2005 Hedge Designation:

Decrease in fair value of swap agreement:

Quarter ended December 31, 2008

Nine months ended December 31, 2008

Year ended March 31, 2009

Fair Value Measurements — The Fair Value Measurements and Disclosures Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard excludes lease classification or measurement (except in certain instances).

A three-level hierarchal disclosure framework that prioritizes and ranks the level of market price observability is used in measuring assets and liabilities at fair value on a recurring basis in the statement of financial position. Market price observability is impacted by a number of factors, including the type of asset or liability and its characteristics. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

The three levels are defined as follows: (1) Level 1 - inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets; (2) Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and (3) Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Fair Value Measurements and Disclosures Topic of the FASB ASC also applies to disclosures of fair value for all financial instruments disclosed under the Financial Instruments Topic of the FASB ASC. The Financial Instruments Topic requires disclosures about fair value for all financial instruments, whether recognized or not recognized in the statement of financial position. For financial instruments recognized at fair value on a recurring basis in the statement of financial position, the three-level hierarchal disclosure requirements also apply.

Cash equivalents are measured at estimated fair value on a recurring basis in the statement of financial position, therefore, falling under the three-level hierarchal disclosure requirements. At December 31, 2009, we did not hold any investments in cash equivalents.

Our revolving credit facility and long-term debt are not measured at estimated fair value on a recurring basis in the statement of financial position so they do not fall under the three-level hierarchal disclosure requirements. The fair value of our revolving credit facility approximates carrying value due to its short-term nature. At December 31, 2009, the estimated fair value of the Senior Subordinated Notes (fixed rate), the Senior Discount Notes (fixed rate) and the Senior Secured Notes (fixed rate) was determined utilizing the “market approach” based upon quoted prices for these instruments in markets that are not active. Other fixed rate debt (including capital lease obligations) estimated fair values are determined utilizing the “income approach”, calculating a present value of future payments based upon prevailing interest rates for similar obligations.

Estimated fair values for our revolving credit facility and our fixed rate and variable rate long-term debt at December 31, 2009 and March 31, 2009 are summarized in the following table:

Carrying Values:

Revolving credit facility

Fixed rate debt

Variable rate debt

 

Fair Values:

Revolving credit facility

Fixed rate debt

Variable rate debt

Segment Information — Our operating segments are determined based on the way that management organizes the segments for making operating decisions and assessing performance. Management has organized our operating segments based upon differences in products and services provided. We have three operating segments: Bookstore Division, Textbook Division, and Complementary Services Division. The Bookstore and Textbook Divisions qualify as reportable operating segments, while separate disclosure of the Complementary Services Division is provided as management believes that information about this operating segment is useful to the readers of our condensed consolidated financial statements. The Bookstore Division segment encompasses the operating activities of our college bookstores located on or adjacent to college campuses. The Textbook Division segment consists primarily of selling used textbooks to college bookstores, buying them back from students or college bookstores at the end of each college semester and then reselling them to college bookstores. The Complementary Services Division segment includes book-related services such as distance education materials, computer hardware and software, e-commerce technology, and a centralized buying service.

We primarily account for intersegment sales as if the sales were to third parties (at current market prices). Certain assets, net interest expense and taxes (excluding interest and taxes incurred by NBC’s wholly-owned subsidiaries, NBC Textbooks LLC, Net Textstore LLC, College Book Stores of America, Inc. (“CBA”), Campus Authentic LLC, and Specialty Books, Inc.) are not allocated between our segments; instead, such balances are accounted for in a corporate administrative division.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and earnings before interest, taxes, depreciation, amortization and loss on early extinguishment of debt (“Adjusted EBITDA”) are important measures of segment profit or loss utilized by the Chief Executive Officer and President (chief operating decision makers) in making decisions about resources to be allocated to operating segments and assessing operating segment performance.

The following table provides selected information about profit or loss on a segment basis:

Quarter ended December 31, 2009:

External customer revenues

Intersegment revenues

Depreciation and amortization expense

Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA)

 

Quarter ended December 31, 2008:

External customer revenues

Intersegment revenues

Depreciation and amortization expense

Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA)

 

Nine months ended December 31, 2009:

External customer revenues

Intersegment revenues

Depreciation and amortization expense

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA)

 

Nine months ended December 31, 2008:

External customer revenues

Intersegment revenues

Depreciation and amortization expense

Earnings before interest, taxes, depreciation and amortization (EBITDA)

Revenues:

Total for reportable segments

Elimination of intersegment revenues

 

Consolidated total

 

 

Depreciation and Amortization Expense:

Total for reportable segments

Corporate Administration

 

Consolidated total

 

 

Income (Loss) Before Income Taxes:

Total Adjusted EBITDA for reportable segments (1)

Corporate Administration Adjusted EBITDA loss (including interdivision profit elimination) (1)

 

 

Depreciation and amortization

 

Consolidated income (loss) from operations

Interest and other expenses, net

 

Consolidated loss before income taxes

 

Accounting Pronouncements Not Yet Adopted — In January 2010, the FASB issued Accounting Standards Update 2010-06, “Improving Disclosures about Fair Value Measurements” (“Update 2010-06”). Update 2010-06 provides amendments to current standards to require new disclosures for transfers of assets and liabilities between Levels 1 and 2 and for activity in Level 3 fair value measurements. Furthermore, the update provides amendments to clarify that a reporting entity should provide fair value measurement disclosures for each class of assets and liabilities and should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for those measurements that fall in either Level 2 or Level 3. Update 2010-06 becomes effective for us in fiscal year 2011. Management has determined that the update will not have a material impact on the consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update 2009-13, “Multiple Deliverable Arrangements” (“Update 2009-13”). Update 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The update addresses how to separate deliverables and how to measure and allocate arrangement considerations to one or more units of account. Update 2009-13 becomes effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. An entity may elect to adopt the standard on a retrospective basis. We expect to apply this standard on a prospective basis beginning April 1, 2011. Management has not yet determined if the update will have a material impact on the consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update 2009-14, “Certain Revenue Arrangements That Include Software Elements” (“Update 2009-14”). Update 2009-14 clarifies what guidance should be used in allocating and measuring revenue from vendors that sell or lease tangible products in an arrangement that contains software that is more than incidental to the tangible product as a whole. The amendments in this update do not affect software revenue arrangements that do not include tangible products nor do they affect software revenue arrangements that include services if the software is essential to the functionality of those services. Update 2009-14 becomes effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. An entity may elect to adopt the standard on a retrospective basis. We expect to apply this standard on a prospective basis beginning April 1, 2011. Management has determined that the update will not have a material impact on the consolidated financial statements.

Related Party Transactions — In accordance with NBC’s debt covenants, NBC declared and paid $4.2 million in dividends to us during the nine months ended December 31, 2009 and 2008 to provide funding for interest due and payable on our Senior Discount Notes.

Subsequent Event — On January 14, 2010, NBC Holding’s Corp. (the Company’s parent) amended the 2004 Stock Option Plan (the “Plan”), increasing the number of options available for issuance under the Plan to 100,306 options from 85,306 options. Our Board of Directors approved the grant of 4,238 options under the 2004 Stock Option Plan on February 3, 2010.

Bookstore Division

Textbook Division

Complementary Services Division

Intercompany Eliminations

 

 

 

Bookstore Division

Textbook Division

Complementary Services Division

Corporate Administration

 

 

 

Net loss

Interest expense, net

Income tax benefit

Depreciation and amortization

 

EBITDA

Loss on early extinguishment of debt

 

Adjusted EBITDA

Share-based compensation

Interest income

Provision for losses on receivables

Cash paid for interest

Cash paid for income taxes

(Gain) loss on disposal of assets

Changes in operating assets and liabilities, net of effect of acquisitions (1)

 

Net Cash Flows from Operating Activities

 

Net Cash Flows from Investing Activities

 

Net Cash Flows from Financing Activities

 

Bookstore Division

Textbook Division