UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2010
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 333-48221
Nebraska Book Company, Inc.
(Exact name of registrant as specified in our charter)
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Kansas
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47-0549819 |
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
4700
South
19th Street
Lincoln, NE 68501-0529
(Address of principal executive offices)
(402) 421-7300
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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 o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes þ No o
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 o No o (NOTE: Nebraska Book
Company, Inc. is a voluntary filer and is not subject to the filing requirements of Section 13 or
15(d) of the Securities and Exchange Act of 1934. Although not subject to these filing
requirements, Nebraska Book Company, Inc. has filed all reports required under Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months.)
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). o
Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants 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. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
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(do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Market value of the registrants voting stock held by non-affiliates of the registrant Not
applicable as registrants stock is not publicly traded.
There were 100 shares of common stock outstanding as of June 25, 2010.
DOCUMENTS INCORPORATED BY REFERENCE: None
Total Number of Pages: 105
Exhibit Index: Page 101
PART I.
ITEM 1. BUSINESS.
References in this Annual Report on Form 10-K to the Company refer to Nebraska Book Company,
Inc., to NBC refer to our parent company, NBC Acquisition Corp., and to we, our, ours, and
us refer collectively to the Company and its subsidiaries, except where otherwise indicated and
except where the context requires otherwise.
The Company is the sole wholly-owned subsidiary of NBC. NBC does not conduct significant
activities apart from its investment in the Company. Effective July 1, 2002, our distance learning
division was separately incorporated under the laws of the State of Delaware as Specialty Books,
Inc., a wholly-owned subsidiary of the Company (Specialty Books). Effective January 1, 2005, our
textbook division was separately formed under the laws of the State of Delaware as NBC Textbooks
LLC, a wholly-owned subsidiary of the Company (Textbook Division). On May 1, 2006, the Company
added another wholly-owned subsidiary through the acquisition of all of the outstanding stock of
College Book Stores of America, Inc. (CBA), an entity separately formed under the laws of the
State of Illinois. On April 24, 2007, the Company established Net Textstore LLC, a wholly-owned
subsidiary of ours which was separately formed under the laws of the State of Delaware. Effective
January 26, 2009, the Company established Campus Authentic LLC, a wholly-owned subsidiary of ours
which was separately incorporated under the laws of the State of Delaware.
On March 4, 2004, Weston Presidio (Weston Presidio Capital III, L.P., Weston Presidio Capital
IV, L.P., WPC Entrepreneur Fund, L.P., and WPC Entrepreneur Fund II, L.P.) gained a controlling
interest in NBC, and hence in us, through (i) the formation of two new corporations, NBC Holdings
Corp. and New NBC Acquisition Corp.; (ii) a $28.2 million equity investment by Weston Presidio in
NBC Holdings Corp., funds for which were ultimately paid to NBC in the form of a capital
contribution; (iii) Weston Presidios purchase of 36,455 shares of NBCs common stock directly
from its holders; (iv) the cancellation of 870,285 shares of NBCs common stock upon payment by NBC
of merger consideration of $180.4 million to the shareholders of record for such shares; (v) the
exchange of 397,711 shares of NBCs common stock for 512,799 shares of New NBC Acquisition Corp.
capital stock in the merger of the two entities with NBC as the surviving entity; and (vi) the
exchange of 512,799 shares of NBCs common stock by Weston Presidio and current and former members
of management for a like number of shares of NBC Holdings Corp. capital stock. Payment of the
$180.4 million of merger consideration was funded through proceeds from the $28.2 million capital
contribution, available cash, and proceeds from $405.0 million in new debt financing, of which
$261.0 million was used by NBC and us to retire certain debt instruments outstanding at March 4,
2004 or to place funds in escrow for untendered debt instruments called for redemption on March 4,
2004 and redeemed on April 3, 2004. We declared and paid dividends to NBC of $184.3 million to
help finance this transaction. Throughout this Annual Report, we generally refer to all of the
steps comprising this transaction as the March 4, 2004 Transaction.
On April 27, 2004, we filed a Registration Statement on Form S-4 with the Securities and
Exchange Commission (the SEC) for purposes of registering debt securities to be issued in
exchange for the Senior Subordinated Notes arising out of the March 4, 2004 Transaction. The SEC
declared such Registration Statement effective on May 7, 2004. All notes were tendered in the
offer to exchange which was completed on June 8, 2004.
On October 2, 2009, in conjunction with the completion of our offering of the Senior Secured
Notes and payment in full of the Term Loan, we entered into the ABL Credit Agreement which provides
for the ABL Facility and replaced the Revolving Credit Facility (collectively the Refinancing).
On January 8, 2010 we filed a Registration Statement on Form S-4 with the SEC for purposes of
registering debt securities to be issued in exchange for the Senior Secured Notes arising out of
the Refinancing. The SEC declared the Registration Statement effective on February 8, 2010. All
notes were tendered in the offer to exchange that expired on March 15, 2010.
General
We sell or rent a variety of new and used textbooks and sell general merchandise, such as
apparel, general books, sundries and gift items, through our nationwide chain of bookstores on or
adjacent to college campuses. We also engage in these activities on the internet through hundreds
of websites operated by us as well as numerous third-party websites. We believe we are also one of
the largest wholesale distributors of used college textbooks in North America, offering over
105,000 textbook titles and selling over 6.3 million books annually, primarily to bookstores
serving campuses located in the United States. We are also a provider of distance education
materials to students in nontraditional courses, which include correspondence and corporate
education courses. Furthermore, we provide the college bookstore industry with a variety of
services including proprietary information and e-commerce systems, in-store promotions, buying
programs, and consulting services. With origins dating to 1915 as a single
bookstore operation, we have built a consistent reputation for excellence in order
fulfillment, shipping performance and customer service.
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We entered the wholesale used textbook market following World War II, when the supply of new
textbooks could not meet the demand created by the return of ex-GI students. We became a national,
rather than a regional, wholesaler of used textbooks as a result of our purchase of The College
Book Company of California. During the 1970s, we continued our focus on the wholesale business.
However, realizing the synergies that exist between wholesale operations and college bookstore
operations, in the 1980s, we expanded our efforts in the college bookstore market to primarily
operate bookstores on or near larger campuses, typically where the institution-owned college
bookstore was contract-managed by a competitor or where we did not have a significant wholesale
presence. In the last several fiscal years, we have revised our college bookstore strategy to
expand our efforts in the contract-management of institutional bookstores. Today, we service the
college bookstore industry through our Bookstore, Textbook, and Complementary Services Divisions.
Bookstore Division. College bookstores are a primary outlet for sales and rental of new and
used textbooks to students. We also sell a variety of other merchandise including apparel, general
books, sundries, and gift items. In addition to in-store sales, we sell textbooks and other
merchandise on the internet through our own bookstores websites as well as numerous third-party
websites. As of March 31, 2010, we operated 280 college bookstores on or adjacent to college
campuses. Of these 280 bookstores, 146 were leased from the educational institution that they
served (also referred to as contract-managed) and 134 were owned or leased off-campus bookstores.
On May 1, 2006, we acquired 101 college bookstore locations, 98 of which were contract-managed,
through the acquisition of all of the outstanding stock of CBA. CBA began providing
contract-management services to small to medium-sized colleges and universities nationwide in 1984.
Our college bookstores are located at college campuses of all sizes, including some of the
nations largest campuses, such as: Miami-Dade College; Arizona State University; Ohio State
University; University of Florida; Michigan State University; Texas A&M University; University of
Central Florida; Pennsylvania State University; University of Michigan; Florida State University;
and University of Arizona. In addition to generating profits, our Bookstore Division provides an
exclusive source of used textbooks for sale across our wholesale distribution network.
Textbook Division. We believe we are one of the largest wholesale distributors of used college
textbooks in North America. Our Textbook Division consists primarily of selling used textbooks to
college bookstores and on the internet through third-party websites, buying them back from students
or college bookstores at the end of each school semester and then reselling them to college
bookstores and on the internet. We purchase used textbooks from and resell them to college
bookstores at college campuses of all sizes, including many of the nations largest campuses, such
as: University of Virginia; Oregon State University; University of Texas; University of Illinois;
University of Washington; University of Southern California; and Long Beach State University.
Historically, because the demand for used textbooks has consistently outpaced the supply, Textbook
Division sales have been determined primarily by the amount of used textbooks that we could
purchase. Our strong relationships with the management of college bookstores nationwide have
provided important access to valuable market information regarding the campus-by-campus supply and
demand of textbooks, as well as an ability to procure large quantities of a wide variety of
textbooks. We provide an internally-developed Buyers Guide to our Textbook Division customers.
This guide lists details such as author, new copy retail price, and our repurchase price for
approximately 52,000 textbook titles.
Complementary Services Division. With our acquisition of Specialty Books in May 1997, we
entered the distance education market, which consists of providing education materials to students
in private high schools, nontraditional college and other courses (such as correspondence courses,
continuing and corporate education courses and courses offered through electronic media such as the
internet).
Other services offered to college bookstores include the sale of computer hardware and
software, such as our turnkey bookstore management software that incorporates point of sale,
inventory control and accounting modules, and related maintenance contracts. We have installed our
proprietary total store management system at over 940 college bookstore locations, and we have an
installed base of over 220 college bookstore locations for our textbook management control systems.
In total, including our own bookstores, almost 1,200 college bookstore locations use our bookstore
management software products.
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On July 1, 2003, we acquired all of the outstanding shares of common stock of
TheCampusHub.com, Inc. (CampusHub), an entity affiliated with us through common ownership.
CampusHub is no longer separately incorporated and is instead accounted for as a division within
our Complementary Services Division. CampusHub provides college bookstores with a way to sell
in-store inventory and virtual brand name merchandise over the internet utilizing technology
originally developed by us. This technology is utilized at approximately 640 bookstores.
We also provide centralized buying, consulting and store design services to assist college
bookstores with their operations.
Industry Segment Financial Information
Revenue, operating profit or loss, and identifiable assets attributable to each of our
reportable segments are disclosed in the notes to the consolidated financial statements presented
in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K. We make
our periodic and current reports available, free of charge, through
www.nebook.com as soon as
reasonably practicable after such material is electronically filed with the SEC. Information
contained on our website is not a part of this Annual Report on Form 10-K.
Business Strategy
Our objective is to strengthen our position as a leading provider of products and services to
the college bookstore market, thereby increasing revenue and cash flow. In order to accomplish our
goal, we intend to pursue the following strategies:
Capitalize on college bookstore opportunities. We intend to increase revenues for our
Bookstore Division by acquiring, opening or contract-managing additional bookstores at selected
college campuses and by offering additional textbook rental programs, specialty products and
services at our existing bookstores. We intend to pursue revenue growth and expand the buyback of
used textbook inventory through the increased use of technology to enhance our internet activity
using third-party and our own bookstores websites. Over time, we also intend to increase both
in-store and internet transactions through the introduction and use of a national brand in
appropriate markets.
Re-establish growth in the Textbook Division. We expect the Textbook Division to continue to
be a primary contributor of revenues and cash flows, primarily as a result of an expected increase
in college enrollments, continued utilization of used textbooks, and through the expansion of our
own Bookstore Division, which should provide an additional supply of used textbooks. Additionally,
to increase our supply of used textbooks, our commission structure is designed to reward customers
who make a long-term commitment to supplying us with a large portion of their textbooks, and we
continue to change and enhance our marketing campaign to increase student awareness of the benefits
of buying and selling used textbooks. Finally, we expect to continue to utilize technology to
enhance our ability to acquire and sell used textbooks in this division.
Increased market penetration through technology solutions. We intend to continue generating
incremental revenue through the sale of our turnkey bookstore management software that incorporates
point of sale, inventory control and accounting modules. The installation of our software, along
with e-commerce technology offered through CampusHub, a division within the Complementary Services
Division, also increases the channels through which we can access the college and university
market.
Expansion of other services programs. We intend to continue to develop and provide other
services that enhance the college bookstore business, such as distance education distribution, our
centralized buying group, store design consulting and other technology-related programs.
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Industry Overview
Based on recent industry trade data from the National Association of College Stores, we
believe the college bookstore industry remains strong, with approximately 4,500 college bookstores
generating annual sales of approximately $10.2 billion in the 2008-09 academic year to college
students and other consumers in the United States. Sales of textbooks and other education
materials used for classroom instruction comprise approximately sixty-five percent of that amount.
We expect this market will continue to grow as a result of continuing increases in enrollment at
U.S. colleges as estimated by the U.S. Department of Education. The United States Department of
Education projects that total enrollment in the United States colleges will increase from 18.2
million in 2008 to 19.0 million in 2012.
College bookstore market. College bookstores generally fall into three categories:
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institutional bookstores that are primarily owned and operated by institutions of
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contract-managed bookstores owned by institutions of higher learning and managed by
outside, private companies, typically found on-campus; and |
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independent bookstores privately owned and operated stores, generally located off
campus. |
Wholesale textbook market. We believe that used textbooks will continue to be attractive to
both students and college bookstores. Used textbooks provide students with a lower-cost
alternative to new textbooks and bookstores typically achieve higher margins through the sale of
used rather than new textbooks.
The pricing pattern of textbook publishing accounts for a large part of the growth of the used
textbook market. Because of copyright restrictions, each new textbook is produced by only one
publisher, which is free to set the new copy retail price and discount terms to bookstores. Based
on our experience, publishers generally offer new textbooks at prices that enable college
bookstores to achieve a gross margin of 23.0% to 25.0% on new textbooks. Historically, the high
retail costs of new textbooks and the higher margins achieved by bookstores on the sale of used
textbooks have encouraged the growth of the market for used textbooks.
The used textbook cycle begins with new textbook publishers, who purposely plan obsolescence
into the publication of new textbooks. Generally, new editions of textbooks are produced every two
to four years. In the first year of a new edition, there are few used copies of a new edition
available. In the second and third years, used textbooks become increasingly available.
Simultaneously, publishers begin to plan an updated edition. In years four and beyond, at the end
of the average life cycle of a particular edition, as publishers cut back on original production,
used textbooks generally represent a majority (in unit terms) of the particular edition in use.
While the length of the cycle varies by title (and sometimes is indefinite, as certain titles are
never updated), the basic supply/demand progression remains fairly consistent.
College bookstores begin to place orders with used textbook wholesalers once professors
determine which textbooks will be required for their upcoming courses, usually by the end of May
for the fall semester and the end of November for the spring semester. Bookstore operators must
first determine their allocation between new and used copies for a particular title but, in most
cases, they will order an ample supply of used textbooks because: (i) used textbook demand from
students is typically strong and consistent; (ii) many operators only have access to a limited
supply from wholesalers and believe that not having used textbook alternatives could create
considerable frustration among students and with the college administration; (iii) bookstore
operators earn higher margins on used textbooks than on new textbooks; and (iv) both new and used
textbooks are sold with return privileges, eliminating any overstock risk (excluding freight
charges) to the college bookstore.
New textbook ordering usually begins in June (for the fall semester), at which time the store
operator augments its expected used textbook supply by ordering new textbooks. By this time,
publishers typically will have just implemented their annual price increases. These regular price
increases allow us and our competitors to buy used textbooks based on old list prices (in May) and
to almost simultaneously sell them based on new higher prices, thereby creating an immediate margin
increase.
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While price is an important factor in the store operators purchasing decision, available
supply, as well as service, usually determine with which used textbook wholesaler a college
bookstore will develop a strong relationship. Used textbook wholesalers that are able to
significantly service a college bookstore account typically receive preferential treatment from
store operators, both in selling and in buying used textbooks. Pure exclusive supply arrangements
in our market are rare; however, in the past nine to ten fiscal years, we have been marketing
certain supply programs to the industry. These programs reward customers who make a long-term
commitment to supplying us with a large portion of their books through enhanced commissions,
express returns and book-buy promotion ideas and marketing materials. At the end of fiscal year
2010, over 480 bookstores were participating in these programs. Since we are usually able to sell
a substantial majority of the used textbooks we are able to purchase, our ability to obtain
sufficient supply is a critical factor in our success.
Products and Services
Bookstore Division. As of March 31, 2010, we operated 280 college bookstores on or adjacent to
college campuses. These bookstores sell and rent a wide variety of used and new textbooks and sell
general books and assorted merchandise, including apparel, sundries and gift items. Over the past
three fiscal years, external customer revenues (revenues excluding intercompany revenues) of our
bookstores from activities other than used and new textbook sales and rentals have been between
16.6% and 17.4% of total revenues. We have been, and intend to continue, selectively expanding our
product offerings at our bookstores in order to increase revenues and profitability. We have also
installed, and are continually improving, software that provides e-commerce capabilities in all of
our own bookstores, thereby allowing our bookstores to further expand product offerings and compete
with other online textbook and general merchandise sellers. All of our bookstores sell through
their own customized websites and many stores also sell textbooks and general merchandise through
third-party websites that are popular among college students such as Amazon.com and Half.com.
Textbook Division. Our Textbook Division is engaged in the procurement and redistribution of
used textbooks on college campuses primarily across the United States and through third-party
websites. The portion of the used textbook business that our division operates in is limited to
certain stores, certain textbooks and certain third-party websites. In general, the portion of the
college bookstore market that our Textbook Division cannot access includes those contract-managed
stores that are not operated by us that sell their used textbooks to affiliated companies,
institutional and independent bookstores, to the extent that such used textbooks are repurchased
from students and are retained by the bookstore for resale without involving a wholesaler and
third-party websites that we do not buy and sell used textbooks through.
We publish the Buyers Guide, which lists approximately 52,000 textbooks according to author,
title, new copy retail price, and our repurchase price. The Buyers Guide is an important part of
our inventory control and textbook procurement system. We update and reprint the Buyers Guide nine
times each year and make it available in both print and various electronic formats, including on
our proprietary software applications. A staff of dedicated professionals gathers information from
all over the country in order to make the Buyers Guide into what we believe to be the most
comprehensive and up-to-date pricing and buying aid for college bookstores. We also maintain a
database of approximately 174,000 titles in order to better serve our customers.
Complementary Services Division. Through Specialty Books, we have access to the market for
distance education products and services. Currently, we provide students at approximately 30
colleges and private high schools with textbooks and materials for use in distance education and
other education courses, and we are a provider of textbooks to nontraditional programs and students
such as correspondence or corporate education students. We believe the fragmented distance
education market represents an opportunity for us to leverage our fulfillment and distribution
expertise in a growing sector of the industry. Beyond textbooks, we offer services and specialty
course materials to the distance education marketplace. Students are provided a web portal
allowing them a secure and easy-to-use method for obtaining their course materials. Over the past
three fiscal years, external customer revenues of Specialty Books have been between 50.2% and 54.9%
of total Complementary Services Division revenues.
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Other services offered to college bookstores include services related to our turnkey bookstore
management software that incorporates point of sale, inventory control and accounting modules, the
sale of other software and hardware, and the related maintenance contracts. These services generate
revenue and assist us in gaining access to new sources of used textbooks. We have installed our
proprietary total store management system at over 940 college bookstore locations, and we have an
installed base of over 220 college bookstore locations for our textbook management control systems.
In total, including our own bookstores, almost 1,200 college bookstore locations use our bookstore
management software products. In addition, we have developed software for e-commerce capabilities.
These software products allow college bookstores to launch their own e-commerce site and
effectively compete against other online textbook and general merchandise sellers by offering
textbooks and both traditional and non-traditional store merchandise online. Presently, there are
approximately 640 stores, including our own stores, licensing our e-commerce technology via
CampusHub. We also offer a digital delivery solution which allows a college bookstore to offer
students the option of purchasing E-books via download in addition to new and used textbooks. On
April 14, 2008, we announced an agreement with CourseSmart, a comprehensive supplier of digital
course materials, which establishes us as CourseSmarts preferred supplier of e-books to the
college bookstore community.
Through C2O, we are able to offer a variety of products and services to participating college
bookstores. C2O negotiates apparel, supplies, gifts, and general merchandise discounts and develops
and executes marketing programs for its membership. C2O has evolved into a buying group with
substantial purchasing clout by aggregating the purchasing power of approximately 770 participating
stores. Other C2O marketing services include a freight savings program, a credit card processing
program, a shopping bag program, and retail display allowances for magazine displays.
Additionally, the C2O staff of experienced professionals consults with the management and buyers of
member bookstores. Consulting services offered include strategic planning, store review,
merchandise assortment planning, buyer training, and help with other operational aspects of the
business. While consulting has historically represented a relatively small component of C2Os
business, it is nonetheless strategically important to the ongoing success of this aspect of our
business.
We also provide consulting and store design services to assist college bookstores in store
presentation and layout.
Business Description
Bookstore Division. An important aspect of our business strategy is a program designed to
reach new customers through the opening or acquisition of bookstores adjacent to college campuses
or the contract-management of stores on campus. In addition to generating sales or rentals of new
and used textbooks and sales of general merchandise, these outlets enhance our Textbook Division by
increasing the inventory of used books purchased from the campus.
A desirable campus for a company-operated, off-campus college bookstore is one on which our
Textbook Division does not currently buy or sell used textbooks either because a competitor
contract-manages the colleges bookstore or the college bookstore does not have a strong
relationship with us. We generally will not open a location on a campus where we already have a
strong relationship with the college bookstore because some college bookstores may view having a
competing location as a conflict of interest. A desirable campus for contract-management is one
where the current contract-management service is being provided by a competitor of ours and the
contract is expiring.
We tailor each of our own bookstores to fit the needs and lifestyles of the campus on which it
is located. Individual bookstore managers are given significant planning and managing
responsibilities, including, hiring employees, controlling cash and inventory, and purchasing and
merchandising product. We have staff specialists, or contracts with external specialists, to assist
individual bookstore managers in such areas as store planning, merchandise purchasing and layout,
inventory control and media buying.
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As of March 31, 2010 we operated 280 college bookstores nationwide, having expanded from 124
bookstores at the beginning of fiscal year 2006. During fiscal year 2010, we initiated the
contract-management of 14 bookstore locations and established the start-up of 6 bookstore
locations.
The table below highlights certain information regarding our bookstores added and closed
through March 31, 2010.
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Bookstores |
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Bookstores Open |
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Bookstores |
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Lost/Closed |
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Bookstores at |
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at Beginning of |
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Added During |
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During Fiscal |
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End of Fiscal |
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Fiscal Year |
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Fiscal Year |
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Fiscal Year |
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Year |
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Year |
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2006 |
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124 |
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17 |
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2 |
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139 |
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2007 |
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139 |
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120 |
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15 |
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244 |
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2008 |
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244 |
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23 |
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7 |
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260 |
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2009 |
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260 |
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24 |
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7 |
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277 |
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2010 |
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277 |
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20 |
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17 |
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280 |
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We plan to continue increasing the number of bookstores in operation. The private bookstore
expansion plan will focus on campuses where we do not already have a strong relationship with the
on-campus bookstore. In determining whether or not to purchase an existing bookstore or open a new
bookstore, we look at several criteria: (i) a large enough market to justify our efforts (typically
this means a campus of at least 5,000 students); (ii) the competitive environment (how many
bookstores currently serve the campus); (iii) a site in close proximity to campus with adequate
parking and accessibility; (iv) the potential of the bookstore to have a broad product mix (larger
bookstores are more attractive than smaller bookstores because a full line of general merchandise
can be offered in addition to textbooks); (v) the availability of top-quality management; and (vi)
certain other factors, including leasehold improvement opportunities and personnel costs. We also
plan to pursue opportunities to contract-manage additional institutional stores. In determining to
pursue opportunities to contract-manage a campus bookstore, we look at: (i) the size of the market;
(ii) the competitive status of the market; (iii) the availability of top quality management; and
(iv) certain other factors, including personnel costs. As mentioned previously, on May 1, 2006, we
acquired 101 college bookstore locations, 98 of which were contract-managed, through the
acquisition of all of the outstanding stock of CBA.
Wholesale Procurement and Distribution. Historically, because the demand for used textbooks
has consistently exceeded supply, our sales have been primarily determined by the amount of used
textbooks that we can purchase. As a result, our success has depended primarily on our inventory
procurement, and we continue to focus our efforts on obtaining inventory. In order to ensure our
ability to both obtain and redistribute inventory, our Textbook Division strategy has emphasized
establishing and maintaining strong customer and supplier relationships with college bookstores
(primarily, independent and institutional college bookstores) through our employee account
representatives. These 27 account representatives (as of March 31, 2010) are responsible for
procuring used textbooks from students, marketing our services on campus, purchasing overstock
textbooks from bookstores and securing leads for sale of our systems products. We have been able
to maintain a competitive edge by providing superior service, made possible primarily through the
development and maintenance of ready access to inventory, information and supply. Other components
of the Textbook Division strategy and its implementation include: (i) selectively paying a marginal
premium relative to competitors to entice students to sell back more textbooks to us; (ii) gaining
access to competitive campuses (where the campus bookstore is contract-managed by a competitor) by
opening or acquiring off-campus, company-owned college
bookstores; (iii) using technology to gain efficiencies and to improve customer service; (iv)
maintaining a knowledgeable and experienced sales force that is customer-service oriented; (v)
providing working capital flexibility for bookstores making substantial purchases; (vi)
establishing long-term supply arrangements by rewarding customers who make a long-term commitment
to supplying us with a large portion of their books; and (vii) purchasing and selling textbooks
over the internet through third-party websites.
The two major used textbook purchasing seasons are at the end of each academic semester, May
and December. Although we make textbook purchases during other periods, the inventory purchased in
May, before publishers announce their price increases in June and July, allows us to purchase
inventory based on the lower retail prices of the previous year. The combination of this
purchasing cycle and the fact that we are able to sell our inventory in relation to retail prices
for the following year permits us to realize additional gross profit. We advance cash to our
representatives during these two periods, and the representatives in turn buy textbooks directly
from students, generally through the on-campus bookstore.
9
After we purchase the textbooks, we arrange for shipment to our warehouse in Nebraska via
common carrier. At the warehouse, we refurbish damaged textbooks and categorize and shelve all
other textbooks in a timely manner, and enter them into our online inventory system.
Customers place orders by phone, mail, fax or other electronic method. Upon receiving an
order, we remove the textbooks from available inventory and hold them for future shipping.
Customers may generally return textbooks within 60 days after the start of classes (90 days for
certain customers participating in the exclusive supply program). External customer returns over
the past three fiscal years have averaged approximately 23.7% of sales and generally are
attributable to course cancellations or overstocking. The majority of returns are textbooks that
we are able to resell for the next semester.
Information Technology. We believe that we can enhance efficiency, profitability and
competitiveness through investments in technology. Because our solutions create a competitive
advantage, establish efficiencies and ensure cost-effectiveness of both our operations and the
operations of our bookstore customers and suppliers, some of our proprietary software applications
are currently in patent pending status with the United States Patent and Trademark Office.
Additionally, we have registered trademarks for many of our software product names where brand
recognition may be an important factor.
The center of our technology infrastructure revolves around PRISM and WinPRISM, our
proprietary college store management, textbook management, point of sale, and inventory control
systems. With more than a combined 25 years of availability in the marketplace, these proven
software applications are maintained and continuously enhanced by a dedicated team of development
and support professionals. Our technology operations process order entry, control inventory,
generate purchase orders and customer invoices, generate various sales reports, and process and
retrieve textbook information. In addition, we have developed integrated e-commerce software and
service solutions allowing college bookstores to launch their own e-commerce site and effectively
compete against other online textbook and general merchandise sellers by offering both print and
digital textbooks and both traditional and non-traditional store merchandise online. We also
develop, license or obtain certain rights related to other software designed to strengthen our
e-commerce capabilities, including the capability for our bookstores to efficiently sell inventory
through third-party websites that are popular among college students such as Amazon.com and
Half.com.
In addition to using our technology for our own benefit through management and inventory
control, we license the use of certain technology to bookstores. The use of our software by
bookstore customers and suppliers helps solidify the business relationship, resulting in increased
sales and access to additional inventory.
We conduct training courses for all systems users online and at our headquarters in Lincoln,
Nebraska. Classes are small and provide hands on training for the various systems. Printed
reference manuals and training materials accompany each system. The customer support call center is
staffed with approximately 60 experienced personnel. Support is offered via website, e-mail, and
toll-free phone numbers. While support hours vary per product and time of year, after-hours pager
support is available for mission-critical systems.
Beginning late in fiscal year 2008, we embarked on a project to replace our
internally-developed general ledger system with a general ledger/business planning and
consolidation solution from SAP. During fiscal year 2009, the new solution was put into place and
utilized for internal management reporting and the fiscal year 2010 budgeting process. The new
solution was fully integrated in fiscal year 2010, and, among other things, provides us with
greater flexibility in recording and analyzing our operating results and streamlining our budgeting
process and is utilized for external financial reporting purposes.
Customers
Our college bookstores are located at college campuses of all sizes, including some of the
nations largest campuses, such as: Miami-Dade College; Arizona State University; Ohio State
University; University of Florida; Michigan State University; Texas A&M University; University of
Central Florida; Pennsylvania State University; University of Michigan; Florida State University;
and University of Arizona.
We sell our Textbook and certain Complementary Services Division products and services to
college bookstores throughout North America, primarily throughout the United States. Our Textbook
Division purchases from and resells used textbooks to college bookstores at college campuses of all
sizes, including many of the nations largest campuses, such as: University of Virginia; Oregon
State University; University of Texas; University of Illinois; University of Washington; University
of Southern California; and Long Beach State University. Our 25 largest Textbook Division
customers accounted for approximately 2.7% of our fiscal year 2010 consolidated revenues. No
single Textbook Division customer accounted for more than 1.0% of our fiscal year 2010 consolidated
revenues.
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Our distance education program is, among other things, a primary supplier of textbooks and
educational material to students enrolled in online courses offered through approximately 30
colleges and private high schools. For the fiscal years ended March 31, 2010, 2009 and 2008, one
institution accounted for approximately 68%, 69% and 63%, respectively, of distance education
program external customer revenues.
No single customer accounted for more than 10.0% of our consolidated revenues in fiscal year
2010, 2009 or 2008.
Competition
We compete with a variety of other companies and also individuals, all of whom seek to provide
products and/or services to the college marketplace. Our main corporate competitors, who provide
products and services to colleges and universities, college bookstores and directly to students,
are Follett Higher Education Group (Follett) and MBS Textbook Exchange/Barnes & Noble College
Booksellers (MBS). MBS Textbook Exchange and Barnes & Noble College Booksellers are affiliated
companies with certain common ownership.
Our Bookstore Division competes with:
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Follett, MBS and a number of smaller companies for the opportunity to contract-manage
institutional college bookstores (Follett and MBS contract-manage more than 700 and 600
stores, respectively); |
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other college bookstores located at colleges and universities that we serve; |
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a number of entities that rent or sell textbooks, sell e-books, other digital content
and other merchandise directly to students through e-commerce bypassing the traditional
college bookstore; |
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student-to-student transactions that take place on campus and over the internet; and |
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course packs and electronic media as a source of textbook information, such as
on-line resources, e-books, print-on-demand textbooks and CD-ROMs which may replace or
modify the need for students to purchase textbooks through the traditional college
bookstore. |
Our Textbook Division competes in the used textbook market, which includes the purchase and
resale of used textbooks. We compete with:
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college bookstores who normally repurchase textbooks from students to be reused on
that campus the following semester or term; |
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student-to-student transactions that take place on campus and over the internet; |
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other wholesalers who purchase used textbooks from students and then resell them to
other college bookstores; and |
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a number of individuals and companies that buy textbooks directly from students
through e-commerce, or in person, bypassing the traditional college bookstores who are
the Textbook Divisions suppliers and customers. |
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Our Textbook Division competes in the wholesale business with Follett and MBS, and certain
smaller regional companies including Budgetext, Texas Book Company, Tichenor College Textbook
Company, and South Eastern Book Company. We believe that our market share of the independent and
non-contract-managed institutional stores is comparable to that of Follett and MBS individually.
Many of Folletts and some of MBSs college bookstores are located on smaller campuses. The size
of the campus and their presence there have precluded us from entering these markets, which in turn
affects both our ability to buy books and our ability to add new accounts.
Our Complementary Services Division competes with:
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MBS in the sale and installation of college bookstore information technology; |
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MBS in the distance education textbook distribution market; |
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college bookstores that provide their own e-commerce solution in competition with
CampusHub; |
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the Independent College Bookstore Association (ICBA) in the centralized buying
service business (participation by college bookstores in C2Os or ICBAs centralized
buying service is voluntary, and college bookstores may, and some do, belong to both
buying associations); and |
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a variety of smaller organizations and individuals involved in these businesses and
others such as marketing services and consulting services. |
Governmental Regulation
We are subject to various federal, state and local health and safety laws and regulations.
Generally, these laws establish standards for vehicle and employee safety. These laws include the
Occupational Safety and Health Act. Future developments, such as stricter employee health and
safety laws and regulations thereunder, could affect our operations. We do not currently anticipate
that the cost of our compliance with, or of any foreseeable liabilities under, employee health and
safety laws and regulations will have a material adverse affect on our business or financial
condition.
Insurance
We maintain general liability, property, workers compensation and other insurance in amounts
and on terms that we believe are customary for companies similarly situated. In addition, we
maintain excess insurance where we reasonably believe it is cost effective.
Employees
As of March 31, 2010 we had a total of approximately 2,600 employees, of which approximately
1,300 were full-time, approximately 800 were part-time and approximately 500 were temporary. We
have no unionized employees and believe that our relationship with our employees is satisfactory.
In view of the seasonal nature of our Textbook Division, we use seasonal labor to improve
operating efficiency. We employ a small number of flex-pool workers who are cross-trained in a
variety of warehouse functions. Temporary employees augment the flex-pool to meet periodic labor
demands.
Geographic Financial Information
Revenues from external customers and long-lived assets, all of which are attributable to
domestic operations, are disclosed in the notes to the consolidated financial statements presented
in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
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ITEM 1A. RISK FACTORS.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking statements as a result of a
number of factors, including, but not limited to, those set forth in the following cautionary
statements and elsewhere in this Annual Report on Form 10-K.
Our highly leveraged capital structure, as well as the conditions of the financial markets,
could affect our ability to extend or refinance debt in advance of its maturity, which would
negatively impact our liquidity and financial condition. Current global financial conditions have
been characterized by increased market volatility. The global credit markets have been
experiencing significant price volatility, dislocations and liquidity disruptions that have caused
the interest rate cost of debt financings to increase considerably.
These circumstances have materially impacted liquidity in the financial markets, making terms
for certain financings less attractive, and in some cases have resulted in the unavailability of
financing. Continued uncertainty in the credit markets may negatively impact our ability to extend
or refinance our existing debt on reasonable terms or at all, which may negatively affect our
business.
Our three tranches of debt (the Senior Secured Notes, the ABL Facility and the Senior
Subordinated Notes) each may mature within a period of six months of each other. The ABL Facility
may mature on the earlier of October 2, 2012 and the date that is 91 days prior to the earliest
maturity of the Senior Secured Notes (which mature on December 1, 2011), the Senior Subordinated
Notes (which mature on March 15, 2012), NBCs Senior Discount Notes (which mature on March 15,
2013), or any refinancing thereof. As a consequence, we may be required to refinance the other
tranches of debt in our capital structure as well as NBCs Senior Discount Notes, in order to
refinance the ABL Facility. Due to our highly leveraged capital structure, in the absence of a
significant improvement in our credit profile and/or the financial markets, we may not be able to
refinance our indebtedness, or NBC may not be able to refinance its indebtedness, at all or on
terms acceptable to us.
We face competition in our markets, which could adversely impact our revenue levels, profit
margins and ability to acquire an adequate supply of used textbooks. Our industry is highly
competitive. A large number of actual and potential competitors exist, some of which are larger
than us and have substantially greater resources than us. Revenue levels and profit margins could
be adversely impacted if we experience increased competition in the markets in which we currently
operate or in markets in which we will operate in the future.
We are experiencing growing competition from alternative media and alternative sources of
textbooks for students (such as websites designed to rent or sell textbooks and sell e-books, other
digital content and other merchandise directly to students; on-line resources; publishers selling
or renting directly to students; print-on-demand textbooks; and CD-ROMs) and from the use of course
packs (which are collections of copyrighted materials and professors original content which are
produced by college bookstores and sold to students), all of which have the potential to reduce or
replace the need for textbooks sold through college bookstores. A substantial increase in the
availability or the acceptance of these alternatives as a source of textbooks and textbook
information could significantly reduce college students use of college bookstores and/or the use
of traditional textbooks and thus adversely impact our revenue levels and profit margins.
We are also experiencing growing competition from technology-enabled student-to-student
transactions that take place over the internet. These transactions, whereby a student enters into
a transaction directly with another student for the sale and purchase of a textbook, provide
competition by reducing the supply of textbooks available to us for purchase and by reducing the
sale of textbooks through college bookstores. While these transactions have occurred for many
years, prior to the internet these transactions were limited by geography, a lack of information
related to pricing and demand, and other factors. A significant increase in the number of these
transactions could adversely impact our revenue levels and profit margins.
Over the years, an increasing number of institution-owned college bookstores have decided to
outsource or contract-manage the operation of their bookstores. The leading managers of these
bookstores include two of our principal competitors in the wholesale textbook distribution
business. Contract-managed bookstores primarily purchase their used textbook requirements from and
sell their available supply of used textbooks to their affiliated operations. A significant
increase in the number of contract-managed bookstores operated by our competitors, particularly at
large college campuses, could adversely affect our ability to acquire an adequate supply of used
textbooks.
We believe all of these competitive factors have contributed to a decline in textbooks sold in
the Textbook Division.
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Further deterioration in the economy and credit markets, a decline in consumer spending or
other conditions may adversely affect our future results of operations. As widely reported, the
global credit markets and financial services industry have been experiencing a period of upheaval
characterized by the bankruptcy, failure, collapse or sale of various financial institutions,
diminished liquidity and credit availability, declines in consumer confidence, declines in economic
growth, increases in unemployment rates, uncertainty about economic stability and intervention
from the United States federal government. There can be no assurance that there will not be
further deterioration in credit and financial markets and confidence in economic conditions or that
any recovery, if and when achieved, will be sustained. While the ultimate outcome of these events
cannot be predicted, it may decrease student enrollment in colleges and universities due to the
lack of financial aid and other sources of funding for education. Spending by students on
textbooks and other general merchandise may also decrease due to the economic downturn.
We are the sole operating subsidiary of our parent company and will need to continue to
distribute funds to our parent to permit satisfaction of its obligations. Our parent company, NBC,
is a holding company and as such conducts substantially all of its operations through us and our
subsidiaries. Consequently, NBC does not have any income from its own operations and does not
expect to generate income from its own operations in the future. As a result, NBCs ability to
meet its debt service obligations, including its obligations under its $77.0 million (face value)
11% Senior Discount Notes, substantially depends upon our and our subsidiaries cash flow and
distribution of funds by us as dividends, loans, advances or other payments. Our ability to
distribute funds to NBC will be limited under certain circumstances under the terms of our
indentures and our other indebtedness. If in the future NBC were unable to satisfy its obligations
under the Senior Discount Notes, which could result from the application of these restrictions on
our ability to distribute funds to NBC, it could result in an event of default under the Senior
Discount Notes. An event of default under the Senior Discount Notes could result in cross-defaults
under our indebtedness, including the ABL Facility.
We may be unable to obtain a sufficient supply of used textbooks, which could adversely impact
our revenue levels and profit margins. Our ability to purchase a sufficient number of used
textbooks largely determines our used textbook sales for future periods. Successfully acquiring
books typically requires a visible presence on college campuses at the end of each semester, which
requires hiring a significant number of temporary personnel, and having access to sufficient funds
under a revolving credit facility or other financing alternatives to purchase the books. Textbook
acquisition also depends upon college students willingness to sell their used textbooks at the end
of each semester. The unavailability of sufficient personnel or credit, or a shift in student
preferences, could impair our ability to acquire sufficient used textbooks to meet our sales
objectives, thereby adversely impacting our revenue levels and profit margins.
We may not be able to successfully acquire or contract-manage additional bookstores or
integrate those additional stores, which could adversely impact our ability to grow revenues and
profit margins. Part of our business strategy is to expand sales for our college bookstore
operations by either acquiring privately-owned bookstores or being awarded additional contracts to
manage institutional bookstores. We may not be able to identify additional private bookstores for
acquisition or we may not be successful in competing for contracts to manage additional
institutional bookstores. Due to the seasonal nature of business in our bookstores, the
operations of the acquired or newly contract-managed bookstores may be affected by the time of the
fiscal year when a bookstore is acquired or contract-managed by us. The process may require
financial resources that would otherwise be available for our existing operations. Our integration
of these future bookstores may not be successful; or, the anticipated strategic benefits of these
future bookstores may not be realized or may not be realized within time frames contemplated by our
management. Acquisitions and additional contract-managed bookstores may involve a number of special
risks, including, but not limited to, adverse short-term effects on our reported results of
operations, diversion of managements attention, standardization of accounting systems, dependence
on retaining, hiring and training key personnel, unanticipated problems or legal liabilities, and
actions of our competitors and customers. If we are unable to successfully integrate our future
bookstores for these or other reasons, anticipated revenues and profit margins from these new
bookstores could be adversely impacted.
14
We may not be able to successfully renew our contract-managed bookstores on profitable terms,
which could adversely impact our profit margins. As we expand our operations in
contract-management of institutional bookstores, we will increasingly be competing for the renewal
of our contracts for those stores as the current contracts expire. Our contracts are typically for
3 to 5 years, with various renewal and cancellation clauses. We may not be successful in renewing
our current contracts or those renewals may not be on terms that provide us the opportunity to
improve or maintain the profitability of managing the bookstore. If we are unable to successfully
renew our contracts on profitable terms, our profit margins could be adversely impacted.
Publishers may not continue to increase prices of textbooks annually, which could adversely
impact our revenue levels and profit margins. We generally buy used textbooks based on publishers
prevailing prices for new textbooks just prior to the implementation by publishers of their annual
price increases (which historically have been 4% to 5%) and resell these textbooks shortly
thereafter based upon the new higher prices, thereby creating an immediate margin increase. Our
ability to increase our used textbook prices each fiscal year depends on annual price increases on
new textbooks implemented by publishers. The failure of publishers to continue annual price
increases on new textbooks could adversely impact our revenue levels and profit margins. In recent
periods, annual increases in prices have allowed us to partially offset a decline in unit sales,
however there is no guaranty that this will continue.
Publisher practices regarding new editions and materials packaged with new textbooks could
change, thereby reducing the supply of used textbooks available to us and adversely impacting our
revenue levels and profit margins. Publishers have historically produced new editions of textbooks
every two to four years. Changes in the business models of publishers to accelerate the new
edition cycle or to significantly increase the number of textbooks with other materials packaged or
bundled with them (which makes it more difficult to repurchase and resell the entire package of
materials) could reduce the supply of used textbooks available to us, thereby adversely impacting
our revenue levels and profit margins.
The loss or retirement of key members of management may occur, which could negatively affect
our ability to execute our current strategy and/or our ability to effectively react to changing
industry dynamics, thereby adversely impacting our revenue levels and profit margins. Our future
success depends to a significant extent on the efforts and abilities of our senior management team.
The loss of the services of any one of these individuals could negatively affect our ability to
execute our current strategy and/or our ability to effectively react to changing industry dynamics,
thereby adversely impacting our revenue levels and profit margins.
Our wholesale and bookstore operations are seasonal in nature a significant reduction in
sales during our peak selling periods could adversely impact our ability to repay the ABL Facility,
thereby increasing interest expense and adversely impacting revenue levels by restricting our
ability to buy an adequate supply of used textbooks. Our wholesale and bookstore operations
experience two distinct selling periods and our wholesale operations experience two distinct buying
periods. The peak selling periods for the wholesale operations occur prior to the beginning of each
school semester in July/August and November/December. The buying periods for the wholesale
operations occur at the end of each school semester in May and December. The primary selling
periods for the bookstore operations are in August/September and January. In fiscal year 2010, 46%
of our annual revenues occurred in the second fiscal quarter (July-September), while 32% of our
annual revenues occurred in the fourth fiscal quarter (January-March). Accordingly, our working
capital requirements fluctuate throughout the fiscal year, increasing substantially in May and
December as a result of the buying periods. We fund our working capital requirements primarily
through the ABL Facility. We repay the ABL Facility with cash provided from operations. A
significant reduction in sales during our peak selling periods could adversely impact our ability
to repay the ABL Facility, increase the average balance outstanding under the ABL Facility (thereby
resulting in increased interest expense), and restrict our ability to buy an adequate supply of
used textbooks (thereby adversely impacting our revenue levels).
We are controlled by one principal equity holder, which has the power to take unilateral
action and could have an interest in pursuing acquisitions, divestitures and other transactions,
even though such transactions might involve risks to other affected parties. Weston Presidio
beneficially owns approximately 81.4% of NBCs issued and outstanding common stock (taking into
account for such percentage calculation options outstanding and options available, if any, for
future grant under the 2004 Stock Option Plan). As a result, Weston Presidio is able to control
all matters, including the election of a majority of our board of directors, the approval of
amendments to NBCs and our certificate of incorporation and the approval of fundamental corporate
transactions such as mergers and asset sales. The interests of Weston Presidio may not in all cases
be aligned with the interests of other affected parties. In addition, Weston Presidio may have an
interest in pursuing acquisitions, divestitures and other transactions, including selling us, that,
in its judgment, could affect its equity investment, even though such transactions might involve
risks to other affected parties.
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Our substantial indebtedness could limit cash flow available for our operations and could
adversely affect our ability to service debt or obtain additional financing, if necessary. As of
March 31, 2010, we had total outstanding debt of approximately $377.6 million. Our level of
indebtedness could have important consequences. For example, it could:
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make it more difficult to pay our debts as they become due, especially during general
negative economic and market industry conditions because if our revenues decrease due to
general economic or industry conditions, we may not have sufficient cash flow from
operations to make our scheduled debt payments; |
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limit our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate and, consequently, places us at a competitive
disadvantage to our competitors with less debt; |
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require us to dedicate a substantial portion of our cash flow from operations to
service our debt, thereby reducing the availability of our cash flow to fund working
capital, capital expenditures, acquisitions and other general corporate purposes; |
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limit our ability to make strategic acquisitions, invest in new products or capital
assets or take advantage of business opportunities; |
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limit our ability to obtain additional financing, particularly in the current
economic environment; and |
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render us more vulnerable to general adverse economic, regulatory and industry
conditions. |
Restrictive covenants may adversely affect our operations. The ABL Credit Agreement and the
indentures governing the Senior Secured Notes, the Senior Subordinated Notes, and NBCs Senior
Discount Notes contain various covenants that limit our ability to, among other things:
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incur or assume additional debt or provide guarantees in respect of obligations of
other persons; |
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issue redeemable stock and preferred stock; |
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pay dividends or distributions or redeem or repurchase capital stock; |
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prepay, redeem or repurchase debt; |
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make loans, investments and capital expenditures; |
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engage in sale/leaseback transactions; |
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restrict dividends, loans or asset transfers from our subsidiaries; |
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sell or otherwise dispose of assets, including capital stock of subsidiaries; |
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consolidate or merge with or into, or sell substantially all of our assets to,
another person; |
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enter into transactions with affiliates; and |
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enter into new lines of business. |
In addition, the restrictive covenants in the ABL Credit Agreement require us to maintain
specified financial ratios and satisfy other financial condition tests. Our ability to meet those
financial ratios and tests can be affected by events beyond our control, and we cannot assure you
that we will meet them. A breach of any of these covenants could result in a default under the ABL
Facility. Moreover, the occurrence of a default under the ABL Facility could result in an event of
default under our other indebtedness including the Senior Subordinated Notes and the Senior Secured
Notes and NBCs Senior Discount Notes. Upon the occurrence of an event of default under the ABL
Facility, the lenders could elect to declare all amounts outstanding under the ABL Facility to be
immediately due and payable and terminate all commitments to extend further credit. If we were
unable to
repay those amounts, the lenders under the ABL Facility could proceed against the collateral
granted to them to secure that indebtedness. We have pledged substantially all of our assets as
collateral under the ABL Facility. If the lenders under the ABL Facility accelerate the repayment
of borrowings, we cannot assure you that we will have sufficient assets to repay the ABL Facility
and our other indebtedness or borrow sufficient funds to refinance such indebtedness. Even if we
are able to obtain new financing, it may not be on commercially reasonable terms, or terms that are
acceptable to us.
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The amount of borrowings permitted under the ABL Facility may fluctuate significantly, and the
maturity of the ABL Facility may be accelerated under certain circumstances, which may adversely
affect our liquidity, financial position and results of operations. The amount of borrowings
permitted at any time under the ABL Facility is limited to a monthly (or more frequently under
certain circumstances) borrowing base valuation of our inventory, accounts receivable and certain
cash balances. As a result, access to credit under the ABL Facility is potentially subject to
significant fluctuations depending on the value of the eligible assets that comprise the borrowing
base as of any measurement date, as well as certain discretionary rights of the agent in respect of
the calculation of such borrowing base value. In addition, in the event that we fail to comply
with the covenants and restrictions of the ABL Facility, we may be in default, at which time
payment of the obligations and unpaid interest may be accelerated and become immediately due and
payable under the ABL Facility, which may adversely affect our liquidity, financial position and
results of operations.
A portion of our goodwill recently became impaired and we may be required to write down
additional amounts of goodwill or identifiable intangibles and record impairment charges if future
circumstances indicate that goodwill or identifiable intangibles are impaired. We monitor relevant
circumstances, including industry trends, general economic conditions, and the potential impact
that such circumstances might have on the valuation of our goodwill and identifiable intangibles.
It is possible that changes in such circumstances, or in the numerous variables associated with the
judgments, assumptions and estimates made by us in assessing the appropriate valuation of our
goodwill and identifiable intangibles, could in the future require us to further write down a
portion of our goodwill or write down a portion of our identifiable intangibles and record related
non-cash impairment charges. We evaluate the impairment of the carrying value of our goodwill and
identifiable intangibles in accordance with applicable accounting standards, including the
Intangibles Goodwill and Other and Property, Plant and Equipment Topics of the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (Codification). In
accordance with such standards, we evaluate impairment on goodwill and certain identifiable
intangibles annually and evaluate impairment on all intangibles whenever events or changes in
circumstances indicate that the carrying amounts of such assets may not be recoverable. Our
evaluation of impairment is based on a combination of our projection of estimated future cash flows
and other valuation methodologies. We recorded impairment charges of $107.0 million to reduce the
carrying value of goodwill to its estimated fair value at March 31, 2009. We completed our annual
test for impairment during the fourth quarter for the year ended March 31, 2010 and no impairment
was indicated. The goodwill impairment charge is described in greater detail in Note F of the
notes to our consolidated financial statements.
Our operations are subject to various laws, rules and regulations relating to protection of
the environment and of human health and safety. Our operations are subject to federal, state and
local laws relating to the protection of the environment and of human health and safety. As an
owner and operator of real property, we can be found jointly and severally liable under such laws
for costs associated with investigating, removing and remediating any hazardous or toxic substances
that may exist on, in or about our real property. This liability can be imposed without regard to
whether the owner or operator had knowledge of, or was actually responsible for causing, the
conditions being addressed. Some of our properties may have been impacted by the migration of
hazardous substances released at neighboring third-party locations. In addition, it is possible
that we may face claims alleging harmful exposure to, or property damage resulting from, the
release of hazardous or toxic substances at or from our locations or otherwise related to our
business. Environmental conditions relating to any former, current or future locations could
adversely impact our business and results of operations.
Increases in the price of raw materials used by our suppliers or the reduced availability of
raw materials to our suppliers could increase their cost of goods, which could be passed on to us
through higher prices in new textbooks, clothing and general merchandise, which may decrease our
profitability. The principal raw materials used by our suppliers are paper, various fabrics and
plastics. The prices we pay our suppliers for new textbooks, clothing and general merchandise are
dependent in part on the market price for raw materials used to produce them. The price and
availability of such raw materials may fluctuate substantially, depending on a variety of factors,
including demand, crop yields, weather, supply conditions, transportation costs, energy prices,
work stoppages, government regulation, economic climates and other unpredictable factors. Any and
all of these factors may be exacerbated by global climate change. Fluctuations in the price and
availability of raw materials to our suppliers have not materially affected our profitability in
recent years. However, increases in raw material costs, together with other factors, might cause
an increase in the cost of goods for our suppliers which may be passed onto us through higher
prices.
17
ITEM 2. PROPERTIES.
At March 31, 2010, our Bookstore Division locations consisted of the following: (i) 6 owned
off-campus bookstore locations, (ii) 128 leased off-campus bookstore locations, and (iii) 146
leased on-campus (contract-managed) bookstore locations serving university and post-graduate
educational institutions throughout the United States. These institutions serve more than 2
million students. We own our two Textbook Division warehouses (totaling 253,000 square feet) in
Lincoln, Nebraska (one of which is also the location of our headquarters). Our distance education
program resides in a leased facility with 49,500 square feet in Athens, Ohio. The lease, as
amended, expires on May 31, 2011 and has one one-year option to renew.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we are subject to legal proceedings and other claims arising in the
ordinary course of our business. We believe that currently we are not a party to any litigation
the outcome of which would have a material adverse affect on our financial condition or results of
operations. We maintain insurance coverage against claims in an amount which we believe to be
adequate.
ITEM 4. RESERVED AND REMOVED.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
There were no equity securities issued by us during fiscal year 2010. There is no established
public trading market for our common stock and all of our common stock is owned by NBC. As
discussed in Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operations and Item 8, Financial Statements and Supplementary Data, the payment of dividends is
subject to various restrictions under our debt instruments. For fiscal year 2010 and 2009, cash
dividends of $8.5 million were paid to NBC to provide funding for interest due and payable on NBCs
$77.0 million 11% senior discount notes. No dividends were declared on our common stock during
fiscal year 2008.
Additional information regarding equity compensation plans can be found in Item 12, Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
18
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth our selected historical consolidated financial and other data
and should be read in conjunction with Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated financial statements and the related notes
thereto included in Item 8, Financial Statements and Supplementary Data. The selected historical
consolidated financial data was derived from our audited consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
(dollars in thousands) |
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
605,494 |
|
|
$ |
610,716 |
|
|
$ |
581,248 |
|
|
$ |
544,428 |
|
|
$ |
420,108 |
|
Costs of sales (exclusive of depreciation shown
below) |
|
|
370,196 |
|
|
|
371,369 |
|
|
|
354,140 |
|
|
|
332,444 |
|
|
|
250,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
235,298 |
|
|
|
239,347 |
|
|
|
227,108 |
|
|
|
211,984 |
|
|
|
169,194 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative (1) |
|
|
161,858 |
|
|
|
168,315 |
|
|
|
157,193 |
|
|
|
143,096 |
|
|
|
107,991 |
|
Closure of California Warehouse |
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
774 |
|
|
|
|
|
Depreciation |
|
|
8,517 |
|
|
|
7,603 |
|
|
|
7,209 |
|
|
|
5,916 |
|
|
|
4,913 |
|
Amortization |
|
|
10,853 |
|
|
|
11,384 |
|
|
|
10,443 |
|
|
|
9,613 |
|
|
|
8,762 |
|
Goodwill impairment (2) |
|
|
|
|
|
|
106,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations |
|
|
54,070 |
|
|
|
(54,927 |
) |
|
|
52,299 |
|
|
|
52,585 |
|
|
|
47,528 |
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
40,680 |
|
|
|
32,878 |
|
|
|
33,559 |
|
|
|
33,135 |
|
|
|
29,395 |
|
Interest income |
|
|
(180 |
) |
|
|
(427 |
) |
|
|
(1,332 |
) |
|
|
(1,643 |
) |
|
|
(1,275 |
) |
Loss on early extinguishment of debt (3) |
|
|
3,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on derivative instrument (4) |
|
|
|
|
|
|
102 |
|
|
|
198 |
|
|
|
225 |
|
|
|
(525 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before income taxes |
|
|
10,504 |
|
|
|
(87,480 |
) |
|
|
19,874 |
|
|
|
20,868 |
|
|
|
19,933 |
|
Income tax expense |
|
|
3,142 |
|
|
|
7,449 |
|
|
|
7,418 |
|
|
|
8,256 |
|
|
|
7,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
7,362 |
|
|
$ |
(94,929 |
) |
|
$ |
12,456 |
|
|
$ |
12,612 |
|
|
$ |
12,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (5) |
|
$ |
73,440 |
|
|
$ |
71,032 |
|
|
$ |
69,951 |
|
|
$ |
68,114 |
|
|
$ |
61,203 |
|
Net cash flows from operating activities |
|
|
36,237 |
|
|
|
31,666 |
|
|
|
20,864 |
|
|
|
27,432 |
|
|
|
22,498 |
|
Net cash flows from investing activities |
|
|
(8,766 |
) |
|
|
(14,898 |
) |
|
|
(22,179 |
) |
|
|
(32,809 |
) |
|
|
(18,122 |
) |
Net cash flows from financing activities |
|
|
(10,537 |
) |
|
|
(2,055 |
) |
|
|
(2,341 |
) |
|
|
4,976 |
|
|
|
(2,218 |
) |
Capital expenditures |
|
|
5,411 |
|
|
|
7,979 |
|
|
|
7,261 |
|
|
|
6,543 |
|
|
|
7,312 |
|
Business acquisition expenditures (6) |
|
|
2,848 |
|
|
|
6,321 |
|
|
|
14,682 |
|
|
|
25,874 |
|
|
|
10,849 |
|
Number of bookstores open at end of the period (7) |
|
|
280 |
|
|
|
277 |
|
|
|
260 |
|
|
|
244 |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (At End of Period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
60,973 |
|
|
$ |
44,038 |
|
|
$ |
29,326 |
|
|
$ |
32,983 |
|
|
$ |
33,383 |
|
Working capital (8) |
|
|
168,561 |
|
|
|
151,520 |
|
|
|
137,100 |
|
|
|
130,389 |
|
|
|
111,066 |
|
Total assets |
|
|
615,505 |
|
|
|
608,067 |
|
|
|
702,087 |
|
|
|
695,489 |
|
|
|
645,346 |
|
Total debt, including current maturities |
|
|
377,624 |
|
|
|
372,411 |
|
|
|
375,204 |
|
|
|
375,587 |
|
|
|
354,309 |
|
|
|
|
(1) |
|
Includes share-based compensation of $1,107, $1,289, $1,041 and $997 for the fiscal
years ended March 31, 2010, 2009, 2008 and 2007, respectively. |
|
(2) |
|
Due to the economic downturn and changes in some variables associated with the
judgments, assumptions and estimates made by us in assessing the appropriate valuation of
our goodwill, including lower market multiples, we determined in the first step of our
goodwill impairment test conducted at March 31, 2009 that the carrying value of certain
reporting units exceeded their fair values, indicating that goodwill may be impaired.
Having determined that goodwill may be impaired, we performed the second step of the
goodwill impairment test. As a result, we recorded an impairment charge of $106,972 in
fiscal year 2009, which reduced our goodwill carrying value to $215,436 as of March 31,
2009. See Note F to our consolidated financial statements in Item 8, Financial Statements
and Supplementary Data. |
19
|
|
|
(3) |
|
The loss on early extinguishment of debt for the fiscal year ended March 31, 2010
relates to the write-off of debt issue costs as a result of the termination of the Term
Loan and Revolving Credit Facility. See Note H to our consolidated financial statements in
Item 8, Financial Statements and Supplementary Data. |
|
(4) |
|
Our interest rate swap agreement expired on September 30, 2008. |
|
(5) |
|
EBITDA is defined as earnings before interest, taxes, depreciation, and amortization.
Adjusted EBITDA is EBITDA adjusted for goodwill impairment and for loss on early
extinguishment of debt. There was no goodwill impairment or loss on early extinguishment
of debt in fiscal years 2008, 2007 and 2006; therefore, Adjusted EBITDA equals EBITDA for
those years. As we are highly leveraged and as our equity is not publicly-traded,
management believes that the non-GAAP measures, EBITDA and Adjusted EBITDA, are useful in
evaluating our results and provide additional information for determining our ability to
meet debt service requirements. That belief is driven by the consistent use of the
measures in the computations used to establish the value of our equity over the past 15
years and the fact that our debt covenants also use those measures, as further described
below, to measure and monitor our financial results. Due to the importance of EBITDA and
Adjusted EBITDA to our equity and debt holders, our chief operating decision makers and
other members of management use EBITDA and Adjusted EBITDA to measure our overall
performance, to assist in resource allocation decision-making, to develop our budget goals,
to determine incentive compensation goals and payments, and to manage other expenditures
among other uses. |
|
|
|
Adjusted EBITDA is defined in the ABL Credit Agreement as: (1) consolidated net income, as
defined therein; plus (2) the following items, to the extent deducted from consolidated net
income: (a) income tax expense; (b) interest expense, amortization or write-off of debt
discount and debt issuance costs and commissions, discounts and other fees and charges
associated with indebtedness; (c) depreciation and amortization expense; (d) amortization of
intangibles and organization costs; (e) any non-cash extraordinary, unusual or non-recurring
expenses or losses; (f) any other non-cash charges; and (g) charges incurred on or prior to
September 30, 2010 in connection with the restricted stock plan not to exceed $5.0 million in
the aggregate; minus (3) the following items, to the extent included in the statement of net
income for such period; (i) interest income; (ii) any extraordinary, unusual or non-recurring
income or gains; and (iii) any other non-cash income. Adjusted EBITDA is similarly defined
in the indentures to the Senior Subordinated Notes and the Senior Secured Notes except that
charges incurred in connection with the restricted stock plan are not added back to
consolidated net income. Adjusted EBITDA is utilized when calculating the pro forma fixed
charge coverage ratio under the ABL Credit Agreement and the pro forma consolidated coverage
ratio under the indentures to the Senior Subordinated Notes and the Senior Secured Notes.
See Note H to the consolidated financial statements for disclosure of certain of our
financial covenants. |
|
|
|
There are material limitations associated with the use of EBITDA and Adjusted EBITDA. EBITDA
and Adjusted EBITDA do not represent and should not be considered as alternatives to net cash
flows from operating activities or net income as determined by accounting principles
generally accepted in the United States of America (GAAP). Furthermore, EBITDA and
Adjusted EBITDA do not necessarily indicate whether cash flows will be sufficient for cash
requirements because the measures do not include reductions for cash payments for our
obligation to service our debt, fund our working capital, make capital expenditures and make
acquisitions or pay our income taxes and dividends; nor are they a measure of our
profitability because they do not include costs and expenses identified below. We believe
EBITDA and Adjusted EBITDA when viewed with both our GAAP results and the reconciliations to
operating cash flows and net income provide a more complete understanding of our business
than otherwise could be obtained absent this disclosure. Items excluded from EBITDA and
Adjusted EBITDA, such as interest, taxes, depreciation, amortization, goodwill impairment,
and loss on early extinguishment of debt, are significant components in understanding and
assessing our financial performance. EBITDA and Adjusted EBITDA measures presented may not
be comparable to similarly titled measures presented by other companies. |
20
The following presentation reconciles net income (loss), which we believe to be the closest
GAAP performance measure, to EBITDA and Adjusted EBITDA and reconciles EBITDA and Adjusted
EBITDA to net cash flows from operating activities, which we believe to be the closest GAAP
liquidity measure, as presented in the Consolidated Statements of Cash Flows included in Item
8, Financial Statements and Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
(dollars in thousands) |
|
Net income (loss) |
|
|
7,362 |
|
|
|
(94,929 |
) |
|
|
12,456 |
|
|
|
12,612 |
|
|
|
12,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
40,499 |
|
|
|
32,553 |
|
|
|
32,425 |
|
|
|
31,717 |
|
|
|
27,595 |
|
Income tax expense |
|
|
3,142 |
|
|
|
7,449 |
|
|
|
7,418 |
|
|
|
8,256 |
|
|
|
7,691 |
|
Depreciation and amortization |
|
|
19,371 |
|
|
|
18,987 |
|
|
|
17,652 |
|
|
|
15,529 |
|
|
|
13,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
70,374 |
|
|
|
(35,940 |
) |
|
|
69,951 |
|
|
|
68,114 |
|
|
|
61,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment |
|
|
|
|
|
|
106,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
3,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (5) |
|
$ |
73,440 |
|
|
$ |
71,032 |
|
|
$ |
69,951 |
|
|
$ |
68,114 |
|
|
$ |
61,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
1,107 |
|
|
|
1,288 |
|
|
|
1,041 |
|
|
|
997 |
|
|
|
|
|
Interest income |
|
|
180 |
|
|
|
427 |
|
|
|
1,332 |
|
|
|
1,643 |
|
|
|
1,275 |
|
Provision for losses on receivables |
|
|
1,399 |
|
|
|
1,367 |
|
|
|
468 |
|
|
|
834 |
|
|
|
231 |
|
Cash paid for interest |
|
|
(29,102 |
) |
|
|
(30,654 |
) |
|
|
(31,755 |
) |
|
|
(31,388 |
) |
|
|
(27,875 |
) |
Cash paid for income taxes |
|
|
(3,155 |
) |
|
|
(9,930 |
) |
|
|
(13,031 |
) |
|
|
(6,551 |
) |
|
|
(9,589 |
) |
(Gain) Loss on disposal of assets |
|
|
235 |
|
|
|
125 |
|
|
|
285 |
|
|
|
(1 |
) |
|
|
90 |
|
Due to Parent |
|
|
(3,064 |
) |
|
|
(3,160 |
) |
|
|
(237 |
) |
|
|
(84 |
) |
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and
liabilities, net of effect of
acquisitions (9) |
|
|
(4,803 |
) |
|
|
1,171 |
|
|
|
(7,190 |
) |
|
|
(6,132 |
) |
|
|
(2,762 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
$ |
36,237 |
|
|
$ |
31,666 |
|
|
$ |
20,864 |
|
|
$ |
27,432 |
|
|
$ |
22,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|
Business acquisition expenditures represent established businesses purchased by us. |
|
(7) |
|
On May 1, 2006, we acquired 101 college bookstore locations through the acquisition of
all of the outstanding stock of CBA. |
|
(8) |
|
Working capital is defined as current assets minus current liabilities. |
|
(9) |
|
Changes in operating assets and liabilities, net of effect of acquisitions includes the
changes in the balances of receivables, inventories, prepaid expenses and other current
assets, other assets, accounts payable, accrued employee compensation and benefits, accrued
incentives, accrued expenses, deferred revenue, and other long-term liabilities. |
21
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussions should be read in conjunction with our consolidated financial
statements and the related notes thereto included in Item 8, Financial Statements and Supplementary
Data, and other information in this Annual Report on Form 10-K.
Executive Summary
Overview
Acquisitions. Our Bookstore Division continues to grow its number of bookstore locations
through acquisitions and start-up locations. We initiated the contract-management of 14 bookstore
locations in 11 separate transactions and established the start-up of 6 bookstore locations during
the fiscal year ended March 31, 2010. We believe there are attractive opportunities for us to
continue to expand our chain of bookstores across the country.
Revenue Results. Consolidated revenues for the fiscal year ended March 31, 2010 decreased
$5.2 million, or 0.9%, from the fiscal year ended March 31, 2009. This decrease was primarily due
to a decrease in revenues in the Textbook Division as a result of a decrease in units sold.
Revenues increased in the Bookstore Division primarily due to acquisition activity and start-up
growth since April 1, 2008. Revenues increased in the Complementary Services Division primarily as
a result of increased revenues from our distance education and e-commerce businesses which were
partially offset by a decrease in revenues from our consulting business.
Adjusted EBITDA Results. Consolidated Adjusted EBITDA for the fiscal year ended March 31,
2010 increased $2.4 million, or 3.4%, from the fiscal year ended March 31, 2009. The Adjusted
EBITDA increase is attributable to an increase in our Bookstore and Complementary Services
Divisions Adjusted EBITDA and a lower Adjusted EBITDA loss in the Corporate Administration
Division, which were offset by a decrease in the Adjusted EBITDA of the Textbook Division.
Adjusted EBITDA in the Bookstore Division was up due primarily to lower selling, general and
administrative expenses primarily as a result of cost cutting measures implemented during the last
quarter of fiscal 2009. Complementary Services Division Adjusted EBITDA was up primarily due to
improved results from our distance education and e-commerce services businesses. Corporate
Administration Adjusted EBITDA loss was down due to prior year costs related to an early retirement
program and severance, which were not incurred again in fiscal 2010. Adjusted EBITDA in the
Textbook Division was down due primarily to lower revenues, which was partially offset by lower
selling, general and administrative expenses primarily as a result of cost cutting measures
implemented during the last quarter of fiscal 2009. EBITDA and Adjusted EBITDA are considered
non-GAAP measures by the SEC, and therefore you should refer to the more detailed explanation of
those measures that is provided below.
EBITDA is defined as earnings before interest, taxes, depreciation, and amortization.
Adjusted EBITDA is EBITDA adjusted for goodwill impairment and for loss on early extinguishment of
debt. There was no goodwill impairment or loss on early extinguishment of debt for the fiscal year
ended March 31, 2008; therefore, Adjusted EBITDA equals EBITDA for that period. As we are
highly-leveraged and as our equity is not publicly-traded, management believes that the non-GAAP
measures, EBITDA and Adjusted EBITDA, are useful in evaluating our results and provide additional
information for determining our ability to meet debt service requirements. That belief is driven
by the consistent use of the measures in the computations used to establish the value of our equity
over the past 15 years and the fact that our debt covenants also use those measures, as further
described below, to measure and monitor our financial results. Due to the importance of EBITDA and
Adjusted EBITDA to our equity and debt holders, our chief operating decision makers and other
members of management use EBITDA and Adjusted EBITDA to measure our overall performance, to assist
in resource allocation decision-making, to develop our budget goals, to determine incentive
compensation goals and payments, and to manage other expenditures among other uses.
Adjusted EBITDA is defined in the ABL Credit Agreement as: (1) consolidated net income, as
defined therein; plus (2) the following items, to the extent deducted from consolidated net income:
(a) income tax expense; (b) interest expense, amortization or write-off of debt discount and debt
issuance costs and commissions, discounts and other fees and charges associated with indebtedness;
(c) depreciation and amortization expense; (d) amortization of intangibles and organization costs;
(e) any non-cash extraordinary, unusual or non-recurring expenses or losses; (f) any other non-cash
charges; and (g) charges incurred on or prior to September 30, 2010 in connection with the
restricted stock plan not to exceed $5.0 million in the aggregate; minus (3) the following items,
to the extent included in the statement of net income for such period; (i) interest income; (ii)
any extraordinary, unusual or non-recurring income or gains; and (iii) any other non-cash income.
Adjusted EBITDA is similarly defined in the indentures to the Senior Subordinated Notes and the
Senior Secured Notes except that charges incurred in connection with the restricted stock plan are
not added back to consolidated net income. Adjusted EBITDA is utilized when calculating the pro
forma
fixed charge coverage ratio under the ABL Credit Agreement and the pro forma consolidated
coverage ratio under the indentures to the Senior Subordinated Notes and the Senior Secured Notes.
See Note H to the consolidated financial statements for disclosure of certain of our financial
covenants.
22
There are material limitations associated with the use of EBITDA and Adjusted EBITDA. EBITDA
and Adjusted EBITDA do not represent and should not be considered as alternatives to net cash flows
from operating activities or net income as determined by GAAP. Furthermore, EBITDA and Adjusted
EBITDA do not necessarily indicate whether cash flows will be sufficient for cash requirements
because the measures do not include reductions for cash payments for our obligation to service our
debt, fund our working capital, make capital expenditures and make acquisitions or pay our income
taxes and dividends; nor are they a measure of our profitability because they do not include costs
and expenses identified below. We believe EBITDA and Adjusted EBITDA when viewed with both our
GAAP results and the reconciliations to operating cash flows and net income provide a more complete
understanding of our business than otherwise could be obtained absent this disclosure. Items
excluded from EBITDA and Adjusted EBITDA, such as interest, taxes, depreciation, amortization,
goodwill impairment, and loss on early extinguishment of debt, are significant components in
understanding and assessing our financial performance. EBITDA and Adjusted EBITDA measures
presented may not be comparable to similarly titled measures presented by other companies.
Challenges and Expectations
We expect that we will continue to face challenges and opportunities similar to those which we
have faced in the recent past and, in addition, new and different challenges and opportunities
given the general instability in the credit markets and economy. Our three tranches of debt (the
Senior Secured Notes, the ABL Facility and the Senior Subordinated Notes) each may mature within a
period of six months of each other. Due to our highly leveraged capital structure, continued
uncertainty in the credit markets and/or our future results of operations may negatively impact our
ability to extend or refinance our existing debt on reasonable terms, or at all. We have
experienced, and we believe we will continue to experience, increasing competition for the supply
of used textbooks from other companies, including other textbook wholesalers and from
student-to-student transactions, increasing competition from alternative media and alternative
sources of textbooks for students, competition for contract-management opportunities and other
challenges. We also believe that we will continue to face challenges and opportunities related to
acquisitions. Finally, we are uncertain what impact the current economy might have on our
business. Despite these challenges, we expect that we will continue to grow EBITDA on a
consolidated basis in fiscal year 2011. We also expect that our capital expenditures will remain
modest for a company of our size.
Fiscal Year Ended March 31, 2010 Compared With Fiscal Year Ended March 31, 2009.
Revenues. Revenues for the fiscal years ended March 31, 2010 and 2009 and the corresponding
change in revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
$ |
472,492,275 |
|
|
$ |
472,038,009 |
|
|
$ |
454,266 |
|
|
|
0.1 |
% |
Textbook Division |
|
|
140,592,220 |
|
|
|
147,287,779 |
|
|
|
(6,695,559 |
) |
|
|
(4.5 |
)% |
Complementary Services
Division |
|
|
35,470,836 |
|
|
|
34,233,883 |
|
|
|
1,236,953 |
|
|
|
3.6 |
% |
Intercompany Eliminations |
|
|
(43,061,718 |
) |
|
|
(42,843,490 |
) |
|
|
(218,228 |
) |
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
605,493,613 |
|
|
$ |
610,716,181 |
|
|
$ |
(5,222,568 |
) |
|
|
(0.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year ended March 31, 2010, Bookstore Division revenues increased $0.5 million,
or 0.1%, from the fiscal year ended March 31, 2009. The increase in Bookstore Division revenues
was primarily attributable to the addition of 44 bookstore locations through acquisitions or
start-ups since April 1, 2008. The new bookstores provided an additional $21.6 million of revenue
for the fiscal year ended March 31, 2010. Same-store sales for the fiscal year ended March 31,
2009 decreased $11.5 million, or 2.6%, from the fiscal year ended March 31, 2009, primarily due to
decreased new and used textbook revenues and to a smaller decrease in clothing and insignia wear
revenues. The same-store sale decrease in new and used textbooks is partly attributable to the
rental program implemented in the fourth quarter of fiscal 2010 in our off-campus stores. If the
books rented would have been sold instead, we estimate that same-store sales would have been
approximately $4.4 million higher, lowering the same-store sales decrease to 1.6% for the current
fiscal year. We define same-store sales for the fiscal year ended March 31, 2010 as sales from any
store, even if expanded or relocated, that has been operated by us since the start of fiscal year
2009. Finally, revenues declined $9.6 million as a result of certain lost contract-managed stores
and store closings since April 1, 2008.
23
For the fiscal year ended March 31, 2010, Textbook Division revenues decreased $6.7 million,
or 4.5%, from the fiscal year ended March 31, 2009, due primarily to an approximate 4.8% decrease
in units sold, which was slightly offset by an approximate 0.2% increase in the average price per
book sold. Complementary Services Division revenues increased $1.2 million, or 3.6%, from the year
ended March 31, 2009, as increases in the distance education and e-commerce services businesses
were mostly offset by a decrease in revenues from our consulting business. Intercompany
eliminations for the fiscal year ended March 31, 2010 decreased $0.2 million from the fiscal year
ended March 31, 2009.
Gross profit. Gross profit for the fiscal year ended March 31, 2010 decreased $4.0 million,
or 1.7%, to $235.3 million from $239.3 million for the fiscal year ended March 31, 2009. The
decrease in gross profit was primarily attributable to the decrease in revenues in the Textbook
Division. The consolidated gross margin percentage decreased slightly to 38.9% for the fiscal year
ended March 31, 2010 from 39.2% for the fiscal year ended March 31, 2009 primarily due to a
decrease in gross margin percentage in the Textbook Division.
Selling, general and administrative expenses. Selling, general and administrative expenses for
the fiscal year ended March 31, 2010 decreased $6.4 million, or 3.8%, to $161.9 million from $168.3
million for the fiscal year ended March 31, 2009. Selling, general and administrative expenses as a
percentage of revenues were 26.7% and 27.6% for the fiscal years ended March 31, 2010 and 2009,
respectively. The decrease in selling, general and administrative expenses includes a $10.3
million decrease in personnel costs and a $1.6 million decrease in advertising and travel expenses,
which were primarily due to cost cutting measures implemented during the last quarter of fiscal
2009. These decreases were partially offset by a $4.2 million increase in commission expense,
primarily due to an increase in sales on the internet involving third-party websites and a $1.8
million increase in rent, primarily due to an increase in the number of bookstores in the Bookstore
Division.
Earnings before interest, taxes, depreciation, amortization, goodwill impairment, and loss on
early extinguishment of debt (Adjusted EBITDA). Adjusted EBITDA for the fiscal years ended March
31, 2010 and 2009 and the corresponding change in Adjusted EBITDA were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
$ |
45,685,171 |
|
|
$ |
44,029,528 |
|
|
$ |
1,655,643 |
|
|
|
3.8 |
% |
Textbook Division |
|
|
37,050,519 |
|
|
|
39,009,073 |
|
|
|
(1,958,554 |
) |
|
|
(5.0 |
)% |
Complementary Services
Division |
|
|
2,301,001 |
|
|
|
1,320,700 |
|
|
|
980,301 |
|
|
|
74.2 |
% |
Corporate Administration |
|
|
(11,597,268 |
) |
|
|
(13,326,971 |
) |
|
|
1,729,703 |
|
|
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
73,439,423 |
|
|
$ |
71,032,330 |
|
|
$ |
2,407,093 |
|
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore Division Adjusted EBITDA increased $1.7 million, or 3.8%, primarily due to lower
selling, general and administrative expenses. The $2.0 million, or 5.0%, decrease in Textbook
Division Adjusted EBITDA was primarily due to the previously mentioned decrease in revenues and
gross profit, which were partially offset by a decrease in selling, general and administrative
expenses primarily as a result of cost cutting measures implemented during the last quarter of
fiscal 2009. Complementary Services Division Adjusted EBITDA increased $1.0 million primarily due
to improved results in our e-commerce and distance education businesses which was partially offset
by lower results in our consulting business. Corporate Administrations Adjusted EBITDA loss
decreased $1.7 million primarily due to expenses incurred in the prior year that were not incurred
again in fiscal 2010, including $1.1 million of costs associated with a voluntary early retirement
program and severance.
24
For an explanation of why EBITDA and Adjusted EBITDA are useful measures in evaluating our
operating results and provide additional information for determining our ability to meet debt
service requirements, see Adjusted EBITDA Results earlier in this Item. The following
presentation reconciles net income (loss), which we believe to be the closest GAAP performance
measure, to EBITDA and Adjusted EBITDA and reconciles EBITDA and Adjusted EBITDA to net cash flows
from operating activities, which we believe to be the closest GAAP liquidity measure, and also sets
forth net cash flows from investing and financing activities as presented in the Consolidated
Statements of Cash Flows included in Item 8, Financial Statements and Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
Net income (loss) |
|
|
7,362,198 |
|
|
|
(94,928,668 |
) |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
40,499,120 |
|
|
|
32,553,689 |
|
Income tax expense |
|
|
3,142,094 |
|
|
|
7,448,658 |
|
Depreciation and amortization |
|
|
19,370,252 |
|
|
|
18,986,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
70,373,664 |
|
|
|
(35,939,670 |
) |
|
|
|
|
|
|
|
|
|
Goodwill impairment |
|
|
|
|
|
|
106,972,000 |
|
Loss on early extinguishment of debt |
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
|
$ |
73,439,423 |
|
|
$ |
71,032,330 |
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
1,106,882 |
|
|
|
1,288,543 |
|
Interest income |
|
|
180,709 |
|
|
|
426,536 |
|
Provision for losses on receivables |
|
|
1,399,466 |
|
|
|
1,366,979 |
|
Cash paid for interest |
|
|
(29,102,221 |
) |
|
|
(30,653,694 |
) |
Cash paid for income taxes |
|
|
(3,155,473 |
) |
|
|
(9,930,165 |
) |
Loss on disposal of assets |
|
|
235,803 |
|
|
|
124,871 |
|
Tax expense due to parent |
|
|
(3,064,522 |
) |
|
|
(3,160,038 |
) |
Changes in operating assets and
liabilities, net of effect of
acquisitions (2) |
|
|
(4,803,359 |
) |
|
|
1,170,551 |
|
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
$ |
36,236,708 |
|
|
$ |
31,665,913 |
|
|
|
|
|
|
|
|
Net Cash Flows from Investing Activities |
|
$ |
(8,765,940 |
) |
|
$ |
(14,898,403 |
) |
|
|
|
|
|
|
|
|
Net Cash Flows from Financing Activities |
|
$ |
(10,536,611 |
) |
|
$ |
(2,055,498 |
) |
|
|
|
|
|
|
|
|
|
|
(1) |
|
March 31, 2010 Adjusted EBITDA includes an adjustment for loss on
early extinguishment of debt and March 31, 2009 Adjusted EBITDA
includes an adjustment for goodwill impairment. |
|
(2) |
|
Changes in operating assets and liabilities, net of effect of
acquisitions, include the changes in the balances of receivables,
inventories, prepaid expenses and other current assets, other assets,
accounts payable, accrued employee compensation and benefits, accrued
incentives, accrued expenses, deferred revenue, and other long-term
liabilities. |
Depreciation expense. Depreciation expense for the fiscal year ended March 31, 2010 increased
$0.9 million, or 12.0%, to $8.5 million from $7.6 million for the fiscal year ended March 31, 2009,
due primarily to new bookstores added since April 1, 2008 and bookstore remodeling projects.
Amortization expense. Amortization expense for the fiscal year ended March 31, 2010 decreased
$0.5 million, or 4.7%, to $10.9 million from $11.4 million for the fiscal year ended March 31,
2009, primarily due to a $0.5 million decrease in amortization of covenant not to compete
agreements arising from bookstore acquisitions.
Goodwill impairment. During the fourth quarter of 2009, we recognized a non-cash charge of
$107.0 million related to the impairment of goodwill. The impairment, which was determined during
our 2009 annual impairment testing of goodwill conducted at March 31, was due to the economic
downturn and changes in some variables associated with the judgments, assumptions and estimates
made by us in assessing the valuation of our goodwill, including lower market multiples. No
impairment charge was recorded for the year ended March 31, 2010.
25
Interest expense, net. Interest expense, net for the fiscal year ended March 31, 2010
increased $7.9 million, or 24.4%, to $40.5 million from $32.6 million for the fiscal year ended
March 31, 2009, due primarily to a $5.7 million increase in interest on the Term Loan and Senior
Secured Notes mainly due to higher interest rates and a $2.6 million increase in amortization of
additional prepaid loan costs related to the issuance of the Senior Secured Notes and entering into
the ABL Credit Agreement. These increases were partially offset by a $0.6 million decline in
interest on the Revolving Credit Facility due to lower outstanding indebtedness.
Loss on early extinguishment of debt. The loss on extinguishment of debt of $3.1 million for
the fiscal year ended March 31, 2010 relates to the write-off of debt issue costs as a result of
the termination of the Term Loan and Revolving Credit Facility.
Income taxes. Income tax expense for the fiscal year ended March 31, 2010 decreased $4.3
million to $3.1 million from $7.4 million for the fiscal year ended March 31, 2009. Our effective
tax rate for the fiscal years ended March 31, 2010 and 2009 was 29.9% and (8.5)%, respectively.
Our effective tax rate for fiscal year 2010 differs from the statutory tax rate primarily due to
the adjustment of the deferred tax rate and the change in NOL carryforward benefit. The effective
tax rate would have been 41.4% without the effect of the adjustment to the deferred tax rate and
change in NOL carryforward benefit. Our effective tax rate for fiscal year 2009 differs from the
statutory tax rate primarily as a result of a pre-tax earnings charge for non-deductible goodwill
impairment. Excluding the impact of the goodwill impairment charge, which was all attributed to
non-deductible goodwill and as such is treated as a permanent difference for income tax purposes,
our effective tax rate would have been 38.2% for the fiscal year ended March 31, 2009.
Fiscal Year ended March 31, 2009 Compared With Fiscal Year ended March 31, 2008.
Revenues. Revenues for the fiscal years ended March 31, 2009 and 2008 and the corresponding
change in revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
$ |
472,038,009 |
|
|
$ |
454,374,873 |
|
|
$ |
17,663,136 |
|
|
|
3.9 |
% |
Textbook Division |
|
|
147,287,779 |
|
|
|
139,685,035 |
|
|
|
7,602,744 |
|
|
|
5.4 |
% |
Complementary Services Division |
|
|
34,233,883 |
|
|
|
34,372,223 |
|
|
|
(138,340 |
) |
|
|
(0.4 |
)% |
Intercompany Eliminations |
|
|
(42,843,490 |
) |
|
|
(47,184,345 |
) |
|
|
4,340,855 |
|
|
|
(9.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
610,716,181 |
|
|
$ |
581,247,786 |
|
|
$ |
29,468,395 |
|
|
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year ended March 31, 2009, Bookstore Division revenues increased $17.7 million,
or 3.9%, from the fiscal year ended March 31, 2008. The increase in Bookstore Division revenues
was primarily attributable to the addition of 47 bookstore locations through acquisitions or
start-ups since April 1, 2007. The new bookstores provided an additional $34.1 million of revenue
for the fiscal year ended March 31, 2009. Same-store sales for the fiscal year ended March 31,
2009 decreased $9.0 million, or 2.1%, from the fiscal year ended March 31, 2008, primarily due to
decreased new textbook and clothing and insignia wear revenues which offset a small increase in
revenues from used textbooks. We define same-store sales for the fiscal year ended March 31, 2009
as sales from any store, even if expanded or relocated, that has been operated by us since the
start of fiscal year 2008. Finally, revenues declined $7.5 million as a result of certain lost
contract-managed bookstores and store closings since April 1, 2007.
For the fiscal year ended March 31, 2009, Textbook Division revenues increased $7.6 million,
or 5.4%, from the fiscal year ended March 31, 2008 due primarily to an approximate 6.7% increase in
the average price per book sold, which was offset in part by an approximate 1.7% decrease in units
sold. Complementary Services Division revenues decreased slightly from the year ended March 31,
2008, as decreases in the systems and consulting businesses were mostly offset by an increase in
revenue from our e-commerce services and distance education businesses. Primarily as a result of a
shift in Textbook Division revenues from our own bookstores to independent bookstores (external
customers), intercompany revenues and the corresponding intercompany eliminations for the fiscal
year ended March 31, 2009 decreased $4.3 million from the fiscal year ended March 31, 2008.
Gross profit. Gross profit for the fiscal year ended March 31, 2009 increased $12.2 million,
or 5.4%, to $239.3 million from $227.1 million for the fiscal year ended March 31, 2008. The
increase in gross profit was primarily attributable to the increase in
revenues, as the consolidated gross margin percentage increased only slightly to 39.2% for the
fiscal year ended March 31, 2009 from 39.1% for the fiscal year ended March 31, 2008. The
increase in consolidated gross margin percentage was primarily attributable to improved margins in
the Textbook Division offset by slightly lower gross margins in the Bookstore Division.
26
Selling, general and administrative expenses. Selling, general and administrative expenses for
the fiscal year ended March 31, 2009 increased $11.1 million, or 7.1%, to $168.3 million from
$157.2 million for the fiscal year ended March 31, 2008. Selling, general and administrative
expenses as a percentage of revenues were 27.6% and 27.0% for the fiscal years ended March 31, 2009
and 2008, respectively. The increase in selling, general and administrative expenses includes a
$4.9 million increase in personnel costs and a $3.6 million increase in rent which was primarily
attributable to our continued growth in the Bookstore Division. The increase in personnel costs
was partially due to approximately $1.1 million in personnel costs resulting from a voluntary early
retirement plan and severance expenses in fiscal year 2009. Commission and shipping expenses also
increased $0.9 million and $0.7 million, respectively, primarily due to increased Bookstore
Division sales on the internet involving third-party websites. Also included in the increase in
selling, general and administrative expenses was $0.2 million in legal expenses related to our
Senior Credit Facility amendment in February, 2009.
Earnings before interest, taxes, depreciation, amortization, and goodwill impairment (Adjusted
EBITDA). Adjusted EBITDA for the fiscal years ended March 31, 2009 and 2008 and the corresponding
change in Adjusted EBITDA were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
$ |
44,029,528 |
|
|
$ |
45,941,624 |
|
|
$ |
(1,912,096 |
) |
|
|
(4.2 |
)% |
Textbook Division |
|
|
39,009,073 |
|
|
|
33,731,382 |
|
|
|
5,277,691 |
|
|
|
15.6 |
% |
Complementary Services
Division |
|
|
1,320,700 |
|
|
|
1,558,414 |
|
|
|
(237,714 |
) |
|
|
(15.3 |
)% |
Corporate Administration |
|
|
(13,326,971 |
) |
|
|
(11,280,477 |
) |
|
|
(2,046,494 |
) |
|
|
(18.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
71,032,330 |
|
|
$ |
69,950,943 |
|
|
$ |
1,081,387 |
|
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore Division Adjusted EBITDA decreased $1.9 million, or 4.2%, as increased revenues were
offset by a slightly lower gross profit percentage and slightly higher selling, general and
administrative expenses as a percentage of revenues. The $5.3 million, or 15.6%, increase in
Textbook Division Adjusted EBITDA was primarily due to the previously mentioned increase in
revenues and gross profits, as well as control of selling, general and administrative expenses.
Complementary Services Division Adjusted EBITDA decreased $0.2 million, or 15.3%, primarily due to
lower results in our systems and distance education businesses which was partially offset by
improved results in our e-commerce business. Corporate Administrations Adjusted EBITDA loss
increased $2.0 million primarily due to $1.1 million in current year costs associated with the
voluntary early retirement plan and severance, and legal expenses related to the February, 2009
refinancing.
27
For an explanation of why EBITDA and Adjusted EBITDA are useful measures in evaluating our
operating results and provide additional information for determining our ability to meet debt
service requirements, see Adjusted EBITDA Results earlier in this Item. The following
presentation reconciles net income (loss), which we believe to be the closest GAAP performance
measure, to EBITDA and Adjusted EBITDA and reconciles EBITDA and Adjusted EBITDA to net cash flows
from operating activities, which we believe to be the closest GAAP liquidity measure, and also sets
forth net cash flows from investing and financing activities as presented in the Consolidated
Statements of Cash Flows included in Item 8, Financial Statements and Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
Net income (loss) |
|
|
(94,928,668 |
) |
|
|
12,456,023 |
|
Interest expense, net |
|
|
32,553,689 |
|
|
|
32,424,742 |
|
Income tax expense |
|
|
7,448,658 |
|
|
|
7,418,339 |
|
Depreciation and amortization |
|
|
18,986,651 |
|
|
|
17,651,839 |
|
|
|
|
|
|
|
|
EBITDA |
|
|
(35,939,670 |
) |
|
|
69,950,943 |
|
Goodwill impairment |
|
|
106,972,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
71,032,330 |
|
|
$ |
69,950,943 |
|
Share-based compensation |
|
|
1,288,543 |
|
|
|
1,040,599 |
|
Interest income |
|
|
426,536 |
|
|
|
1,332,497 |
|
Provision for losses on receivables |
|
|
1,366,979 |
|
|
|
468,007 |
|
Cash paid for interest |
|
|
(30,653,694 |
) |
|
|
(31,755,319 |
) |
Cash paid for income taxes |
|
|
(9,930,165 |
) |
|
|
(13,030,853 |
) |
Loss on disposal of assets |
|
|
124,871 |
|
|
|
284,891 |
|
Tax expense due to parent |
|
|
(3,160,038 |
) |
|
|
(236,872 |
) |
Changes in operating assets and
liabilities, net of effect of
acquisitions (1) |
|
|
1,170,551 |
|
|
|
(7,190,132 |
) |
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
$ |
31,665,913 |
|
|
$ |
20,863,761 |
|
|
|
|
|
|
|
|
Net Cash Flows from Investing Activities |
|
$ |
(14,898,403 |
) |
|
$ |
(22,179,160 |
) |
|
|
|
|
|
|
|
Net Cash Flows from Financing Activities |
|
$ |
(2,055,498 |
) |
|
$ |
(2,341,021 |
) |
|
|
|
|
|
|
|
|
|
|
(1) |
|
Changes in operating assets and liabilities, net of effect of acquisitions, includes the
changes in the balances of receivables, inventories, prepaid expenses and other current
assets, other assets, accounts payable, accrued employee compensation and benefits, accrued
incentives, accrued expenses, deferred revenue, and other long-term liabilities. |
Depreciation expense. Depreciation expense for the fiscal year ended March 31, 2009 increased
$0.4 million, or 5.5%, to $7.6 million from $7.2 million for the fiscal year ended March 31, 2008,
due primarily to growth in the Bookstore Division (including new bookstores added since April 1,
2007 and bookstore remodeling projects).
Amortization expense. Amortization expense for the fiscal year ended March 31, 2009 increased
$1.0 million, or 9.0%, to $11.4 million from $10.4 million for the fiscal year ended March 31,
2008, due in part to a $0.4 million increase in amortization of covenant not to compete agreements
arising from bookstore acquisitions, a $0.3 million increase in amortization of contract-managed
acquisition costs primarily associated with contract-managed bookstore acquisitions/renewals
occurring since April 1, 2007 and $0.2 million of amortization of certain contractual rights
associated with a September 1, 2007 agreement with a third-party software company.
Goodwill impairment. During the fourth quarter of 2009, we recognized a non-cash charge of
$107.0 million related to the impairment of goodwill. The impairment, which was determined during
our 2009 annual impairment testing of goodwill, was due to the economic downturn and changes in
some variables associated with the judgments, assumptions and estimates made by us in assessing the
valuation of our goodwill, including lower market multiples. No impairment charge was recorded for
the year ended March 31, 2008.
28
Interest expense, net. Interest expense, net for the fiscal year ended March 31, 2009
increased $0.2 million, or 0.4%, to $32.6 million from $32.4 million for the fiscal year ended
March 31, 2008, due primarily to a $0.9 million decline in interest income as a result of lower
interest rates on invested funds, which was offset by a $0.7 million decrease in Term Loan interest
expense as a result of lower variable interest rates.
Income taxes. Income tax expense for the fiscal year ended March 31, 2009 was comparable to
fiscal year ended March 31, 2008 at $7.4 million. Our effective tax rate for the fiscal years
ended March 31, 2009 and 2008 was (8.5)% and 37.3%, respectively. Our effective tax rate for
fiscal year 2009 differs from the statutory tax rate primarily as a result of a pre-tax earnings
charge for non-deductible goodwill impairment. Excluding the impact of the goodwill impairment
charge, which was all attributed to non-deductible goodwill and as such is treated as a permanent
difference for income tax purposes, our effective tax rate would have been 38.2% for the fiscal
year ended March 31, 2009 as compared to 37.3% for the fiscal year ended March 31, 2008. The lower
effective tax rate in fiscal year 2008 is due primarily to the recognition of certain state income
tax benefits in connection with a state tax incentive program.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Managements Discussion and Analysis of Financial Condition and Results of Operations
discusses our consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these
consolidated financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, we evaluate our estimates and
judgments, including those related to returns, bad debts, inventory valuation and obsolescence,
goodwill and intangible assets, rebate programs, income taxes, and contingencies and litigation.
We base our estimates and judgments on historical experience and on various other factors that
management believes to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions. We believe the following critical accounting policies, among others,
affect our more significant judgments and estimates used in the preparation of our consolidated
financial statements:
Revenue Recognition. We recognize revenue from Textbook Division sales at the time of
shipment. We have established a program which, under certain conditions, enables our customers to
return textbooks. We record reductions to revenue and costs of sales for the estimated impact of
textbooks with return privileges which have yet to be returned to the Textbook Division. External
customer returns over the past three fiscal years have ranged from approximately 22.9% to 24.8% of
sales. Additional reductions to revenue and costs of sales may be required if the actual rate of
returns exceeds the estimated rate of returns. Consistent with prior years, the estimated rate of
returns is determined utilizing actual historical return experience. The accrual rate for customer
returns at March 31, 2010 was approximately 24.5% of sales.
Bad Debts. We maintain allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. Consistent with prior years, in
determining the adequacy of the allowance, we analyze the aging of the receivable, the customers
financial position, historical collection experience, and other economic and industry factors. Net
charge-offs over the past three fiscal years have been between $0.5 million and $1.4 million, or
0.1% to 0.3%, of revenues. We have maintained an allowance for doubtful accounts between $1.0
million and $1.2 million, or 0.2% to 0.3%, of revenues over the past three fiscal years. If the
financial condition of our customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.
Inventory Valuation and Obsolescence. Inventories, including rental inventory, are stated at
the lower of cost or market. The cost of used textbook inventories is determined using the
weighted-average method. Our Bookstore Division uses the retail inventory method to determine cost
for new textbooks and non-textbook inventories. The cost of other inventories is determined on a
first-in, first-out cost method. Consistent with prior years, we account for inventory
obsolescence based upon assumptions about future demand and market conditions. At March 31, 2010,
used textbook inventory was subject to an obsolescence reserve of $2.3 million. For the prior
three fiscal years, the obsolescence reserve was between $2.3 million and $2.4 million. If actual
future demand or market conditions are less favorable than those projected by us, inventory
write-downs may be required. In determining inventory adjustments, we consider amounts of
inventory on hand, projected demand, new editions, and industry factors.
29
Goodwill and Intangible Assets. The March 4, 2004 Transaction and our acquisitions of college
bookstores result in the application of the acquisition method of accounting as of the acquisition
date. In certain circumstances, our management performs valuations where appropriate to determine
the fair value of assets acquired and liabilities assumed. The goodwill in such transactions is
determined by calculating the difference between the consideration transferred and the fair value
of net assets acquired. We evaluate the impairment of the carrying value of our goodwill and
identifiable intangibles in accordance with applicable accounting standards, including the
Intangibles Goodwill and Other and the Property, Plant and Equipment Topics of the FASB ASC. In
accordance with such standards, we evaluate impairment on goodwill and certain identifiable
intangibles annually at March 31 and evaluate impairment on all intangibles whenever events or
changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.
We are required to make certain assumptions and estimates regarding the fair value of intangible
assets when assessing such assets for impairment. We evaluate goodwill at the reporting unit level
and have identified our reportable segments, the Textbook Division, Bookstore Division and
Complementary Services Division, as our reporting units. Our reporting units are determined based
on the way management organizes the segments for making operating decisions and assessing
performance. Management has organized our reporting segments based upon differences in products
and services provided.
In the first step of our goodwill impairment test, fair value is determined using a market
approach based primarily on an EBITDA multiple, and is deemed to be the most indicative of the
Companys fair value. The EBITDA multiple approach requires that we estimate a certain valuation
multiple of EBITDA derived from comparable companies and apply that multiple to our latest twelve
month pro forma EBITDA. We reviewed comparable company information to determine the EBITDA
multiple and concluded that 6.76x was an appropriate EBITDA multiple at March 31, 2010 and 7.0x was
appropriate at March 31, 2009. This total company fair value is allocated to the reporting units
based upon their percentage of EBITDA. The fair value was also calculated using the income
approach (discounted cash flow approach) and we concluded that it was supportive of the fair value
based upon the EBITDA multiple approach. If we fail the first step of the goodwill impairment
test, we are required, in the second step, to estimate the fair value of reporting unit assets and
liabilities, including intangible assets, to derive the fair value of the reporting units
goodwill.
Due to the economic downturn and changes in comparable company market multiples, we determined
in the first step of our goodwill impairment test conducted at March 31, 2009 that the carrying
values of the Textbook and Bookstore Divisions exceeded their fair values, indicating that goodwill
may be impaired. Having determined that goodwill may be impaired, we performed the second step of
the goodwill impairment test which involves calculating the implied fair value of goodwill by
allocating the fair value of the reporting unit to all of its assets and liabilities other than
goodwill (including both recognized and unrecognized intangible assets) and comparing the residual
amount to the carrying value of goodwill. As a result, we recorded an impairment charge of $107.0
million in fiscal year 2009. The carrying value of goodwill in excess of the implied fair value
was $67.0 million and $40.0 million for the Textbook and Bookstore Divisions, respectively. At
March 31, 2010, the date of the most recent step one test, after adjusting the carrying values for
goodwill impairment, the fair value of the Textbook Division exceeded the carrying value of $210.7
million by 4.8% and the Bookstore Division fair value exceeded the carrying value of $244.5 million
by 4.7%. We continue to monitor events and circumstances which may affect the fair values of both
reporting units, including current market conditions, and we believe that both reporting units are
still at risk of failing step one of the impairment test.
We are also required to make certain assumptions and estimates when assigning an initial value
to covenants not to compete arising from bookstore acquisitions. Changes in the fact patterns
underlying such assumptions and estimates could ultimately result in the recognition of impairment
losses on intangible assets.
We monitor relevant circumstances, including industry trends, general economic conditions, and
the potential impact that such circumstances might have on the valuation of our goodwill and
identifiable intangibles. It is possible that changes in such circumstances, or in the numerous
variables associated with the judgments, assumptions and estimates made by us in assessing the
appropriate valuation of our goodwill and identifiable intangibles, including a further
deterioration in the economy or debt markets or a significant delay in the expected recovery, could
in the future require us to further write down a portion of our goodwill or write down a portion of
our identifiable intangibles and record related non-cash impairment charges. If we were to have
used a multiple of 6.44x or below at March 31, 2010, the first step of the goodwill impairment test
would have indicated that goodwill may be impaired and we would have performed the second step of
the goodwill impairment test to determine the goodwill impairment, if any.
Accrued Incentives. Our Textbook Division offers certain incentive programs to its customers
that allow the participating customers the opportunity to earn rebates for used textbooks sold to
the Textbook Division. The rebates can be redeemed in a number of ways, including to pay for
freight charges on textbooks sold to the customer or to pay for certain products or services we
offer through our Complementary Services Division. The customer can also use the rebates to pay
for the cost of textbooks sold by the Textbook Division to the customer; however, a portion of the
rebates earned by the customer are forfeited if the customer chooses to use rebates in this manner.
If the customer fails to comply with the terms of the program, rebates earned
30
during the year are forfeited. Significant judgment is required in estimating the expected
level of forfeitures on rebates earned. Although we believe that our estimates of anticipated
forfeitures, which have consistently been based upon historical experience, are reasonable, actual
results could differ from these estimates resulting in an ultimate redemption of rebates which
differs from that which is reflected in accrued incentives in the consolidated financial
statements. For the past three fiscal years, actual forfeitures have ranged between 9.4% and 16.6%
of rebates earned within those years. After adjusting for estimated forfeitures, rebates earned
are accrued at a rate of approximately 13.5% of the dollar value of eligible textbooks purchased by
the Textbook Division. Accrued incentives at March 31, 2010 were $6.3 million, including estimated
forfeitures, however, if we accrued for rebates earned and unused as of March 31, 2010, assuming no
forfeitures, our accrued incentives would have been $7.0 million.
Income Taxes. We account for income taxes by recording taxes payable or refundable for the
current fiscal year and deferred tax assets and liabilities for future tax consequences of events
that have been recognized in our consolidated financial statements or the consolidated income tax
returns. Significant judgment is required in determining the provision for income taxes and
related accruals, deferred tax assets, and deferred tax liabilities. In the ordinary course of
business, there are transactions and calculations where the ultimate tax outcome is uncertain.
Additionally, the consolidated income tax returns are subject to audit by various tax authorities.
Although we believe that our estimates are reasonable, actual results could differ from these
estimates resulting in a final tax outcome that may be different from that which is reflected in
the consolidated financial statements.
Changes in Accounting Standards. In June 2009, the FASB Codification became the single source
of authoritative 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, Emerging Issues Task Force, FASB Staff Position,
etc. Authoritative standards included in the Codification are designated by their 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 annual report
for the fiscal year ended March 31, 2010 to reflect the new referencing system.
LIQUIDITY AND CAPITAL RESOURCES
Financing Activities
On October 2, 2009, in conjunction with the completion of our offering of the Senior Secured
Notes and payment in full of the Term Loan, we entered into the ABL Credit Agreement which provides
for the ABL Facility and replaced the Revolving Credit Facility, effectively terminating the Senior
Credit Facility. The ABL Facility is secured by a first priority interest in substantially all of
our and our subsidiaries property and assets, which also secure the Senior Secured Notes on a
second priority basis. The ABL Facility is scheduled to mature on the earlier of October 2, 2012
and 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), NBCs Senior Discount Notes
(due March 15, 2013), or any refinancing thereof. 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 the base interest rate 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. There also is a commitment fee ranging from
0.75% to 1.0% for the daily average unused amount. Costs of $10.2 million associated with the
issuance of the Senior Secured Notes and entering into the ABL Credit Agreement were capitalized as
debt issue costs to be amortized to interest expense over the remaining life of the debt
instruments. Debt issue costs of $3.1 million were written off as a result of the termination of
the Term Loan and Revolving Credit Facility.
Effective February 3, 2009, the Senior Credit Facility, which has been terminated as described
earlier, was amended to, among other things, (i) extend the maturity date of the Revolving Credit
Facility to May 31, 2010, (ii) decrease the maximum borrowing capacity under the Revolving Credit
Facility from $85.0 million to $65.0 million, (iii) amend certain definitions and financial
covenants under the Senior Credit Facility, including limiting future acquisitions to
contract-managed stores, and (iv) increase the interest rate on the Term Loan and Revolving Credit
Facility. The applicable margin on the Revolving Credit Facility and Term Loan increased to 6.0%
on Eurodollar borrowings and 5.0% on Base rate borrowings. The Eurodollar interest rate was not to
be less than 3.25% plus the applicable margin. The interest rate on Base rate borrowings was the
greater of a) Prime rate, b) 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. The commitment fee rate
increased to 0.75%. The modifications to the Senior Credit Facility resulted in the payment of
$4.0 million in costs associated with such modifications, which were capitalized as debt issue
costs to be amortized to interest expense over the remaining life of the debt instruments.
31
In conjunction with the Senior Credit Facility amendment on February 3, 2009, NBC entered into
a Stock Subscription Agreement with NBC Holdings Corp. (Holdings), pursuant to which Holdings
purchased 10,000 shares of a newly created series of NBC preferred stock, par value $0.01 per
share, for $1,000 per share, for an aggregate purchase price of $10.0 million. As a result of the
Stock Subscription Agreement, the Company received a $10.0 million capital contribution from NBC.
Our primary liquidity requirements are for debt service under the ABL Credit Agreement, which
replaced the Revolving Credit Facility, the Senior Secured Notes, which were issued on October 2,
2009 in conjunction with the payment in full of the Term Loan, the Senior Subordinated Notes and
other outstanding indebtedness, dividends to NBC to pay interest on its Senior Discount Notes, for
working capital, for income tax payments, for capital expenditures and for certain acquisitions.
We have historically funded these requirements primarily through internally generated cash flows
and funds borrowed under our revolving credit facility. At March 31, 2010, our total indebtedness
was $377.6 million, consisting of a $75.0 million ABL Facility which was unused at March 31, 2010,
$200 million of Senior Secured Notes with unamortized discount of $0.8 million, $175.0 million of
Senior Subordinated Notes, and $3.4 million of other indebtedness, including capital lease
obligations. To provide additional financing to fund the March 4, 2004 Transaction, NBC issued
Senior Discount Notes, the balance of which at March 31, 2009 was $77.0 million (face value).
Principal and interest payments under the ABL Facility, the Senior Secured Notes, the Senior
Subordinated Notes, and NBCs Senior Discount Notes represent significant liquidity requirements
for us. An excess cash flow payment of $6.0 million for fiscal year ended March 31, 2009 under the
Senior Credit Facility was paid in September 2009.
Loans under the Senior Credit Facility were subject to interest at floating rates based upon
the borrowing option selected by us. On July 15, 2005, we entered into an interest rate swap
agreement to essentially convert a portion of the variable rate Term Loan into debt with a fixed
rate of 6.844% (4.344% plus an applicable margin as defined by the Senior Credit Facility). This
agreement was effective as of September 30, 2005 and expired September 30, 2008.
The Senior Secured Notes require semi-annual interest payments at a fixed rate of 10.0% and
mature on December 1, 2011. The Senior Subordinated Notes require semi-annual interest payments at
a fixed rate of 8.625% and mature on March 15, 2012. NBCs Senior Discount Notes require
semi-annual cash interest payments commencing September 15, 2008 at a fixed rate of 11.0% and
mature on March 15, 2013.
In July 2007, a bookstore location was relocated, the new property lease for which has been
classified as a capital lease. This lease expires in fiscal year 2018 and contains two five-year
options to renew. The capital lease obligation and corresponding property recorded at inception of
the lease totaled $2.2 million. In November 2006, two bookstore locations were acquired, the
property leases for which have been classified as capital leases. These leases expire in fiscal
year 2012 and contain multiple options to renew every five years. The capital lease obligations
and corresponding property recorded at inception of the leases totaled $1.1 million.
Investing Cash Flows
Our capital expenditures were $5.4 million, $8.0 million and $7.3 million for the fiscal years
ended March 31, 2010, 2009 and 2008, respectively. Capital expenditures consist primarily of
leasehold improvements and furnishings for new bookstores, bookstore renovations, computer upgrades
and miscellaneous warehouse improvements. The ABL Credit Agreement does not have a limitation on
capital expenditures other than as part of the fixed charge coverage ratio. We expect capital
expenditures to be between $6.0 million and $7.0 million for fiscal year 2011.
Business acquisition and contract-management renewal expenditures were $2.8 million, $6.3
million and $14.7 million for the fiscal years ended March 31, 2010, 2009 and 2008, respectively.
During the fiscal year ended March 31, 2010, 14 bookstore locations were acquired in 11 separate
transactions (all of which were contract-managed locations). During the fiscal year ended March
31, 2009, 22 bookstore locations were acquired in 19 separate transactions (19 of which were
contract-managed locations). During the fiscal year ended March 31, 2008, we acquired 20 bookstore
locations in 14 separate transactions (10 of which were contract-managed locations). Our ability
to make acquisition expenditures is subject to certain restrictions under the ABL Credit Agreement.
During the fiscal years ended March 31, 2010 and 2009 we capitalized $0.6 million and during
the fiscal year ended March 31, 2008, we capitalized $0.3 million in software development costs
associated with new software products and enhancements to existing software products.
32
Effective September 1, 2007, we entered into an agreement whereby we agreed to pay $1.7
million over a period of thirty-six months to a software company in return for certain rights
related to that companys products that are designed to enhance web-based sales. This other identifiable intangible is being amortized on a straight-line basis
over the thirty-six month base term of the agreement. The asset and corresponding liability were
recorded based upon the present value of the future payments assuming an imputed interest rate of
6.7%, resulting in a discount of $0.1 million which will be recorded as interest expense over the
base term of the agreement utilizing the effective interest method of accounting.
In addition to the previously mentioned business acquisition and contract-management renewal
expenditures, the contract-managed acquisition costs during the fiscal year ended March 31, 2010
included $0.6 million of unpaid consideration. The purchase price of one of the bookstores during
the fiscal year ended March 31, 2008 included $0.7 million of contingent consideration, which is
paid to the previous owner on a monthly basis and is calculated as a percentage of revenues
generated by the acquired bookstore each month. Such payments totaled $133,474, $123,972 and
$41,219 for the fiscal years ended March 31, 2010, 2009 and 2008, respectively.
Operating Cash Flows
Our principal sources of cash to fund our future operating liquidity needs will be cash from
operating activities and borrowings under the ABL Facility. Usage of the ABL Facility to meet our
liquidity needs fluctuates throughout the fiscal year due to our distinct buying and selling
periods, increasing substantially at the end of each college semester (May and December). For the
fiscal year ended March 31, 2010, weighted-average borrowings under our revolving credit facilities
approximated $4.0 million, with actual borrowings ranging from a low of no borrowings to a high of
$28.6 million. Net cash flows from operating activities for the fiscal year ended March 31, 2010
were $36.2 million, up $4.5 million from $31.7 million for the fiscal year ended March 31, 2009.
The increase in net cash flows from operating activities is due primarily to a $6.5 million
decrease in accounts receivable primarily due to a decrease in Bookstore Division receivables from
publishers for returns and a decrease of $6.8 million in income taxes paid during the fiscal year
ended March 31, 2010. The increase in net cash flows was partially offset by an $11.0 million
increase in payments for inventories partially due to increased rental inventories in the Bookstore
Division at March 31, 2010. Net cash flows from operating activities for the fiscal year ended
March 31, 2009 were $31.7 million, an increase of $10.8 million from $20.9 million for the fiscal
year ended March 31, 2008. The increase in net cash flows from operations was due primarily to a
$9.5 million decrease in payments for inventories and a decrease of $3.1 million in income taxes
paid during the fiscal ended March 31, 2009.
As of March 31, 2010, we had $61.0 million in cash available to help fund working capital
requirements. At certain times of the year, we also invest in cash equivalents. Any investments
in cash equivalents are subject to restrictions under the ABL Credit Agreement. The ABL Credit
Agreement allows investments in (1) certain short-term securities issued by, or unconditionally
guaranteed by, the federal government, (2) certain short-term deposits in banks that have combined
capital and surplus of not less than $500 million, (3) certain short-term commercial paper of
issuers rated at least A-1 by Standard & Poors or P-1 by Moodys, (4) certain money market funds
which invest exclusively in assets otherwise allowable under the ABL Credit Agreement and (5)
certain other similar short-term investments. Although we invest in compliance with the
restrictions under our credit agreement and generally seek to minimize the risk associated with
investments by investing in investment grade, highly liquid securities, we cannot give assurances
that the cash equivalents that are in or will be selected to be in our investment portfolio will
not lose a portion of their value or become impaired in the future.
33
Covenant Restrictions
We have a substantial level of indebtedness. Our debt agreements impose significant financial
restrictions, which could prevent us from incurring additional indebtedness and taking certain
other actions and could result in all amounts outstanding being declared due and payable if we are
not in compliance with such restrictions. Access to borrowings under the ABL Facility is subject
to the calculation of a borrowing base, which is a function of eligible accounts receivable and
inventory, up to the maximum borrowing limit (less outstanding letters of credit). The ABL Credit
Agreement restricts our ability and the ability of certain of our subsidiaries to make investments,
acquisitions, loans or advances and pay dividends, except that, among other things, we may pay
dividends to NBC (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 NBC. In addition, under our 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 funds under the ABL Facility. At March 31, 2010, we had up to $75.0 million of total
revolving credit commitments under the ABL Facility (less outstanding letters of credit and subject
to a borrowing base). The calculated borrowing base as of March 31, 2010 was $44.7 million, of
which $1.0 million was outstanding under a letter of credit and $43.7 million was unused. At March
31, 2010, our pro forma fixed charge coverage ratio was 1.5x.
The indenture governing the Senior Secured 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 certain of 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. The indentures governing the Senior Subordinated Notes and NBCs Senior Discount
Notes contain similar restrictions on our ability and the ability of certain of our subsidiaries
and the ability of NBC to pay dividends or make certain other payments. In addition, if there is
no availability under the restricted payment calculation mentioned above, but we maintain the 2.0
to 1.0 consolidated coverage ratio on a pro forma basis, we may make dividends to NBC to meet the
interest payments on the Senior Discount Notes. If we do not maintain the 2.0 to 1.0 ratio on a
pro forma basis, we may still make payments, including dividends, up to $15.0 million in the
aggregate. At March 31, 2010, our pro forma consolidated coverage ratio calculated under the
indenture to the Senior Subordinated Notes was 1.85 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 March 31, 2010, the amount distributable under the most restrictive indenture was
$10.8 million after applying the $4.2 million dividend we paid to NBC for the March 15, 2010
interest on NBCs Senior Discount Notes. Such restrictions are not expected to affect our ability
to meet our cash obligations for the next twelve months.
As of March 31, 2010, we were in compliance with all of our debt covenants.
Our debt covenants use EBITDA and Adjusted EBITDA in the ratio calculations mentioned above.
For a discussion of EBITDA and Adjusted EBITDA, see Adjusted EBITDA Results earlier in this Item
and for a presentation reconciling EBITDA and Adjusted EBITDA to net cash flows from operating
activities, which we believe to be the closest GAAP liquidity measure, see Fiscal Year Ended March
31, 2010 Compared With Fiscal Year Ended March 31, 2009 and Fiscal Year Ended March 31, 2009
Compared With Fiscal Year Ended March 31, 2008 earlier in this Item.
34
Sources of and Needs for Capital
As of March 31, 2010, we had up to $75.0 million of total revolving credit commitments under
the ABL Facility (less outstanding letters of credit and subject to a borrowing base). The
calculated borrowing base as of March 31, 2010 was $44.7 million, of which $1.0 million was
outstanding under a letter of credit and $43.7 million was unused. Amounts drawn under the ABL
Facility may be used for working capital and general corporate purposes (including up to $10.0
million for letters of credit), subject to certain limitations.
On October 2, 2009, in conjunction with the completion of our offering of the Senior Secured
Notes and payment in full of the Term Loan, we entered into the ABL Credit Agreement which provides
for the ABL Facility and replaced the Revolving Credit Facility (collectively the Refinancing).
Although our overall indebtedness did not materially increase upon consummation of the Refinancing,
our liquidity requirements have increased, primarily due to increased interest payment obligations.
After giving effect to the Refinancing, our three principal tranches of debt (the Senior Secured
Notes, the ABL Facility and the Senior Subordinated Notes) each will mature within a period of six
months of each other. The ABL Facility will mature on the earlier of October 2, 2012 and the date
that is 91 days prior to the earliest maturity of the $200.0 million Senior Secured Notes (which
mature on December 1, 2011), the $175.0 million Senior Subordinated Notes (which mature on March
15, 2012), NBCs $77.0 million Senior Discount Notes (which mature on March 15, 2013), or any
refinancing thereof. As a consequence, we may be required to refinance the other tranches of debt
in our and NBCs capital structure in order to refinance the ABL Facility. Due to our highly
leveraged capital structure, in the absence of a significant improvement in our credit profile
and/or the financial markets, we may not be able to refinance our indebtedness, or NBC may not be
able to refinance its indebtedness, on terms acceptable to us.
Our ability to satisfy our debt obligations and to pay principal and interest on our debt,
fund working capital and make anticipated capital expenditures will depend on our future
performance, which is subject to general economic conditions and other factors, some of which are
beyond our control. We believe that funds generated from operations, existing cash, and borrowings
under the ABL Facility will be sufficient to finance our current operations, cash interest
requirements, income tax payments, planned capital expenditures, and internal growth for the
foreseeable future. Future acquisitions, if any, may require additional debt or equity financing.
As noted previously, we also cannot give assurance that we will generate sufficient cash flow from
operations or that future borrowings will be available under the ABL Facility in an amount
sufficient to enable us to service our debt or to fund our liquidity needs.
35
Off-Balance Sheet Arrangements
As of March 31, 2010, we had no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources.
The following tables present aggregated information as of March 31, 2010 regarding our
contractual obligations and commercial commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
Less Than |
|
|
2-3 |
|
|
4-5 |
|
|
After 5 |
|
Contractual Obligations |
|
Total |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (1) |
|
$ |
375,237,954 |
|
|
$ |
54,403 |
|
|
$ |
375,127,935 |
|
|
$ |
55,616 |
|
|
$ |
|
|
Interest on long-term debt |
|
|
70,239,747 |
|
|
|
35,116,701 |
|
|
|
35,120,521 |
|
|
|
2,525 |
|
|
|
|
|
Capital lease obligations |
|
|
3,226,790 |
|
|
|
846,053 |
|
|
|
982,976 |
|
|
|
620,311 |
|
|
|
777,450 |
|
Interest on capital lease obligations |
|
|
804,053 |
|
|
|
231,847 |
|
|
|
311,557 |
|
|
|
179,425 |
|
|
|
81,224 |
|
Operating leases |
|
|
80,384,000 |
|
|
|
19,630,000 |
|
|
|
29,807,000 |
|
|
|
15,875,000 |
|
|
|
15,072,000 |
|
Uncertain tax position liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
529,892,544 |
|
|
$ |
55,879,004 |
|
|
$ |
441,349,989 |
|
|
$ |
16,732,877 |
|
|
$ |
15,930,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Amount of Commitment Expiration Per Period |
|
|
|
Amounts |
|
|
Less Than |
|
|
2-3 |
|
|
4-5 |
|
|
Over 5 |
|
Other Commercial Commitments |
|
Committed |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused line of credit (2) |
|
$ |
75,000,000 |
|
|
$ |
|
|
|
$ |
75,000,000 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Does not include the effect of $0.8 million of unamortized discount for the Senior
Secured Notes. |
|
(2) |
|
Interest is not estimated on the line of credit due to uncertainty surrounding the
timing and extent of usage of the line of credit. |
We have recorded other long-term liabilities of $2.3 million, which consist primarily of
certain lease related liabilities of $1.2 million to appropriately recognize rent expense over the
rental term, deferred payments related to acquisitions of $0.7 million and deferred compensation of
$0.4 million, which are excluded from the preceding table primarily because we cannot reasonably
estimate the timing of the long-term payments.
Transactions with Related and Certain Other Parties
In accordance with our debt covenants, we declared and paid $8.5 million in dividends to NBC
during the fiscal years ended March 31, 2010 and 2009 to provide funding for interest due and
payable on NBCs $77.0 million 11% senior discount notes. There were no dividends declared or paid
to NBC in fiscal year 2008.
In conjunction with the Senior Credit Facility amendment on February 3, 2009, NBC entered into
a Stock Subscription Agreement with Holdings, pursuant to which Holdings purchased 10,000 shares of
a newly created series of NBC preferred stock, par value $0.01 per share, for $1,000 per share, for
an aggregate purchase price of $10.0 million. As a result of the Stock Subscription Agreement, the
Company received a $10.0 million capital contribution from NBC.
36
Impact of Inflation
Our results of operations and financial condition are presented based upon historical costs.
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of
the estimates required, we believe that the effects of inflation, if any, on our results of
operations and financial condition have not been material. However, there can be no assurance that
during a period of significant inflation, our results of operations will not be adversely affected.
Accounting Standards 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, Revenue Recognition
(Topic 605) 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
determined that the update will not have a material impact on the consolidated financial
statements.
In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985)
Certain Revenue Arrangements That Include Software Elements (Update 2009-14). Update 2009-14
clarifies what guidance should be used in allocating and measuring revenue for 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.
37
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This Annual Report on Form 10-K contains or incorporates by reference certain statements that
are not historical facts, including, most importantly, information concerning possible or assumed
future results of our operations, such as, but not limited to, statements relating to EBITDA or
Adjusted EBITDA growth, the expected revenue of new bookstores we are operating, expanding sales on
the internet, continued growth of the market for new and used textbooks, the increase of student
enrollment in colleges, expected growth or changes in certain segments, volume or revenue growth,
our ability to extend, refinance or repay our indebtedness, expressions of general optimism or
pessimism about the future, and statements preceded by, followed by or that include the words
may, believes, expects, feels, anticipates, or the negation thereof, or similar
expressions, which constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the Reform Act). These forward-looking statements, for
which we claim the protection of the safe harbor contained in the Reform Act, involve risks,
uncertainties and other factors which may cause the actual performance or our achievements to be
materially different from any future results, performances or achievements expressed or implied by
such forward-looking statements. Several important factors could affect our future results and
could cause those results to differ materially from those expressed in the forward-looking
statements contained herein. These factors include, but are not limited to, the following: (1) the
risks of operating with a substantial level of indebtedness including possible increases in our
costs of borrowing, our inability to pay interest as it comes due, repay debt, extend or refinance
debt as it matures, and obtain additional financing, and the possibility that the maturity of our
credit facility may be accelerated and that cash flow will be diverted away from operations; (2)
increased competition from other companies that target our markets; (3) increased competition from
alternative media and alternative sources of textbooks for students, including digital or other
educational content sold or rented directly to students and increased competition for the purchase
and sale of used textbooks from student-to-student transactions; (4) further deterioration in the
economy and credit markets, a decline in consumer spending, and/or changes in general economic
conditions in the markets in which we compete or may compete; (5) our inability to successfully
start-up, acquire or contract-manage additional bookstores or to integrate those additional
bookstores and/or to cost-effectively maintain our current contract-managed bookstores; (6) our
inability to purchase a sufficient supply of used textbooks; (7) changes in pricing of new and/or
used textbooks or in publisher practices regarding new editions and materials packaged with new
textbooks; (8) the loss or retirement of key members of management; (9) the impact of seasonality
of the wholesale and bookstore operations; (10) further goodwill impairment or impairment of
identifiable intangibles resulting in a non-cash write down of goodwill or identifiable
intangibles; and other risks detailed in our SEC filings, in particular in this Annual Report on
Form 10-K, all of which are difficult or impossible to predict accurately and many of which are
beyond our control. We will not undertake and specifically decline any obligation to publicly
release the result of any revisions which may be made to any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
38
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our primary market risk exposure is, and is expected to continue to be, fluctuation in
interest rates. Our exposure to market risk for changes in interest rates relates to our
short-term investments and borrowings under the ABL Facility. All of our long-term debt that would
have exposed us to market risk due to fluctuations in variable interest rates has been paid in
full. Exposure to interest rate fluctuations for our long-term debt is managed by maintaining
fixed interest rate debt (primarily the Senior Subordinated Notes and the Senior Secured Notes).
Because we pay fixed interest coupons on our notes, market fluctuations do not impact our debt
interest payments. However, the fair value of our notes fluctuates as a result of changes in
market interest rates, changes in our credit worthiness, and changes in the overall credit market.
The following table presents quantitative information about our market risk sensitive
instruments, which include the Senior Subordinated Notes, the Senior Secured Notes, capital lease
obligations, and other long-term debt:
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Debt |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
Principal |
|
|
Interest |
|
|
|
Cash Flows (1) |
|
|
Rate |
|
Fiscal Year Ended March 31: |
|
|
|
|
|
|
|
|
2011 |
|
$ |
900,456 |
|
|
|
9.36 |
% |
2012 |
|
|
375,649,664 |
|
|
|
9.35 |
% |
2013 |
|
|
461,247 |
|
|
|
8.63 |
% |
2014 |
|
|
402,190 |
|
|
|
8.46 |
% |
2015 |
|
|
273,739 |
|
|
|
8.29 |
% |
Thereafter |
|
|
777,450 |
|
|
|
8.29 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
378,464,746 |
|
|
|
9.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
$ |
372,317,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Principal cash flows represent scheduled principal payments and are adjusted for
certain optional prepayments, if any, to be applied toward principal balances. |
39
Certain quantitative market risk disclosures have changed since March 31, 2009 as a result of
the payment in full of the Term Loan and our issuance of the Senior Secured Notes, market
fluctuations, movement in interest rates, and principal payments. The following table presents
summarized market risk information (the weighted-average variable rates are based on implied
forward rates in the yield curve as of the date presented):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Carrying Values: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruments entered into for purposes other than trading: |
|
$ |
|
|
|
$ |
4,999,319 |
|
Cash equivalents (treasury notes) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate debt |
|
|
377,624,262 |
|
|
|
179,334,183 |
|
Variable rate debt |
|
|
|
|
|
|
193,076,346 |
|
|
|
|
|
|
|
|
|
|
Fair Values: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruments entered into for purposes other than trading: |
|
|
|
|
|
|
|
|
Cash equivalents (treasury notes) |
|
$ |
|
|
|
$ |
4,999,319 |
|
|
|
|
|
|
|
|
|
|
Fixed rate debt |
|
|
372,317,000 |
|
|
|
90,367,000 |
|
Variable rate debt |
|
|
|
|
|
|
160,253,000 |
|
|
|
|
|
|
|
|
|
|
Overall Weighted-Average Interest Rates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (treasury notes) |
|
|
|
|
|
|
0.07 |
% |
|
|
|
|
|
|
|
|
|
Fixed rate debt |
|
|
9.35 |
% |
|
|
8.63 |
% |
Variable rate debt |
|
|
|
|
|
|
9.25 |
% |
40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements of Nebraska Book Company, Inc.
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholder of
Nebraska Book Company, Inc.
Lincoln, Nebraska
We have audited the accompanying consolidated balance sheets of Nebraska Book Company, Inc. (a
wholly-owned subsidiary of NBC Acquisition Corp.) and subsidiaries as of March 31, 2010 and 2009,
and the related consolidated statements of operations, stockholders equity, and cash flows for
each of the three years in the period ended March 31, 2010. Our audits also included the financial
statement schedule listed in the Index at Item 15. These financial statements and financial
statement schedule are the responsibility of the Companys management. Our responsibility is to
express an opinion on the financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Nebraska Book Company, Inc. and subsidiaries as of March 31,
2010 and 2009, and the results of their operations and their cash flows for each of the three years
in the period ended March 31, 2010 in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
June 25, 2010
42
NEBRASKA BOOK COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
60,972,625 |
|
|
$ |
44,038,468 |
|
Receivables, net |
|
|
57,987,794 |
|
|
|
61,301,636 |
|
Inventories |
|
|
97,497,689 |
|
|
|
93,115,663 |
|
Recoverable income taxes |
|
|
2,435,287 |
|
|
|
2,869,583 |
|
Deferred income taxes |
|
|
6,247,559 |
|
|
|
6,581,802 |
|
Prepaid expenses and other assets |
|
|
4,070,281 |
|
|
|
3,950,874 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
229,211,235 |
|
|
|
211,858,026 |
|
PROPERTY AND EQUIPMENT, net of depreciation & amortization |
|
|
42,155,424 |
|
|
|
45,638,522 |
|
GOODWILL |
|
|
215,571,126 |
|
|
|
215,436,126 |
|
CUSTOMER RELATIONSHIPS, net of amortization |
|
|
79,902,820 |
|
|
|
85,644,340 |
|
TRADENAME |
|
|
31,320,000 |
|
|
|
31,320,000 |
|
OTHER IDENTIFIABLE INTANGIBLES, net of amortization |
|
|
5,295,324 |
|
|
|
9,172,622 |
|
DEBT ISSUE COSTS, net of amortization |
|
|
9,198,683 |
|
|
|
6,875,122 |
|
OTHER ASSETS |
|
|
2,850,632 |
|
|
|
2,121,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
615,505,244 |
|
|
$ |
608,066,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
26,387,040 |
|
|
$ |
26,865,614 |
|
Accrued employee compensation and benefits |
|
|
9,401,468 |
|
|
|
13,780,209 |
|
Accrued interest |
|
|
7,295,709 |
|
|
|
678,516 |
|
Accrued incentives |
|
|
6,313,933 |
|
|
|
6,110,700 |
|
Accrued expenses |
|
|
9,051,651 |
|
|
|
4,277,105 |
|
Deferred revenue |
|
|
1,299,960 |
|
|
|
959,274 |
|
Current maturities of long-term debt |
|
|
54,403 |
|
|
|
6,917,451 |
|
Current maturities of capital lease obligations |
|
|
846,053 |
|
|
|
748,692 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
60,650,217 |
|
|
|
60,337,561 |
|
LONG-TERM DEBT, net of current maturities |
|
|
374,343,069 |
|
|
|
361,445,728 |
|
CAPITAL LEASE OBLIGATIONS, net of current maturities |
|
|
2,380,737 |
|
|
|
3,298,658 |
|
OTHER LONG-TERM LIABILITIES |
|
|
2,278,963 |
|
|
|
5,304,166 |
|
DEFERRED INCOME TAXES |
|
|
50,467,019 |
|
|
|
54,313,459 |
|
DUE TO PARENT |
|
|
23,194,711 |
|
|
|
20,130,189 |
|
COMMITMENTS (Note I) |
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Common stock, voting, authorized 50,000 shares
of $1.00 par value; issued and outstanding 100
shares |
|
|
100 |
|
|
|
100 |
|
Additional paid-in capital |
|
|
148,197,307 |
|
|
|
148,135,923 |
|
Accumulated Deficit |
|
|
(46,006,879 |
) |
|
|
(44,899,077 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
102,190,528 |
|
|
|
103,236,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
615,505,244 |
|
|
$ |
608,066,707 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
43
NEBRASKA BOOK COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
$ |
605,493,613 |
|
|
$ |
610,716,181 |
|
|
$ |
581,247,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of depreciation shown below) |
|
|
370,195,916 |
|
|
|
371,369,240 |
|
|
|
354,139,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
235,297,697 |
|
|
|
239,346,941 |
|
|
|
227,108,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
161,858,274 |
|
|
|
168,314,611 |
|
|
|
157,193,426 |
|
Closure of California Warehouse |
|
|
|
|
|
|
|
|
|
|
(36,057 |
) |
Depreciation |
|
|
8,517,004 |
|
|
|
7,602,631 |
|
|
|
7,208,504 |
|
Amortization |
|
|
10,853,248 |
|
|
|
11,384,020 |
|
|
|
10,443,335 |
|
Goodwill impairment |
|
|
|
|
|
|
106,972,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181,228,526 |
|
|
|
294,273,262 |
|
|
|
174,809,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
|
54,069,171 |
|
|
|
(54,926,321 |
) |
|
|
52,299,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
40,679,829 |
|
|
|
32,878,225 |
|
|
|
33,559,239 |
|
Interest income |
|
|
(180,709 |
) |
|
|
(426,536 |
) |
|
|
(1,332,497 |
) |
Loss on early extinguishment of debt |
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
Loss on derivative financial instrument |
|
|
|
|
|
|
102,000 |
|
|
|
198,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,564,879 |
|
|
|
32,553,689 |
|
|
|
32,424,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
10,504,292 |
|
|
|
(87,480,010 |
) |
|
|
19,874,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
|
|
3,142,094 |
|
|
|
7,448,658 |
|
|
|
7,418,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
7,362,198 |
|
|
$ |
(94,928,668 |
) |
|
$ |
12,456,023 |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
44
NEBRASKA BOOK COMPANY, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Paid-in |
|
|
(Accumulated |
|
|
Comprehensive |
|
|
|
|
|
|
Comprehensive |
|
|
|
Stock |
|
|
Capital |
|
|
Deficit) |
|
|
Income (Loss) |
|
|
Total |
|
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, April 1, 2007 |
|
$ |
100 |
|
|
$ |
138,017,229 |
|
|
$ |
46,043,568 |
|
|
$ |
613,000 |
|
|
$ |
184,673,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed capital |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
12,456,023 |
|
|
|
|
|
|
|
12,456,023 |
|
|
|
12,456,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation attributable to NBC Holdings Corp. stock options |
|
|
|
|
|
|
70,489 |
|
|
|
|
|
|
|
|
|
|
|
70,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on interest rate swap agreement, net of taxes of $861,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,361,000 |
) |
|
|
(1,361,000 |
) |
|
|
(1,361,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2008 |
|
|
100 |
|
|
|
138,087,705 |
|
|
|
58,499,591 |
|
|
|
(748,000 |
) |
|
|
195,839,396 |
|
|
$ |
11,095,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed capital |
|
|
|
|
|
|
10,004,802 |
|
|
|
|
|
|
|
|
|
|
|
10,004,802 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
(94,928,668 |
) |
|
|
|
|
|
|
(94,928,668 |
) |
|
|
(94,928,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation attributable to NBC Holdings Corp. stock options |
|
|
|
|
|
|
43,416 |
|
|
|
|
|
|
|
|
|
|
|
43,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
(8,470,000 |
) |
|
|
|
|
|
|
(8,470,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swap agreement, net of taxes of $473,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
748,000 |
|
|
|
748,000 |
|
|
|
748,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2009 |
|
|
100 |
|
|
|
148,135,923 |
|
|
|
(44,899,077 |
) |
|
|
|
|
|
|
103,236,946 |
|
|
$ |
(94,180,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed capital |
|
|
|
|
|
|
(40 |
) |
|
|
|
|
|
|
|
|
|
|
(40 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
7,362,198 |
|
|
|
|
|
|
|
7,362,198 |
|
|
|
7,362,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation attributable to NBC Holdings Corp. stock options |
|
|
|
|
|
|
61,424 |
|
|
|
|
|
|
|
|
|
|
|
61,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
(8,470,000 |
) |
|
|
|
|
|
|
(8,470,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2010 |
|
$ |
100 |
|
|
$ |
148,197,307 |
|
|
$ |
(46,006,879 |
) |
|
$ |
|
|
|
$ |
102,190,528 |
|
|
$ |
7,362,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
45
NEBRASKA BOOK COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
7,362,198 |
|
|
$ |
(94,928,668 |
) |
|
$ |
12,456,023 |
|
Adjustments to reconcile net income (loss) to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
1,106,882 |
|
|
|
1,288,543 |
|
|
|
1,040,599 |
|
Provision for losses on receivables |
|
|
1,399,466 |
|
|
|
1,366,979 |
|
|
|
468,007 |
|
Depreciation |
|
|
8,517,004 |
|
|
|
7,602,631 |
|
|
|
7,208,504 |
|
Amortization |
|
|
15,654,145 |
|
|
|
13,589,972 |
|
|
|
12,298,118 |
|
Goodwill impairment |
|
|
|
|
|
|
106,972,000 |
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
Amortization of bond discount |
|
|
159,518 |
|
|
|
|
|
|
|
|
|
Loss on derivative financial instrument |
|
|
|
|
|
|
102,000 |
|
|
|
198,000 |
|
Loss on disposal of assets |
|
|
235,803 |
|
|
|
124,871 |
|
|
|
284,891 |
|
Deferred income taxes |
|
|
(3,512,197 |
) |
|
|
(1,947,665 |
) |
|
|
(3,443,682 |
) |
Changes in operating assets and liabilities, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
1,252,806 |
|
|
|
(5,271,324 |
) |
|
|
(2,920,327 |
) |
Inventories |
|
|
(2,874,880 |
) |
|
|
8,101,584 |
|
|
|
(1,425,783 |
) |
Recoverable income taxes |
|
|
434,296 |
|
|
|
(2,846,510 |
) |
|
|
|
|
Prepaid expenses and other assets |
|
|
30,593 |
|
|
|
(1,400,805 |
) |
|
|
(545,433 |
) |
Other assets |
|
|
462,071 |
|
|
|
275,316 |
|
|
|
490,219 |
|
Accounts payable |
|
|
(376,486 |
) |
|
|
(2,132,402 |
) |
|
|
(1,098,060 |
) |
Accrued employee compensation and benefits |
|
|
(4,378,741 |
) |
|
|
1,679,569 |
|
|
|
(2,112,361 |
) |
Accrued interest |
|
|
6,617,193 |
|
|
|
18,579 |
|
|
|
(50,863 |
) |
Accrued incentives |
|
|
203,233 |
|
|
|
(998,157 |
) |
|
|
125,595 |
|
Accrued expenses |
|
|
516,894 |
|
|
|
1,104,983 |
|
|
|
837,883 |
|
Income taxes payable |
|
|
|
|
|
|
(847,370 |
) |
|
|
(2,405,704 |
) |
Deferred revenue |
|
|
340,686 |
|
|
|
96,280 |
|
|
|
(35,672 |
) |
Other long-term liabilities |
|
|
20,465 |
|
|
|
(284,493 |
) |
|
|
(506,193 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
|
36,236,708 |
|
|
|
31,665,913 |
|
|
|
20,863,761 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(5,410,976 |
) |
|
|
(7,979,371 |
) |
|
|
(7,260,909 |
) |
Acquisitions, net of cash acquired |
|
|
(2,847,608 |
) |
|
|
(6,320,772 |
) |
|
|
(14,681,655 |
) |
Proceeds from sale of property and equipment |
|
|
141,167 |
|
|
|
35,503 |
|
|
|
36,385 |
|
Software development costs |
|
|
(648,523 |
) |
|
|
(633,763 |
) |
|
|
(272,981 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
(8,765,940 |
) |
|
|
(14,898,403 |
) |
|
|
(22,179,160 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
199,000,000 |
|
|
|
|
|
|
|
|
|
Payment of financing costs |
|
|
(10,190,217 |
) |
|
|
(3,961,811 |
) |
|
|
|
|
Principal payments on long-term debt |
|
|
(193,125,225 |
) |
|
|
(2,070,654 |
) |
|
|
(1,957,852 |
) |
Principal payments on capital lease obligations |
|
|
(820,560 |
) |
|
|
(722,823 |
) |
|
|
(624,910 |
) |
Borrowings under revolving credit facility |
|
|
85,000,000 |
|
|
|
200,600,000 |
|
|
|
148,000,000 |
|
Payments under revolving credit facility |
|
|
(85,000,000 |
) |
|
|
(200,600,000 |
) |
|
|
(148,000,000 |
) |
Dividends paid to parent |
|
|
(8,470,000 |
) |
|
|
(8,470,000 |
) |
|
|
|
|
Capital contributions |
|
|
4,869 |
|
|
|
10,009,752 |
|
|
|
4,869 |
|
Due to parent |
|
|
3,064,522 |
|
|
|
3,160,038 |
|
|
|
236,872 |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
(10,536,611 |
) |
|
|
(2,055,498 |
) |
|
|
(2,341,021 |
) |
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
16,934,157 |
|
|
|
14,712,012 |
|
|
|
(3,656,420 |
) |
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
44,038,468 |
|
|
|
29,326,456 |
|
|
|
32,982,876 |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
60,972,625 |
|
|
$ |
44,038,468 |
|
|
$ |
29,326,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
29,102,221 |
|
|
$ |
30,653,694 |
|
|
$ |
31,755,319 |
|
Income taxes |
|
|
3,155,473 |
|
|
|
9,930,165 |
|
|
|
13,030,853 |
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Property acquired through capital leases |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,200,000 |
|
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on interest rate swap agreement, net of income taxes |
|
|
|
|
|
|
748,000 |
|
|
|
(1,361,000 |
) |
Deferred taxes resulting from unrealized gain (loss) on interest rate swap
agreement |
|
|
|
|
|
|
473,000 |
|
|
|
(861,000 |
) |
Other intangible agreement to be paid over three years |
|
|
|
|
|
|
|
|
|
|
1,585,407 |
|
Unpaid consideration associated with bookstore acquisitions |
|
|
574,465 |
|
|
|
155,000 |
|
|
|
700,000 |
|
See notes to consolidated financial statements.
46
NEBRASKA BOOK COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF OPERATIONS
Nebraska Book Company, Inc. (the Company, we, our, or us) is a wholly-owned subsidiary
of NBC Acquisition Corp. (NBC). Wholly-owned subsidiaries of Nebraska Book Company, Inc. include
NBC Textbooks LLC and Net Textstore LLC (accounted for in the Companys Textbook Division),
Specialty Books, Inc. (accounted for in the Companys Complementary Services Division), Campus
Authentic LLC (accounted for in the Companys Bookstore Division), and College Book Stores of
America, Inc. (CBA) (a portion of the Companys Bookstore Division representing a group of
primarily contract-managed college bookstore locations acquired on May 1, 2006).
We participate in the college bookstore industry primarily by operating our own college
bookstores, by providing used textbooks to college bookstore operators, by providing distance
education products and services, and by providing proprietary college bookstore information and
e-commerce systems, consulting and other services.
On March 4, 2004, Weston Presidio formed NBC Holdings Corp. and acquired the controlling
interest in NBC through a series of steps which resulted in Weston Presidio owning a substantial
majority of NBCs common stock (referred to as the March 4, 2004 Transaction).
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are as follows:
Principles of Consolidation: Effective July 1, 2002, our distance learning division was
separately incorporated under the laws of the State of Delaware as Specialty Books, Inc., one of
our wholly-owned subsidiaries. Effective January 1, 2005, our Textbook Division was separately
incorporated under the laws of the State of Delaware as NBC Textbooks LLC, one of our wholly-owned
subsidiaries. On May 1, 2006, we acquired all of the outstanding stock of CBA, an entity
separately incorporated under the laws of the State of Illinois and now accounted for as one of our
wholly-owned subsidiaries. On April 24, 2007, we established Net Textstore LLC as a wholly-owned
subsidiary separately incorporated under the laws of the State of Delaware. Effective January 26,
2009, we established Campus Authentic LLC, a wholly-owned subsidiary which was separately
incorporated under the laws of the State of Delaware. Subsequent to the date of incorporation or
acquisition, our financial statements have been presented on a consolidated basis to include all of
the balances of Specialty Books, Inc., NBC Textbooks LLC, CBA, Net Textstore LLC and Campus
Authentic LLC, after elimination of all intercompany balances and transactions. In connection with
their incorporation, Specialty Books, Inc., NBC Textbooks LLC, CBA, Net Textstore LLC and Campus
Authentic LLC have guaranteed payment and performance of obligations, liabilities, and indebtedness
arising under, out of, or in connection with the Senior Subordinated Notes, Senior Secured Notes
and the ABL Facility.
Revenue Recognition: Our revenue recognition policies, by reporting segment, are as follows:
Bookstore Division The Bookstore Divisions revenues consist primarily of the sale or
rental of new and used textbooks, as well as the sale of a variety of other merchandise
including apparel, general books, sundries, and gift items. Such sales occur primarily
over-the-counter or online with revenues being recognized at the point of sale or upon
shipment. We implemented a rental program for new and used textbooks in fiscal 2010 and
revenues associated with that program are recognized at the time of rental.
Textbook Division The Textbook Division recognizes revenue from the sale of used textbooks
when title passes (at the time of shipment), net of estimated product returns. The Textbook
Division has established a program which, under certain conditions, enables its customers to
return the used textbooks. The effect of this program is estimated utilizing actual
historical return experience and revenues are adjusted accordingly.
Complementary Services Division Complementary Services Division revenues come from a
variety of sources, including the sale of distance education materials, the sale of computer
hardware and software (and licensing thereof), software maintenance contracts, membership
fees, and a variety of services provided to college bookstores. Revenues from the sale of
distance education materials and computer hardware/software (and licensing thereof) are
recognized at the time of delivery. Software maintenance contracts and membership fees are
generally invoiced to the customer annually, with the revenues being deferred and recognized on a straight-line basis over the
term of the contract. Revenues from the various services provided to college bookstores are
recognized once services have been rendered.
47
Shipping and Handling Fees and Costs: Amounts billed to a customer for shipping and handling
have been classified as revenues in the consolidated statements of operations and approximated $7.6
million, $6.1 million and $5.7 million for the fiscal years ended March 31, 2010, 2009 and 2008,
respectively. Shipping and handling costs are included in operating expenses in the consolidated
statements of operations and approximated $11.0 million, $10.4 million and $9.9 million for the
fiscal years ended March 31, 2010, 2009 and 2008, respectively.
Sales Tax Collections: We account for sales tax collected from customers and remitted to the
applicable taxing authorities on a net basis, with no impact on revenues and any differences
between amount collected and amount remitted being recorded in selling, general and administrative
expenses.
Advertising: Advertising costs are expensed as incurred and approximated $6.3 million, $7.0
million and $7.3 million for the fiscal years ended March 31, 2010, 2009 and 2008, respectively.
Use of Estimates: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from the
estimates.
Cash and Cash Equivalents: Cash and cash equivalents consist of cash on hand and in regular
checking accounts and an overnight sweep account at the bank as well as short-term investments in
treasury notes with maturities of three months or less when purchased.
Accounts Receivable and Allowance for Doubtful Accounts: We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to make required
payments. In determining the adequacy of the allowance, we analyze the aging of the receivable,
the customers financial position, historical collection experience, and other economic and
industry factors. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be required. Credits due
from publishers for returns are re-classed from accounts payable to accounts receivable.
Inventories: Inventories are stated at the lower of cost or market. The cost of used textbook
inventories is determined using the weighted-average method. Our Bookstore Division uses the
retail inventory method to determine cost for new textbooks and non-textbook inventories. The cost
of other inventories is determined on a first-in, first-out cost method. We account for inventory
obsolescence based upon assumptions about future demand and market conditions. If actual future
demand or market conditions are less favorable than those projected by us, inventory write-downs
may be required. In determining inventory adjustments, we consider amounts of inventory on hand,
projected demand, new editions and other industry factors.
Property and Equipment: Property and equipment are stated at cost. Depreciation is determined
using the straight-line method. The majority of property and equipment have useful lives of one to
seven years, with the exception of buildings which are depreciated over 39 years and leasehold
improvements which are depreciated over the remaining life of the corresponding lease, or the
useful life, if shorter. We do not consider renewal options for the determination of the
amortization period for leasehold improvements unless renewal is considered reasonably assured at
the inception of the lease.
Goodwill: Goodwill arose as a result of the March 4, 2004 Transaction and the acquisition of
bookstore operations subsequent thereto. The goodwill in such transactions is determined by
calculating the difference between the consideration transferred and the fair value of net assets
acquired. We evaluate the impairment of the carrying value of our goodwill and identifiable
intangibles in accordance with applicable accounting standards, including the Intangibles
Goodwill and Other and Property, Plant and Equipment Topics of the FASB ASC. In accordance with
such standards, goodwill is not amortized but rather tested at least annually at March 31 for
impairment and we evaluate impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. We evaluate goodwill at the reporting unit level and have
identified our reportable segments the Textbook Division, Bookstore Division and Complementary
Services Division as our reporting units. Our reporting units 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.
48
In the first step of our goodwill impairment test, fair value is determined using a market
approach based primarily on an earnings before interest, taxes, depreciation, and amortization
(EBITDA) multiple, and is deemed to be the most indicative of the Companys fair value. The
EBITDA multiple approach requires that we estimate a certain valuation multiple of EBITDA derived
from comparable companies and apply that multiple to our latest twelve month pro forma EBITDA. We
reviewed comparable company information to determine the EBITDA multiple and concluded that 6.76x
was an appropriate EBITDA multiple at March 31, 2010 and 7.0x was appropriate at March 31, 2009.
This total company fair value is allocated to the reporting units based upon their percentage of
EBITDA. The fair value was also calculated using the income approach (discounted cash flow
approach) and we concluded that it was supportive of the fair value based upon the EBITDA multiple
approach. If we fail the first step of the goodwill impairment test, we are required, in the
second step, to estimate the fair value of reporting unit assets and liabilities, including
intangible assets, to derive the fair value of the reporting units goodwill.
We monitor relevant circumstances, including industry trends, general economic conditions, and
the potential impact that such circumstances might have on the valuation of our goodwill and
identifiable intangibles. It is possible that changes in such circumstances, or in the numerous
variables associated with the judgments, assumptions and estimates made by us in assessing the
appropriate valuation of our goodwill and identifiable intangibles, including a further
deterioration in the economy or debt markets or a significant delay in a recovery, could in the
future require us to further write down a portion of our goodwill or write down a portion of our
identifiable intangibles and record related non-cash impairment charges.
Identifiable Intangibles Customer Relationships: The identifiable intangible asset for
customer relationships is attributable to the non-contractual long-term relationships we have
established over the years with customers in our Textbook and Complementary Services Divisions.
This identifiable intangible is amortized on a straight-line basis over an estimated useful life of
20 years. We test our customer relationship intangible for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable.
Due to the economic downturn and in conjunction with the goodwill impairment test conducted
for March 31, 2009, the identifiable intangible asset for customer relationships was tested for
impairment at March 31, 2009. In accordance with the Property, Plant and Equipment Topic of the
FASB ASC, an impairment loss will be recognized if the carrying amount of an intangible asset is
not recoverable and its carrying amount exceeds its fair value. We completed our test using the
income approach which utilizes valuation techniques to convert future amounts of cash flows or
earnings to a present amount and determined that the intangible asset for customer relationships
was not impaired.
Identifiable Intangibles Tradename: The identifiable intangible asset for tradename relates
to the trademark owned on the name Nebraska Book Company and the corresponding logo. This
identifiable intangible has an indefinite useful life; and, thus, is not amortized but rather
tested at least annually for impairment. In accordance with the Intangibles Goodwill and Other
Topic of the FASB ASC, an impairment loss shall be recognized if the carrying amount of an
intangible asset is not recoverable and its carrying amount exceeds its fair value. We completed
our test at March 31, 2010 by reviewing the valuation from March 31, 2009 and determined that the
assumptions used in the valuation have not significantly changed; therefore, we determined that the
intangible asset for tradename was not impaired.
Other Identifiable Intangibles Developed Technology: Our primary activities regarding the
internal development of software revolve around its proprietary college bookstore information
technology (PRISM and WinPRISM) and e-commerce technology (WebPRISM), which are used by our
Bookstore Division and also marketed to the college bookstore industry and other businesses. As
this internally developed software is intended for both internal use and sale to external
customers, we adhere to the guidance in the Software and Internal-Use Software Topics of the FASB
ASC.
Development costs included in the research and development of new software products and
enhancements to existing software products associated with our proprietary college bookstore
information technology and e-commerce technology are expensed as incurred until technological
feasibility has been established. After technological feasibility is established, additional
development costs are capitalized and amortized on a straight-line basis over the lesser of six
years or the economic life of the related product. Recoverability of such capitalized costs is
evaluated based upon estimates of future undiscounted cash flows. We test our developed technology
intangible for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
Due to the economic downturn and in conjunction with the goodwill impairment test conducted
for March 31, 2009, the identifiable intangible asset for developed technology was tested for
impairment at March 31, 2009. In accordance with the Property, Plant and Equipment Topic of the
FASB ASC, an impairment loss shall be recognized if the carrying amount of an intangible asset is
not recoverable and its carrying amount exceeds its fair value. We completed our test using the
cost approach which considers replacement cost based on the cost to acquire or construct a substitute asset
of comparable utility from the perspective of a market participant and determined that the
intangible asset for developed technology was not impaired.
49
Development costs also include the development of new software products and enhancements to
existing software products used solely for internal purposes. Such costs are expensed until the
preliminary project stage is completed and the project has been authorized by management, at which
point subsequent costs are capitalized until the project is substantially complete and ready for
its intended use. These costs, capitalization of which totaled $0.6 million for the fiscal years
ended March 31, 2010 and 2009 and $0.3 million for the fiscal year ended March 31, 2008 are
amortized on a straight-line basis over a period up to six years.
Amortization of the capitalized costs associated with developed technology totaled $2.1
million for the fiscal years ended March 31, 2010 and 2009 and $2.0 million for the fiscal year
ended March 31, 2008.
Other Identifiable Intangibles Covenants Not to Compete: The identifiable intangible asset
for covenants not to compete represents the value assigned to such agreements, which are typically
entered into with the owners of college bookstores acquired by us. This identifiable intangible is
amortized on a straight-line basis over the term of the agreement, which ranges from 2 to 15 years.
We test our covenants not to compete intangible for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Other Identifiable Intangibles Contract-Managed Acquisition Costs: The identifiable
intangible asset for contract-managed acquisition costs generally represents payments made at the
time of contract signing or renewal to institutions that contract with us to manage the on-campus
bookstore. This identifiable intangible is amortized on a straight-line basis over the term of the
agreements, which range from 1 to 15 years. We test our contract-managed acquisition costs
intangible for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
Other Identifiable Intangibles Other: The other identifiable intangible asset relates to an
agreement whereby we agreed to pay $1.7 million over a period of 36 months, beginning September 1,
2007, to a software company in return for certain rights related to that companys products that
are designed to enhance web-based sales. This identifiable intangible is amortized on a
straight-line basis over the 36 month base term of the agreement. We test our other intangible for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable.
Debt Issue Costs: The costs related to the issuance of debt are capitalized and amortized to
interest expense using the effective interest method over the lives of the related debt.
Accumulated amortization of such costs as of March 31, 2010 and 2009 was approximately $6.9 million
and $8.9 million, respectively and $3.1 million of such costs were written off during the fiscal
year ended March 31, 2010 in conjunction with the termination of the Term Loan and Revolving Credit
Facility under the Senior Credit Facility. See also long-term debt which is disclosed in Note H.
Accrued Incentives. Our Textbook Division offers certain incentive programs to its customers
that allow the participating customers the opportunity to earn rebates for used textbooks sold to
the Textbook Division. As the rebates are earned by the customer, we recognize the rebates based
on historical rates of usage and forfeitures and the balance of earned but unused rebates is
recorded as accrued incentives. Accrued incentives at March 31, 2010 were $6.3 million, including
estimated forfeitures, however, if we accrued for rebates earned and unused as of March 31, 2010,
assuming no forfeitures, our accrued incentives would have been $7.0 million.
Derivative Financial Instruments: Interest rate swap agreements have historically been used
by us to reduce exposure to fluctuations in the interest rates on our variable rate debt. Such
agreements are recorded in the consolidated balance sheet at fair value. Changes in the fair value
of the agreements are recorded in earnings or other comprehensive income (loss), based on whether
the agreements are designated as part of the hedge transaction and whether the agreements are
effective in offsetting the change in the value of the interest payments attributable to the
Companys variable rate debt.
Fair Value of Financial Instruments: The carrying amounts of financial instruments including
cash and cash equivalents, accounts receivable, and accounts payable approximate fair value as of
March 31, 2010 and 2009, because of the relatively short maturity of these instruments. The fair
value of long-term debt, including the current maturities, was approximately $372.3 million and
$250.6 million as of March 31, 2010 and 2009, respectively, as determined by quoted market values
and prevailing interest rates for similar debt issues. The interest rate swap agreement was
expired at March 31, 2010 and 2009 and was recorded at a loss of $1.1 million as of March 31, 2008.
The fair value of the interest rate swap agreement at March 31, 2008 was determined by calculating
the net present value of estimated future payments between the Company and its counterparty.
50
Share-Based Compensation: On April 1, 2006, we adopted SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123R) codified in the Compensation Stock Compensation Topic of
the FASB ASC. The Topic focuses primarily on accounting for transactions in which an entity
obtains employee services in share-based payment transactions and requires an entity to, in most
cases, measure and recognize the cost of such services based on the grant-date fair value of the
award. This Topic eliminates the intrinsic value method of accounting for share-based compensation
by us for transactions occurring after March 31, 2006.
We account for our share-based compensation arising from transactions occurring prior to April
1, 2006 under the provisions of the Compensation Stock Compensation Topic of the FASB ASC
utilizing the intrinsic value method. Under this method, compensation expense is recorded on the
date of grant only if the current market price of the underlying stock exceeds the exercise price.
The Topic establishes accounting and disclosure requirements using a fair-value-based method of
accounting for share-based employee compensation plans. For purposes of measuring share-based
compensation, we are considered a nonpublic entity as defined in the Topic. As allowed by the
Topic, we elected to continue to apply the intrinsic-value-based method of accounting for options
granted prior to April 1, 2006 and used the minimum value method for pro forma disclosure of the
impact of accounting standard changes.
Nonvested Stock: Under the NBC Holdings Corp. 2005 Restricted Stock Plan, 4,200 shares of NBC
Holdings Corp. capital stock may be and were issued on March 31, 2006 for $0.01 per share to
certain of our officers and directors. Certain restrictions limit the sale or transfer of these
shares (as more fully described in Note O to the consolidated financial statements). Such shares
are subject to both call rights on behalf of NBC Holdings Corp. and put rights on behalf of the
officers and directors once vested (as more fully described in Note O to the consolidated financial
statements). The shares vest on September 30, 2010 (the vesting date). Due to the existence of
the put rights, share-based compensation will be recognized from March 31, 2006 until the vesting
date and recorded as other long-term liabilities or accrued expenses in the consolidated
balance sheets, as appropriate.
Income Taxes: We file a consolidated federal income tax return with our parent and follow a
policy of recording an amount equal to the income tax expense which we would have incurred had we
filed a separate return. We are responsible for remitting tax payments and collecting tax refunds
for the consolidated group. The amount due to parent (i.e., NBC) represents the cumulative
reduction in tax payments made by us as a result of the tax benefit of operating losses generated
by our parent. We provide for deferred income taxes based upon temporary differences between
financial statement and income tax bases of assets and liabilities, and tax rates in effect for
periods in which such temporary differences are estimated to reverse.
We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty to Income
Taxes (FIN 48) codified in the Income Taxes Topic of the FASB ASC on April 1, 2007. Tax benefits
are recorded only for tax positions that are more likely than not to be sustained upon examination
by tax authorities. The amount recognized is measured as the largest amount of benefit that is
greater than 50% likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax
benefits claimed in the tax returns that do not meet these recognition and measurement standards.
The adoption of the accounting standard had no impact on our consolidated financial statements.
Although the statute of limitations varies by state, generally starting with fiscal year 2006, tax
years remain open and subject to examination by either the Internal Revenue Service or a number of
states where we do business. Interest and penalties associated with underpayments of income taxes
are classified in the consolidated statements of operations as income tax expense.
Comprehensive Income (Loss): Comprehensive income (loss) includes net income and other
comprehensive income (losses). Other comprehensive income (losses) consists of unrealized gains
(losses) on the interest rate swap agreement, net of taxes.
Presentation: In our accompanying 2009 and 2008 Consolidated Statements of Cash Flows we have
revised our presentation of proceeds from, and principal payments of, our revolving credit facility
to reflect the cash flows in connection with the borrowings and repayments under this revolver.
Related amounts had previously been presented on a net basis, rather than in accordance with ASC
Topic 230, Statement of Cash Flows (formerly SFAS No. 95, Statement of Cash Flows) on a gross
basis. This revision had no impact on the net proceeds from, and principal repayments of, this
revolver or on our net cash flows from financing activities.
Accounting Standards 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.
51
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 determined that the update will not have a material
impact on the consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update 2009-14, 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.
C. RECEIVABLES
Receivables are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Trade receivables, less allowance for
doubtful accounts of $1,283,360 at March
31, 2010 and 2009 |
|
$ |
30,944,300 |
|
|
$ |
29,097,291 |
|
Receivables from book publishers for returns |
|
|
22,148,190 |
|
|
|
25,233,975 |
|
Advances for book buy-backs |
|
|
1,675,625 |
|
|
|
2,795,286 |
|
Other |
|
|
3,219,679 |
|
|
|
4,175,084 |
|
|
|
|
|
|
|
|
|
|
$ |
57,987,794 |
|
|
$ |
61,301,636 |
|
|
|
|
|
|
|
|
Trade receivables include the effect of estimated product returns. The amount of estimated
product returns at March 31, 2010 and 2009 was $5.3 million and $5.5 million, respectively.
D. INVENTORIES
Inventories are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Bookstore Division |
|
$ |
68,765,952 |
|
|
$ |
59,785,703 |
|
Textbook Division |
|
|
26,132,007 |
|
|
|
30,571,333 |
|
Complementary Services Division |
|
|
2,599,730 |
|
|
|
2,758,627 |
|
|
|
|
|
|
|
|
|
|
$ |
97,497,689 |
|
|
$ |
93,115,663 |
|
|
|
|
|
|
|
|
Textbook Division inventories include the effect of estimated product returns. The amount of
estimated product returns at March 31, 2010 and 2009 was $2.4 million and $2.5 million,
respectively.
General and administrative costs associated with the storage and handling of inventory
approximated $9.9 million and $10.4 million for the fiscal years ended March 31, 2010 and 2009,
respectively of which $2.0 million and $2.2 million was capitalized into inventory at March 31,
2010 and 2009, respectively.
52
E. PROPERTY AND EQUIPMENT
A summary of the cost of property and equipment follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Land |
|
$ |
3,565,382 |
|
|
$ |
3,565,382 |
|
Buildings and improvements |
|
|
25,774,209 |
|
|
|
25,675,055 |
|
Leasehold improvements |
|
|
16,207,697 |
|
|
|
14,598,193 |
|
Furniture and fixtures |
|
|
17,153,671 |
|
|
|
15,976,841 |
|
Information systems |
|
|
14,640,695 |
|
|
|
14,650,613 |
|
Automobiles and trucks |
|
|
231,743 |
|
|
|
220,008 |
|
Machinery |
|
|
351,011 |
|
|
|
378,966 |
|
Projects in process |
|
|
83,703 |
|
|
|
178,309 |
|
|
|
|
|
|
|
|
|
|
|
78,008,111 |
|
|
|
75,243,367 |
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation & amortization |
|
|
(35,852,687 |
) |
|
|
(29,604,845 |
) |
|
|
|
|
|
|
|
|
|
$ |
42,155,424 |
|
|
$ |
45,638,522 |
|
|
|
|
|
|
|
|
F. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLES
As discussed in Note A, on March 4, 2004, Weston Presidio acquired the controlling interest in
NBC through a series of steps which resulted in Weston Presidio owning a substantial majority of
NBCs common stock. The March 4, 2004 Transaction was accounted for as a purchase at NBC Holdings
Corp. with the related purchase accounting pushed-down to NBC and us as of the date of the
transaction. The excess of the purchase price over the historical basis of the net assets acquired
was applied to adjust net assets to their fair values, as determined in part using an
independent third-party appraisal. The allocation of the excess purchase price included establishing identifiable intangibles for customer relationships of $114.8 million and tradename of
$31.3 million; adjusting the carrying value of developed technology at March 4, 2004 to a fair
value of $11.4 million; and adjusting the carrying value of goodwill at March 4, 2004 to a fair
value of $269.1 million, of which $25.3 million is deductible for income tax purposes. The
weighted-average amortization period for the identifiable intangibles subject to amortization is
19.1 years, including 20 years for customer relationships and 4.0 years for developed technology.
For the fiscal year ended March 31, 2010, 14 bookstore locations were acquired in 11 separate
transactions. The total purchase price, net of cash acquired, of such acquisitions was $2.9
million, of which $0.1 million was assigned to tax-deductible goodwill, $0.1 million was assigned
to tax deductible covenants not to compete with an amortization period of two years, and $0.5
million was assigned to contract-managed acquisition costs with a weighted-average amortization
period of 3.4 years and a weighted-average amortization period for all intangibles acquired of 3.3
years. As of March 31, 2010, $0.6 million of acquisition costs were unpaid. Finally, during the
period ended March 31, 2010, we paid $0.1 million of previously accrued consideration for bookstore
acquisitions and contract-managed costs occurring in prior fiscal years.
We also incurred $0.3 million in contract-managed acquisition costs with a weighted-average
amortization period of 3.2 years associated with the renewal of 6 contract-managed locations during
the fiscal year ended March 31, 2010.
Effective September 1, 2007, we entered into an agreement whereby we agreed to pay $1.7
million over a period of thirty-six months to a software company in return for certain rights
related to that companys products that are designed to enhance web-based sales. This other
identifiable intangible is being amortized on a straight-line basis over the thirty-six month base
term of the agreement. The asset and corresponding liability were recorded based upon the present
value of the future payments assuming an imputed interest rate of 6.7%, resulting in a discount of
$0.1 million which is recorded as interest expense over the base term of the agreement utilizing
the effective interest method of accounting.
For the fiscal year ended March 31, 2009, 22 bookstore locations were acquired in 19 separate
transactions. The purchase price, net of cash acquired, of such acquisitions was $5.8 million, of
which $0.4 million was assigned to tax-deductible goodwill, $1.6 million was assigned to non
tax-deductible goodwill, $0.2 million was assigned to tax-deductible covenants not to compete with
amortization periods of three years, $0.4 million was assigned to non tax-deductible covenants not
to compete with amortization periods of three years, and $0.9 million was assigned to
contract-managed acquisition costs with a weighted-average amortization period of 4.5 years and a
weighted-average amortization period for all intangibles acquired of 4.0 years. Included in the
total purchase price, net of cash acquired, was $0.7 million of contingent consideration associated
with one of the bookstores acquired, which is being paid to the previous owner on a monthly basis
and is calculated as a percentage of revenues generated by the acquired bookstore each month.
53
We also incurred $0.5 million in contract-managed acquisition costs with a weighted-average
amortization period of 6.9 years associated with the renewal of 10 contract-managed locations
during the fiscal year ended March 31, 2009.
Goodwill assigned to corporate administration represents goodwill arising out of 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore |
|
|
Corporate |
|
|
|
|
|
|
Division |
|
|
Administration |
|
|
Total |
|
Balance, April 1, 2008 |
|
$ |
51,305,398 |
|
|
$ |
269,061,875 |
|
|
$ |
320,367,273 |
|
Additions to goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore acquisitions |
|
|
2,040,853 |
|
|
|
|
|
|
|
2,040,853 |
|
Impairment |
|
|
|
|
|
|
(106,972,000 |
) |
|
|
(106,972,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2009 |
|
|
53,346,251 |
|
|
|
162,089,875 |
|
|
|
215,436,126 |
|
Additions to goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore acquisitions |
|
|
135,000 |
|
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010 |
|
$ |
53,481,251 |
|
|
$ |
162,089,875 |
|
|
$ |
215,571,126 |
|
|
|
|
|
|
|
|
|
|
|
The following table presents the gross carrying amount and accumulated impairment charge of
goodwill:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Gross carrying amount |
|
$ |
322,543,126 |
|
|
$ |
322,408,126 |
|
Accumulated impairment |
|
|
(106,972,000 |
) |
|
|
(106,972,000 |
) |
|
|
|
|
|
|
|
Net carrying amount |
|
$ |
215,571,126 |
|
|
$ |
215,436,126 |
|
|
|
|
|
|
|
|
We test for impairment annually or more frequently if impairment indicators exist. We have
identified the Bookstore Division, Textbook Division and Complementary Services Division as our
reporting units for the purposes of assessing impairment. We completed our annual test for
impairment by reporting unit during the fourth quarter for the year ended March 31, 2010 and no
impairment was indicated. Goodwill impairment testing is a two-step process. The first step
involves comparing the fair value of the Companys reporting units to their carrying amount. If
the fair value of the reporting unit is greater than the carrying amount, there is no impairment.
If the reporting units carrying amount is greater than the fair value, the second step must be
completed to measure the amount of impairment, if any. The second step involves calculating the
implied fair value of goodwill by allocating the fair value of the reporting unit to all of its
assets and liabilities other than goodwill (including both recognized and unrecognized intangible
assets) and comparing the residual amount to the carrying value of goodwill. If the implied fair
value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized
equal to the difference.
54
Due to the economic downturn and changes in comparable company market multiples, we determined
in the first step of the goodwill impairment test conducted at March 31, 2009, that the carrying
value of the Textbook and Bookstore Divisions exceeded their fair values, indicating that goodwill
may be impaired. Having determined that goodwill may be impaired, we performed the second step of
the goodwill impairment test. As a result, we recorded an impairment charge of $107.0 million in
fiscal year 2009. The carrying value of goodwill in excess of the implied fair value was $67.0
million and $40.0 million for the Textbook and Bookstore Divisions, respectively. The impairment
charge reduced our goodwill carrying value to $215.4 million as of March 31, 2009. Fair value was
determined using a market approach based primarily on an EBITDA multiple, and was deemed to be the
most indicative of the Companys fair value and is consistent in principle with the methodology
used for goodwill evaluation in prior years. The EBITDA multiple approach requires that we
estimate a certain valuation multiple of EBITDA derived from comparable companies and apply that
multiple to our latest twelve month pro forma EBITDA. We review comparable company information to
determine the EBITDA multiple. This total company fair value is allocated to the reporting units
based upon their percentage of EBITDA. The fair value is also calculated using the income approach
(discounted cash flow approach) and we concluded at March 31, 2010 and 2009 that it was supportive
of the fair value based upon the EBITDA multiple approach. Determining the fair value of a
reporting unit is judgmental in nature and requires the use of significant estimates and
assumptions about future economic conditions and comparable company market multiples, among others.
In the second step of the goodwill impairment test, we are required to estimate the fair value of
reporting unit assets and liabilities, including intangible assets, to derive the fair value of the
reporting units goodwill. For purposes of the second step of the goodwill impairment test
conducted at March 31, 2009, we estimated the fair value of our intangible assets Tradename,
Customer Relationships and Developed Technology using the relief-from-royalty market approach,
excess earnings method income approach and replacement cost approach, respectively.
The following table presents the gross carrying amount and accumulated amortization of
identifiable intangibles subject to amortization, in total and by asset class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Customer relationships |
|
$ |
114,830,000 |
|
|
$ |
(34,927,180 |
) |
|
$ |
79,902,820 |
|
Developed technology |
|
|
13,709,789 |
|
|
|
(12,137,672 |
) |
|
|
1,572,117 |
|
Covenants not to compete |
|
|
3,416,000 |
|
|
|
(2,268,172 |
) |
|
|
1,147,828 |
|
Contract-managed acquisition costs |
|
|
4,555,740 |
|
|
|
(2,200,557 |
) |
|
|
2,355,183 |
|
Other |
|
|
1,585,407 |
|
|
|
(1,365,211 |
) |
|
|
220,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
138,096,936 |
|
|
$ |
(52,898,792 |
) |
|
$ |
85,198,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009 |
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Customer relationships |
|
$ |
114,830,000 |
|
|
$ |
(29,185,660 |
) |
|
$ |
85,644,340 |
|
Developed technology |
|
|
13,086,017 |
|
|
|
(10,069,126 |
) |
|
|
3,016,891 |
|
Covenants not to compete |
|
|
6,614,699 |
|
|
|
(4,069,131 |
) |
|
|
2,545,568 |
|
Contract-managed acquisition costs |
|
|
4,816,378 |
|
|
|
(1,954,878 |
) |
|
|
2,861,500 |
|
Other |
|
|
1,585,407 |
|
|
|
(836,744 |
) |
|
|
748,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
140,932,501 |
|
|
$ |
(46,115,539 |
) |
|
$ |
94,816,962 |
|
|
|
|
|
|
|
|
|
|
|
55
Information regarding aggregate amortization expense for identifiable intangibles subject to
amortization is presented in the following table:
|
|
|
|
|
|
|
Amortization |
|
|
|
Expense |
|
|
|
|
|
|
Fiscal year ended March 31, 2010 |
|
$ |
10,853,248 |
|
Fiscal year ended March 31, 2009 |
|
|
11,384,020 |
|
Fiscal year ended March 31, 2008 |
|
|
10,443,335 |
|
|
|
|
|
|
Estimated amortization expense for the fiscal years ending March 31: |
|
|
|
|
2011 |
|
$ |
8,104,852 |
|
2012 |
|
|
6,880,562 |
|
2013 |
|
|
6,482,335 |
|
2014 |
|
|
6,119,918 |
|
2015 |
|
|
5,961,196 |
|
Identifiable intangibles not subject to amortization consist solely of the tradename asset
arising out of the March 4, 2004 Transaction and total $31,320,000. The tradename was determined
to have an indefinite life based on our current intentions. We periodically review the underlying
factors relative to this intangible asset. If factors were to change that would indicate the need
to assign a definite life to this asset, we would do so and commence amortization. We test the
tradename for impairment annually on March 31. We completed our test at March 31, 2010 by
reviewing the valuation from prior year and determined that the assumptions used in the valuation
have not significantly changed. We completed our test at March 31, 2009 using the
relief-from-royalty market approach which is applied using relevant information generated by market
transactions involving identical or comparable assets or liabilities. We determined at March 31,
2010 and 2009 that the intangible asset for tradename was not impaired.
Identifiable intangibles subject to amortization consist of customer relationships, developed
technology, covenants not to compete, contract-managed acquisition costs and other intangibles.
These intangibles are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Due to the economic downturn and in conjunction
with the goodwill impairment test conducted for March 31, 2009, the customer relationships and
developed technology intangibles were tested for impairment at March 31, 2009. We completed our
test using the excess earnings method income approach for customer relationships and the
replacement cost approach for developed technology and determined that the intangible assets were
not impaired.
G. ACCRUED EXPENSES
Accrued expenses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Accrued rent |
|
$ |
4,285,622 |
|
|
$ |
3,725,616 |
|
Accrued share-based compensation |
|
|
4,257,652 |
|
|
|
|
|
Accrued property taxes |
|
|
508,377 |
|
|
|
551,489 |
|
|
|
|
|
|
|
|
|
|
$ |
9,051,651 |
|
|
$ |
4,277,105 |
|
|
|
|
|
|
|
|
Accrued share-based compensation is the liability recognized for the shares issued under the
2005 Restricted Stock Plan, which vest September 30, 2010, and the Restricted Stock Special Bonus
Agreement, which are described in further detail in Note O and was presented as a long-term
liability in prior years.
56
H. LONG-TERM DEBT
Details regarding each of the instruments of indebtedness of the Company are provided in the
following table:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Term Loan paid in full October 2, 2009, principal and interest payments were due quarterly, interest accrued at a floating rate based on Eurodollar rate plus an applicable margin percent (9.25%, as reset on March 31, 2009) |
|
$ |
|
|
|
$ |
193,076,346 |
|
Senior Secured Notes, second-priority to ABL Facility, unamortized bond discount $840,482, principal due December 1, 2011, interest payments accrue at fixed rate of 10.0% and are payable semi-annually on December 1 and June 1 beginning December 1, 2009 |
|
|
199,159,518 |
|
|
|
|
|
Senior Subordinated Notes, unsecured, principal due on March 15, 2012, interest payments accrue at a fixed rate of 8.625% and are payable semi-annually on March 15 and September 15 beginning September 15, 2004 |
|
|
175,000,000 |
|
|
|
175,000,000 |
|
Mortgage note payable with an insurance company assumed with the acquisition of a bookstore facility, due December 1, 2013, monthly payments of $6,446 including interest at 10.75% |
|
|
237,954 |
|
|
|
286,833 |
|
|
|
|
|
|
|
|
|
|
|
374,397,472 |
|
|
|
368,363,179 |
|
Less current maturities of long-term debt |
|
|
(54,403 |
) |
|
|
(6,917,451 |
) |
|
|
|
|
|
|
|
Long-term debt |
|
$ |
374,343,069 |
|
|
$ |
361,445,728 |
|
|
|
|
|
|
|
|
Indebtedness at March 31, 2010 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), which was unused at March 31, 2010; $200.0 million of 10.0%
senior secured notes (the Senior Secured Notes) issued at a discount of $1.0 million with
unamortized bond discount of $0.8 million at March 31, 2010 (effective rate of 10.14%); $175.0
million of 8.625% senior subordinated notes (the Senior Subordinated Notes), and other
indebtedness. The ABL Facility is scheduled to expire on the earlier of October 2, 2012 and 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), NBCs $77.0 million of 11% senior
discount notes (the Senior Discount Notes, due March 15, 2013), or any refinancing thereof.
On October 2, 2009, in conjunction with the completion of the offering of the Senior Secured
Notes, we entered into the ABL Credit Agreement which provides for the ABL Facility mentioned
previously. The ABL Facility is secured by a first priority interest in substantially all of our
and our subsidiaries property and assets, which also secure the Senior Secured Notes on a second
priority basis. 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) prime rate, b) 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. 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.
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 amended on February 3, 2009 (the Senior Credit Facility) provided to us 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) prime rate, b) 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 average borrowings under the Revolving Credit Facility and the ABL Facility were
$4.0 million at an average rate of 8.8% for the fiscal year ended March 31, 2010.
57
Prior to the February 3, 2009 amendment, the interest rate on the Term Loan was Prime plus an
applicable margin of up to 1.5% or, on Eurodollar borrowings, the Eurodollar interest rate plus an
applicable margin of up to 2.5%. The Revolving Credit Facility interest rate was Prime plus an
applicable margin of up to 1.75% or, on Eurodollar borrowings, the Eurodollar interest rate plus an
applicable margin of up to 2.75%. Accrued interest on the Term Loan and Revolving Credit Facility
is due quarterly. Additionally, there was a 0.5% commitment fee for the average daily unused
amount of the Revolving Credit Facility. The average borrowings under the Revolving Credit
Facility for the fiscal years ended March 31, 2009 and 2008 were $16.9 million and $15.2 million at
an average rate of 5.8% and 8.8%, respectively.
NBC has guaranteed the prompt and complete payment and performance of our obligations under
the ABL Facility.
The Senior Credit Facility stipulated that excess cash flows, as defined therein, would 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.
A loss from early extinguishment of debt totaling $3.1 million was recorded for the fiscal
year ended March 31, 2010 related to the write-off of unamortized loan 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, restrict our ability and the ability of certain
of our subsidiaries to incur additional indebtedness, dispose of assets, make capital expenditures,
investments, acquisitions, loans or advances, and pay dividends, except that, among other things,
we may pay dividends to NBC (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 NBC. In addition, under our 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
March 31, 2010 was $44.7 million, of which $1.0 million was outstanding under a letter of credit
and $43.7 million was unused. At March 31, 2010, our pro forma fixed charge coverage ratio was
1.5.
The indenture governing the Senior Secured 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 certain of 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. The indentures governing the Senior Subordinated Notes and NBCs Senior Discount
Notes contain similar restrictions on our ability and the ability of certain of our subsidiaries
and the ability of NBC and certain of its subsidiaries to pay dividends or make certain other
payments. In addition, if there is no availability under the restricted payment calculation
mentioned above, but we maintain the 2.0 to 1.0 consolidated coverage ratio on a pro forma basis,
we may make dividends to NBC to meet the interest payments on the Senior Discount Notes. If we do
not maintain the 2.0 to 1.0 ratio on a pro forma basis, we may still make payments, including
dividends to NBC, up to $15.0 million in the aggregate. At March 31, 2010, our pro forma
consolidated coverage ratio calculated under the indenture to the Senior Subordinated Notes was
1.85 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 March 31, 2010, the amount
distributable under the most restrictive indenture was $10.8 million after applying the $4.2
million dividend paid to NBC for the March 15, 2010 interest on NBCs Senior Discount Notes. Such
restrictions are not expected to affect our ability to meet our cash obligations for the next
twelve months.
At March 31, 2010, we were in compliance with all of our debt covenants.
58
At March 31, 2010, the aggregate maturities of long-term debt for the next five fiscal
years were as follows:
|
|
|
|
|
Fiscal Year |
|
|
|
|
|
|
|
|
|
2011
|
|
$ |
54,403 |
|
2012
|
|
|
375,060,548 |
|
2013
|
|
|
67,387 |
|
2014
|
|
|
55,616 |
|
2015
|
|
|
|
|
I. LEASES AND OTHER COMMITMENTS
We have 7 bookstore facility leases classified as capital leases. These leases expire at
various dates through fiscal year 2018 and contain options to renew for periods of up to ten years.
Capitalized leased property included in property and equipment was $2.6 million and $3.4 million,
net of accumulated depreciation at March 31, 2010 and 2009, respectively.
We also lease bookstore facilities and data processing equipment under noncancelable operating
leases expiring at various dates through fiscal year 2024, many of which contain options to renew
for periods of up to fifteen years. Certain of the leases are based on a percentage of sales,
ranging from 0.0% to 15.0%.
Future minimum capital lease payments and aggregate minimum lease payments under noncancelable
operating leases for the fiscal years ending March 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
Operating |
|
Fiscal Year |
|
Leases |
|
|
Leases |
|
2011 |
|
$ |
1,077,900 |
|
|
$ |
19,630,000 |
|
2012 |
|
|
764,606 |
|
|
|
16,990,000 |
|
2013 |
|
|
529,925 |
|
|
|
12,817,000 |
|
2014 |
|
|
448,973 |
|
|
|
9,200,000 |
|
2015 |
|
|
350,765 |
|
|
|
6,675,000 |
|
Thereafter |
|
|
858,674 |
|
|
|
15,072,000 |
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
|
4,030,843 |
|
|
$ |
80,384,000 |
|
|
|
|
|
|
|
|
|
Less amount representing interest at 9.0% |
|
|
(804,053 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Present value of minimum lease payments |
|
|
3,226,790 |
|
|
|
|
|
Less obligations due within one year |
|
|
(846,053 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations |
|
$ |
2,380,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent expense for the fiscal years ended March 31, 2010, 2009 and 2008 was $35.1 million,
$33.3 million and $29.7 million, respectively. Percentage rent expense, above the guaranteed rent
minimum amount, for the fiscal years ended March 31, 2010, 2009 and 2008 was approximately $11.4
million, $10.0 million and $9.3 million, respectively.
J. 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 our 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 its future interest
payments on portions of its 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, historically,
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 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.
59
Effective September 30, 2005, the interest rate swap agreement qualified as a cash flow hedge
instrument as the following criteria were met:
|
(1) |
|
Formal documentation of the hedging relationship and the Companys risk
management objective and strategy for undertaking the hedge were in place. |
|
(2) |
|
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. |
The Company estimated the effectiveness of the interest rate swap agreement utilizing the
hypothetical derivative method. Under this method, the fair value of the actual interest rate swap
agreement is compared to the fair value of a hypothetical swap agreement that has the same critical
terms as the portion of the debt being hedged. To the extent that the agreement is not considered
to be highly effective in offsetting the change in the value of the interest payments being hedged,
the fair value relating to the ineffective portion of such agreement and any subsequent changes in
such fair value are immediately recognized in earnings as gain or loss on derivative financial
instruments. To the extent that the agreement is considered highly effective but not completely
effective in offsetting the change in the value of the interest payments being hedged, any changes
in fair value relating to the ineffective portion of such agreement are immediately recognized in
earnings as interest expense.
Under hedge accounting, interest rate swap agreements are reflected at fair value in the
balance sheet and the related gains or losses on these agreements are generally recorded in
stockholders equity, net of applicable income taxes (as accumulated other comprehensive income
(loss)). Gains or losses recorded in accumulated other comprehensive income (loss) are
reclassified into earnings as an adjustment to interest expense in the same periods in which the
related interest payments being hedged are recognized in earnings. Except as described below, the
net effect of this accounting on our consolidated results of operations was that interest expense
on a portion of the Term Loan was generally being recorded based on fixed interest rates until the
interest rate swap agreement expired on September 30, 2008.
In accordance with our Risk Management Policy, the interest rate swap agreement was intended
as a hedge against certain future interest payments under the Term Loan from the agreements
inception on July 15, 2005. However, formal documentation designating the interest rate swap
agreement as a hedge against certain future interest payments under the Term Loan was not put in
place until September 30, 2005 (the effective date of the interest rate swap agreement). As a
result, the interest rate swap agreement did not qualify as a cash flow hedge until September 30,
2005. Accordingly, the $0.7 million increase in the fair value of the interest rate swap agreement
from inception to September 30, 2005 was recognized in earnings as a gain on derivative financial
instruments. Changes in the fair value of this portion of the interest rate swap agreement were
also recognized as a gain (loss) on derivative financial instruments in the consolidated
statements of operations.
Subsequent to September 30, 2005, the change in fair value of a September 30, 2005
hypothetical swap was recorded, net of income taxes, in accumulated other comprehensive income
(loss) in the consolidated balance sheets. Changes in the fair value of the interest rate swap
agreement were reflected in the consolidated statements of cash flows as either gain (loss) on
derivative financial instruments or as noncash investing and financing activities.
60
Information regarding the fair value of the interest rate swap agreement designated as a
hedging instrument is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet Components: |
|
|
|
|
|
|
|
|
Other assets (Accrued interest) fair
value of swap agreement |
|
$ |
|
|
|
$ |
(1,119,000 |
) |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
433,473 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
(685,527 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of Agreement Subsequent to
September 30, 2005 Hedge Designation: |
|
|
|
|
|
|
|
|
Increase (Decrease) in fair value of
swap agreement |
|
$ |
1,221,000 |
|
|
$ |
(2,222,000 |
) |
|
|
|
|
|
|
|
|
|
Portion of Agreement Prior to September
30, 2005 Hedge Designation: |
|
|
|
|
|
|
|
|
Decrease in fair value of swap agreement |
|
|
(102,000 |
) |
|
|
(198,000 |
) |
K. 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.
Our long-term debt is not measured at estimated fair value on a recurring basis in the
statement of financial position so it does not fall under the three-level hierarchal disclosure
requirements. At March 31, 2010, the estimated fair value of the Senior Subordinated 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.
61
At March 31, 2010 and 2009 we did not have any funds drawn under our revolving line of credit.
Estimated fair values for our fixed rate and variable rate long-term debt at March 31, 2010 and
March 31, 2009 are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Carrying Values: |
|
|
|
|
|
|
|
|
Fixed rate debt |
|
$ |
377,624,262 |
|
|
$ |
179,334,183 |
|
Variable rate debt |
|
|
|
|
|
|
193,076,346 |
|
|
|
|
|
|
|
|
|
|
Fair Values: |
|
|
|
|
|
|
|
|
Fixed rate debt |
|
$ |
372,317,000 |
|
|
$ |
90,367,000 |
|
Variable rate debt |
|
|
|
|
|
|
160,253,000 |
|
L. INCOME TAXES
The provision for income taxes consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
4,542,939 |
|
|
$ |
8,043,362 |
|
|
$ |
9,375,591 |
|
State |
|
|
2,111,352 |
|
|
|
1,352,961 |
|
|
|
1,486,430 |
|
Deferred |
|
|
(3,512,197 |
) |
|
|
(1,947,665 |
) |
|
|
(3,443,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,142,094 |
|
|
$ |
7,448,658 |
|
|
$ |
7,418,339 |
|
|
|
|
|
|
|
|
|
|
|
The following represents a reconciliation between the actual income tax expense and income
taxes computed by applying the Federal income tax rate to income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
Statutory rate |
|
|
34.3 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
Goodwill impairment |
|
|
|
|
|
|
(46.7 |
) |
|
|
|
|
Adjustments to state deferred tax rate |
|
|
(8.0 |
) |
|
|
|
|
|
|
|
|
NOL carryforward benefit |
|
|
(3.5 |
) |
|
|
|
|
|
|
|
|
State income tax effect |
|
|
4.9 |
|
|
|
4.2 |
|
|
|
1.0 |
|
Meals and entertainment |
|
|
1.1 |
|
|
|
0.8 |
|
|
|
1.0 |
|
Other |
|
|
1.1 |
|
|
|
(1.8 |
) |
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.9 |
% |
|
|
(8.5 |
%) |
|
|
37.3 |
% |
|
|
|
|
|
|
|
|
|
|
Excluding the impact of the adjustment to the state deferred tax rate and the NOL carryforward
benefit, the effective tax rate would have been 41.4%. For the fiscal year ended March 31, 2009,
our effective tax rate would have been 38.2%, excluding the impact of the goodwill impairment
charge, which was all attributed to non-deductible tax goodwill and as such treated as a permanent
difference for income tax purposes.
62
The components of the deferred tax assets (liabilities) consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Deferred
income tax assets (liabilities), current: |
|
|
|
|
|
|
|
|
Vacation accruals |
|
$ |
1,053,004 |
|
|
$ |
983,822 |
|
Inventories |
|
|
1,176,603 |
|
|
|
802,365 |
|
NOL carryforward benefit |
|
|
759,526 |
|
|
|
|
|
Allowance for doubtful accounts |
|
|
488,432 |
|
|
|
494,055 |
|
Product returns |
|
|
1,140,441 |
|
|
|
1,142,856 |
|
Incentive programs |
|
|
2,391,251 |
|
|
|
2,336,180 |
|
Other |
|
|
(761,698 |
) |
|
|
822,524 |
|
|
|
|
|
|
|
|
|
|
|
6,247,559 |
|
|
|
6,581,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets
(liabilities), noncurrent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation agreements |
|
|
140,707 |
|
|
|
138,953 |
|
Goodwill amortization |
|
|
(10,270,824 |
) |
|
|
(8,612,071 |
) |
Covenants not to compete |
|
|
1,608,593 |
|
|
|
1,424,543 |
|
Identifiable intangibles |
|
|
(42,496,001 |
) |
|
|
(46,109,986 |
) |
Property and equipment |
|
|
(492,925 |
) |
|
|
(1,233,192 |
) |
Other |
|
|
1,043,431 |
|
|
|
78,294 |
|
|
|
|
|
|
|
|
|
|
|
(50,467,019 |
) |
|
|
(54,313,459 |
) |
|
|
|
|
|
|
|
|
|
$ |
(44,219,460 |
) |
|
$ |
(47,731,657 |
) |
|
|
|
|
|
|
|
At March 31, 2010, we had net operating loss (NOL) carryforwards for state income tax
purposes of approximately $20.8 million, which will expire on various dates, if unused, beginning
in 2014 through 2030. We currently believe that it is more likely than not that we will realize
the benefits of our state net operating losses prior to their expiration, therefore, we have not
established a valuation allowance against the deferred tax asset. We had no unrecognized tax
benefits as of March 31, 2010 and 2009. Interest and penalties for underpayments of income taxes
were $8,833 and $10,543, respectively, paid in the fiscal year ended March 31, 2010; $2,250 and
$6,100, respectively, paid in the fiscal year ended March 31, 2009; and $8,211 and $54,099,
respectively, paid in the fiscal year ended March 31, 2008.
M. RETIREMENT PLANS
We participate in and sponsor a 401(k) compensation deferral plan. The plan covers
substantially all employees. The plan provisions include employee contributions based on a
percentage of compensation along with a company matching feature (100% of the employees
contribution up to 1% of their total compensation plus 50% of the employees contribution on the
next 5% of their total compensation). Our contributions for the fiscal years ended March 31, 2010,
2009 and 2008 were $1.5 million, $2.4 million and $2.1 million, respectively.
When we acquired CBA on May 1, 2006, CBA had an Employee Stock Ownership Plan (the Plan).
We acquired all the issued and outstanding shares of CBA stock owned by the Plan. The Plan was
frozen and converted to a qualified profit sharing plan. There have been no contributions to the
Plan since May 1, 2006, and there will be no future contributions to this Plan. The majority of
Plan assets were distributed to participants during fiscal year 2010 and final distribution is
expected to occur in January 2011. The Plan assets, which are not included in our consolidated
financial statements, have been invested by the trustee, primarily in fixed income investments.
63
N. DEFERRED COMPENSATION
We have a non-qualified deferred compensation plan for selected employees. This plan allows
participants to voluntarily elect to defer portions of their current compensation. The amounts can
be distributed upon either death or voluntary/involuntary resignation or termination. Interest is
accrued at the Prime rate adjusted semi-annually on January 1 and July 1 and is compounded as of
March 31. The liability for the deferred compensation is included in other long-term liabilities
and totaled $0.4 million as of March 31, 2010 and 2009.
O. SHARE-BASED COMPENSATION
In conjunction with the March 4, 2004 Transaction, NBC Holdings Corp. established the 2004
Stock Option Plan, which was amended on January 14, 2010 and August 13, 2008 to increase the number
of options available for issuance under the Plan. On September 29, 2005, NBC Holdings Corp.
adopted the NBC Holdings Corp. 2005 Restricted Stock Plan to provide for the sale of NBC Holdings
Corp. capital stock to certain of our officers and directors. Details regarding each of the plans
are as follows:
2004 Stock Option Plan This plan, established and amended by NBC Holdings Corp., provides
for the granting of options to purchase 100,306 shares of NBC Holdings Corp. capital stock to
selected employees, officers, and employee directors of NBC and its affiliates. Additional shares
may be issued upon changes in the capitalization of NBC and upon approval of a committee designated
by NBCs Board of Directors (the Committee). All options granted are intended to be nonqualified
stock options, although the plan also provides for incentive stock options. This plan provides for
the granting of options at the discretion of the Committee. Vesting schedules of options may vary
and are determined at the time of grant by the Committee. Subject to certain exceptions, stock
options granted under this plan are to be granted at an exercise price of not less than fair market
value on the date the options are granted and expire ten years from the date of grant. At March
31, 2010, there were 15,276 options available for grant under this plan. With respect to each
option granted by NBC Holdings Corp., NBC and NBC Holdings Corp. have an understanding that
pursuant to the 2004 Stock Option Plan, NBC has granted, and will continue to grant, an option to
purchase an equivalent number of shares of its common stock at the same exercise price to NBC
Holdings Corp.
No share-based compensation expense was recognized at the time of grant for the options
granted to employees prior to April 1, 2007, as the exercise price was greater than or equal to the
estimated fair value (including a discount for the holders minority interest position and
illiquidity of NBC Holdings Corp.s capital stock) of NBC Holdings Corp.s capital stock on the
date of grant.
On February 3, 2010, NBCs Board of Directors approved the grant of 4,238 options available
for issuance under the 2004 Stock Option Plan. The options, which have an exercise price of $85
per share, vest 25% on each of February 3, 2010, 2011, 2012, and 2013. The options expire on
February 3, 2020. The fair value of such options was estimated on the date of grant under the
calculated value method using a closed-form option valuation model that contained the following
assumption expected volatility of 27.8%, no expected dividends, an expected term of four years,
and a risk-free rate of 1.9%. As the stock underlying such options is not publicly traded, the
expected volatility was based upon quarterly observations of the Dow Jones Global Index for Small
Cap General Retailers over the four year period ended February 3, 2010. This index was selected as
one which fit the industry in which we operate, and the volatility of that index was calculated
utilizing a standard deviation formula. The expected term was an estimate of the period of time
that such options granted are expected to remain outstanding after considering the vesting period
and historical experience. The risk-free rate was based upon the February 3, 2010 estimated yield
of a U.S. Treasury constant maturity series with a four year term.
On October 12, 2007, NBCs Board of Directors approved the grant of 4,917 options available
for issuance under the 2004 Stock Option Plan. The options, which have an exercise price of $205
per share, vest 25% on each of October 12, 2007, 2008, 2009 and 2010. The options expire on
October 12, 2017. The fair value of such options was estimated on the date of grant under the
calculated value method using a closed-form option valuation model that contained the following
assumptions expected volatility of 13.1%, no expected dividends, an expected term of four years,
and a risk-free rate of 4.3%. As the stock underlying such options is not publicly traded, the
expected volatility was based upon quarterly observations of the Dow Jones Global Index for Small
Cap General Retailers over the four year period ended October 12, 2007. This index was selected as
one which fit the industry in which we operate, and the volatility of that index was calculated
utilizing a standard deviation formula. The expected term was an estimate of the period of time
that such options granted are expected to remain outstanding after considering the vesting period
and historical experience. The risk-free rate was based upon the October 12, 2007 estimated yield
of a U.S. Treasury constant maturity series with a four year term.
As a result of employee resignations, 313 options granted prior to April 1, 2007 and 200
options of the 4,917 options granted October 12, 2007 have been forfeited.
64
Specific information regarding share-based compensation for stock options granted after March
31, 2007 is presented in the following table:
|
|
|
|
|
Stock Options Granted October 12, 2007: |
|
|
|
|
General information: |
|
|
|
|
Grant date calculated fair value per option |
|
$ |
38.23 |
|
Shares at March 31, 2010: |
|
|
|
|
Vested |
|
|
3,538 |
|
Nonvested |
|
|
1,179 |
|
|
|
|
|
Total |
|
|
4,717 |
|
|
|
|
|
|
|
|
|
|
Unrecognized share-based compensation at March 31, 2010 |
|
$ |
22,141 |
|
Period over which unrecognized share-based compensation will be
realized (in years) at March 31, 2010 |
|
|
0.5 |
|
|
|
|
|
|
Stock Options Granted February 3, 2010: |
|
|
|
|
General information: |
|
|
|
|
Grant date calculated fair value per option |
|
$ |
13.87 |
|
Shares at March 31, 2010: |
|
|
|
|
Vested |
|
|
1,060 |
|
Nonvested |
|
|
3,178 |
|
|
|
|
|
Total |
|
|
4,238 |
|
|
|
|
|
|
|
|
|
|
Unrecognized share-based compensation at March 31, 2010 |
|
$ |
41,630 |
|
Period over which unrecognized share-based compensation will be
realized (in years) at March 31, 2010 |
|
|
2.8 |
|
|
Financial information:
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
Consolidated Statement of Operations: |
|
|
|
|
Share-based compensation |
|
$ |
61,424 |
|
Deferred tax benefit |
|
|
23,648 |
|
Other Required Disclosures: |
|
|
|
|
Total calculated fair value of shares vested during the period |
|
$ |
58,812 |
|
65
A summary of our share-based compensation activity related to stock options vested or expected
to vest for the 2004 Stock Option Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
March 31, 2010 |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Exercise |
|
|
|
Number |
|
|
Price |
|
|
|
|
|
|
|
|
|
|
2004 Stock Option Plan: |
|
|
|
|
|
|
|
|
Outstanding beginning of year |
|
|
80,203 |
|
|
$ |
117.18 |
|
Granted |
|
|
4,238 |
|
|
|
85.00 |
|
Exercised or converted |
|
|
|
|
|
|
|
|
Forfeited |
|
|
(50 |
) |
|
|
205.00 |
|
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding end of year |
|
|
84,391 |
|
|
$ |
117.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable end of year |
|
|
80,033 |
|
|
$ |
115.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
Exercisable |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
Contractual |
|
|
|
|
|
|
Contractual |
|
|
|
Number |
|
|
Term (Yrs) |
|
|
Number |
|
|
Term (Yrs) |
|
March 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price of $52.47
|
|
|
26,628 |
|
|
|
3.9 |
|
|
|
26,628 |
|
|
|
3.9 |
|
Exercise price of $106
|
|
|
11,760 |
|
|
|
3.9 |
|
|
|
11,760 |
|
|
|
3.9 |
|
Exercise price of $146
|
|
|
10,750 |
|
|
|
3.9 |
|
|
|
10,750 |
|
|
|
3.9 |
|
Exercise price of $160
|
|
|
26,298 |
|
|
|
5.1 |
|
|
|
26,298 |
|
|
|
5.1 |
|
Exercise price of $205
|
|
|
4,717 |
|
|
|
7.5 |
|
|
|
3,538 |
|
|
|
7.5 |
|
Exercise price of $85
|
|
|
4,238 |
|
|
|
9.8 |
|
|
|
1,059 |
|
|
|
9.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,391 |
|
|
|
4.8 |
|
|
|
80,033 |
|
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Restricted Stock Plan This plan provides for the issuance of shares of nonvested stock
to individuals determined by NBC Holdings Corp.s Board of Directors. Any shares issued under the
plan are subject to restrictions on transferability and a right of NBC Holdings Corp. to re-acquire
such shares at less than their then fair market value under certain conditions.
On March 31, 2006, 1,400 shares of NBC Holdings Corp. capital stock were issued for $0.01 per
share to each of our three officers and directors (the Officers) pursuant to a Restricted Stock
Purchase Agreement (the RSPA). The Officers are party to the Stockholders Agreement, dated March
4, 2004, by and among NBC Holdings Corp. and the Stockholders of NBC Holdings Corp. named therein,
the provisions of which restrict the transfer of such shares and provide for certain other rights
as detailed therein. The shares granted to the Officers are also each subject to a Stock
Repurchase Agreement (the SRA) that, among other things, provides for vesting, certain call
rights on behalf of NBC Holdings Corp., and certain put rights on behalf of the applicable Officer.
With respect to each share of capital stock issued by NBC Holdings Corp., NBC and NBC Holdings
Corp. have a separate understanding that pursuant to the 2005 Restricted Stock Plan, NBC has
issued, and will continue to issue, an equivalent number of shares of its common stock at the same
purchase price per share to NBC Holdings Corp.
The vesting provisions in each SRA provide that if the Officer is still employed by NBC
Holdings Corp., the shares granted vest on September 30, 2010 (the Vesting Date). If the Officer
is not employed by NBC Holdings Corp. on that date the shares do not vest except under certain
conditions related to termination of his employment without cause (as defined in the SRA) or due
to his death or disability. If the Officer is terminated without cause prior to the Vesting Date,
the shares vest based upon a formula determined by the number of days from March 31, 2006 to the
date of termination as a percentage of the number of days from March 31, 2006 to the Vesting Date.
If a termination without cause before the Vesting Date follows a change of control (as defined in
the SRA), all of the Officers shares become immediately vested.
66
The call rights provide NBC Holdings Corp. the right to reacquire each Officers unvested
shares upon the occurrence of certain events, including events under its control, for an aggregate
purchase price of $1.00. If the Officer remains employed by us until the Vesting Date or is
terminated without cause prior to such date, NBC Holdings Corp. has the right but not the
obligation to call the vested shares at fair market value (minus any dividends or distributions
paid in respect of such shares) subject to certain adjustments and any restrictions or limitations
in our debt covenants. The call rights expire 30 days after the Vesting Date.
The put rights enable the Officer to require NBC Holdings Corp. to repurchase all vested
shares following the Vesting Date at the lesser of fair market value or effectively $1.0 million
for such Officers 1,400 shares, subject to certain adjustments and any restrictions or limitations
in our debt covenants. The put rights expire 90 days after the Vesting Date. The SRA also
provides that NBC Holdings Corp. will pay a cash bonus to the Officer related to any vested shares
that are repurchased in connection with the put. This bonus is intended to reimburse the Officer
for any federal, state and local taxes related to the repurchase and to this cash bonus itself. The
bonus will not be paid if such payment is restricted or limited by our debt covenants.
In connection with the NBC Holdings Corp. 2005 Restricted Stock Plan, we also entered into a
Restricted Stock Special Bonus Agreement (the SBA) with each Officer. Each SBA provides for the
payment of a cash bonus to the Officer within 30 days following the Vesting Date based upon certain
criteria (the Special Bonus). If the Officer is still employed by us on that date, or has been
terminated without cause, as defined in the SBA, following a change of control, as defined in the
SBA, prior to that date, the amount is calculated as effectively $1.0 million less the fair market
value of his nonvested stock, subject to certain adjustments. If, prior to the Vesting Date, the
Officer has been terminated without cause prior to a change in control, the amount of the Special
Bonus is adjusted based on the number of days from March 31, 2006 to the date of termination as a
percentage of the number of days from March 31, 2006 to the Vesting Date, subject to certain
adjustments. In either case, the Special Bonus will not be paid if such payment is restricted or
limited by our debt covenants. The SBA also provides that in the event of payment of the Special
Bonus, the Company will pay an additional cash bonus to the Officer in an amount sufficient to
reimburse the Officer for any federal, state and local taxes related to the Special Bonus and this
additional bonus itself.
The combination of the NBC Holdings Corp. 2005 Restricted Stock Plan, the RSPA, the SRA and
the SBA is intended to provide a minimum after-tax compensation benefit of $1.0 million to each of
the Officers assuming that they remain employed by us through September 30, 2010 all subject to
certain adjustments and conditions related to our debt covenants as described earlier.
Due to the put rights on behalf of the Officers, share-based compensation is re-measured at
the end of each reporting period and recognized to a minimum of $3.0 million plus anticipated cash
bonuses to be paid to reimburse the Officers for any federal, state and local taxes thereon from
the date of issuance of the nonvested stock until September 30, 2010 and is recorded as accrued
expenses in the consolidated balance sheets and as selling, general and administrative expenses
in the consolidated statements of operations. No additional nonvested shares have been issued nor
have any of the 4,200 nonvested shares vested or been forfeited since the original issuance on
March 31, 2006.
67
In re-measuring share-based compensation at the end of each reporting period, we recognize the
greater of (a) the minimum compensation benefits associated with the nonvested shares or (b) the
estimated fair value of such shares. As of March 31, 2010, the minimum compensation benefits
exceed the estimated fair value of the nonvested shares and are thus used as the basis for
recording share-based compensation. Fair value is estimated utilizing a methodology which is
consistent with the transaction-based method under the market approach described in the AICPA Audit
and Accounting Practice Aid Series, Valuation of Privately-Held-Company Equity Securities (the
Practice Aid). This methodology is consistent with the approaches that have been used in all
four arms-length negotiated transactions involving NBCs common stock since 1995, including the
last transaction on March 4, 2004 and includes the following steps: (a) the determination of an
estimated enterprise value using a multiple of EBITDA; (b) the enterprise value is reduced by
outstanding debt and redeemable preferred stock and accumulated dividends to derive an equity
value; and (c) the equity value is then divided by outstanding common stock and common stock
equivalents to arrive at an estimated equity value per share. As NBC Holdings Corp.s common stock
is not publicly traded and the nonvested shares represent a minority interest position, the
estimated equity value per share is discounted for these factors to arrive at the fair value of the
nonvested shares. The factors to be considered in performing a valuation as outlined in the
Practice Aid, as well as the risks outlined in this Annual Report on Form 10-K and other factors,
impact the selection of the EBITDA multiple used in the previously mentioned valuation methodology.
As these factors and risks change, their impact on the valuation methodology is also considered.
Specific information regarding nonvested stock share-based compensation is presented in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
|
|
Minimum Compensation |
|
Nonvested Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Valuation methodology |
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
Recognized: |
|
|
|
|
|
|
|
|
|
|
|
|
Value of nonvested shares |
|
$ |
666,667 |
|
|
$ |
666,667 |
|
|
$ |
666,666 |
|
Reimbursement for taxes |
|
|
378,791 |
|
|
|
578,460 |
|
|
|
303,444 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,045,458 |
|
|
$ |
1,245,127 |
|
|
$ |
970,110 |
|
|
|
|
|
|
|
|
|
|
|
Unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
Value of nonvested shares |
|
$ |
333,333 |
|
|
$ |
1,000,000 |
|
|
$ |
1,666,667 |
|
Reimbursement for taxes |
|
|
198,825 |
|
|
|
606,097 |
|
|
|
839,618 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
532,158 |
|
|
$ |
1,606,097 |
|
|
$ |
2,506,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax benefit |
|
$ |
375,824 |
|
|
$ |
476,298 |
|
|
$ |
375,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period over which
unrecognized share-based
compensation will be
realized (in years) |
|
|
0.5 |
|
|
|
1.5 |
|
|
|
2.5 |
|
P. 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 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, consulting
services, and a centralized buying service.
68
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 the Companys wholly-owned subsidiaries, NBC Textbooks LLC, Net Textstore LLC, 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.
EBITDA and earnings before interest, taxes, depreciation, amortization, goodwill impairment,
and loss on early extinguishment of debt (Adjusted EBITDA) are important measures of segment
profit or loss used 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 (excluding the impact of the
Companys interdivisional administrative fee see Note S, Condensed Consolidating Financial
Information, to the consolidated financial statements) and assets on a segment basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Complementary |
|
|
|
|
|
|
Bookstore |
|
|
Textbook |
|
|
Services |
|
|
|
|
|
|
Division |
|
|
Division |
|
|
Division |
|
|
Total |
|
Fiscal year ended March 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customer revenues |
|
$ |
471,028,406 |
|
|
$ |
104,918,932 |
|
|
$ |
29,546,275 |
|
|
$ |
605,493,613 |
|
Intersegment revenues |
|
|
1,463,869 |
|
|
|
35,673,288 |
|
|
|
5,924,561 |
|
|
|
43,061,718 |
|
Depreciation and amortization expense |
|
|
9,285,089 |
|
|
|
6,075,652 |
|
|
|
2,606,650 |
|
|
|
17,967,391 |
|
Earnings before interest, taxes,
depreciation, amortization, and loss
on early extinguishment of debt
(Adjusted EBITDA) |
|
|
45,685,171 |
|
|
|
37,050,519 |
|
|
|
2,301,001 |
|
|
|
85,036,691 |
|
Total assets |
|
|
189,058,497 |
|
|
|
121,026,790 |
|
|
|
15,312,328 |
|
|
|
325,397,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customer revenues |
|
$ |
470,690,964 |
|
|
$ |
111,715,360 |
|
|
$ |
28,309,857 |
|
|
$ |
610,716,181 |
|
Intersegment revenues |
|
|
1,347,045 |
|
|
|
35,572,419 |
|
|
|
5,924,026 |
|
|
|
42,843,490 |
|
Depreciation and amortization expense |
|
|
9,009,168 |
|
|
|
6,086,334 |
|
|
|
2,644,555 |
|
|
|
17,740,057 |
|
Earnings before interest, taxes,
depreciation, amortization and
goodwill impairment (Adjusted
EBITDA) |
|
|
44,029,528 |
|
|
|
39,009,073 |
|
|
|
1,320,700 |
|
|
|
84,359,301 |
|
Total assets |
|
|
179,192,480 |
|
|
|
131,827,129 |
|
|
|
17,836,018 |
|
|
|
328,855,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customer revenues |
|
$ |
452,992,078 |
|
|
$ |
99,584,957 |
|
|
$ |
28,670,751 |
|
|
$ |
581,247,786 |
|
Intersegment revenues |
|
|
1,382,795 |
|
|
|
40,100,078 |
|
|
|
5,701,472 |
|
|
|
47,184,345 |
|
Depreciation and amortization expense |
|
|
7,908,134 |
|
|
|
6,096,196 |
|
|
|
2,614,015 |
|
|
|
16,618,345 |
|
Earnings before interest, taxes,
depreciation, and amortization
(EBITDA) |
|
|
45,941,624 |
|
|
|
33,731,382 |
|
|
|
1,558,414 |
|
|
|
81,231,420 |
|
Total assets |
|
|
186,707,038 |
|
|
|
137,629,109 |
|
|
|
21,639,502 |
|
|
|
345,975,649 |
|
69
The following table reconciles segment information presented above with consolidated
information as presented in our consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Total for reportable segments |
|
$ |
648,555,331 |
|
|
$ |
653,559,671 |
|
|
$ |
628,432,131 |
|
Elimination of intersegment revenues |
|
|
(43,061,718 |
) |
|
|
(42,843,490 |
) |
|
|
(47,184,345 |
) |
|
|
|
|
|
|
|
|
|
|
Consolidated total |
|
$ |
605,493,613 |
|
|
$ |
610,716,181 |
|
|
$ |
581,247,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Total for reportable segments |
|
$ |
17,967,391 |
|
|
$ |
17,740,057 |
|
|
$ |
16,618,345 |
|
Corporate Administration |
|
|
1,402,861 |
|
|
|
1,246,594 |
|
|
|
1,033,494 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated total |
|
$ |
19,370,252 |
|
|
$ |
18,986,651 |
|
|
$ |
17,651,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment |
|
$ |
|
|
|
$ |
106,972,000 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted EBITDA for reportable segments (1) |
|
$ |
85,036,691 |
|
|
$ |
84,359,301 |
|
|
$ |
81,231,420 |
|
Corporate Administration Adjusted EBITDA loss
(including interdivision profit elimination) (1) |
|
|
(11,597,268 |
) |
|
|
(13,326,971 |
) |
|
|
(11,280,477 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
73,439,423 |
|
|
|
71,032,330 |
|
|
|
69,950,943 |
|
Depreciation and amortization |
|
|
(19,370,252 |
) |
|
|
(18,986,651 |
) |
|
|
(17,651,839 |
) |
Goodwill impairment |
|
|
|
|
|
|
(106,972,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income (loss) from operations |
|
|
54,069,171 |
|
|
|
(54,926,321 |
) |
|
|
52,299,104 |
|
Interest and other expenses, net |
|
|
(40,499,120 |
) |
|
|
(32,553,689 |
) |
|
|
(32,424,742 |
) |
Loss on early extinguishment of debt |
|
|
(3,065,759 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income (loss) before income taxes |
|
$ |
10,504,292 |
|
|
$ |
(87,480,010 |
) |
|
$ |
19,874,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
Total Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Total for reportable segments |
|
$ |
325,397,615 |
|
|
$ |
328,855,627 |
|
|
$ |
345,975,649 |
|
Assets not allocated to segments: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
49,933,615 |
|
|
|
36,090,627 |
|
|
|
12,110,876 |
|
Receivables, net |
|
|
17,839,544 |
|
|
|
19,857,099 |
|
|
|
19,490,619 |
|
Recoverable income taxes |
|
|
2,435,287 |
|
|
|
2,869,583 |
|
|
|
|
|
Deferred income taxes |
|
|
1,690,559 |
|
|
|
2,350,802 |
|
|
|
1,901,092 |
|
Prepaid expenses and other assets |
|
|
2,216,334 |
|
|
|
3,485,273 |
|
|
|
2,259,681 |
|
Property and equipment, net |
|
|
11,711,425 |
|
|
|
12,258,135 |
|
|
|
12,017,331 |
|
Goodwill (2) |
|
|
162,089,875 |
|
|
|
162,089,875 |
|
|
|
269,061,875 |
|
Identifiable intangibles, net |
|
|
32,035,514 |
|
|
|
32,722,900 |
|
|
|
33,347,263 |
|
Debt issue costs, net |
|
|
9,198,683 |
|
|
|
6,875,122 |
|
|
|
5,119,263 |
|
Other assets |
|
|
956,793 |
|
|
|
611,664 |
|
|
|
803,772 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated total |
|
$ |
615,505,244 |
|
|
$ |
608,066,707 |
|
|
$ |
702,087,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation, amortization, goodwill impairment and loss on early extinguishment of
debt. There was no goodwill impairment or loss on early extinguishment of debt in
fiscal year 2008; therefore Adjusted EBITDA equals EBITDA for that year. |
|
(2) |
|
Due to the economic downturn and changes in comparable company market multiples,
we determined in the first step of our goodwill impairment test conducted at March 31,
2009 that the carrying value of the Textbook and Bookstore Divisions exceeded their fair
values, indicating that goodwill may be impaired. Having determined that goodwill may
be impaired, we performed the second step of the goodwill impairment test. As a result,
we recorded an impairment charge of $107.0 million in fiscal year 2009, which reduced
our goodwill carrying value to $215.4 million as of March 31, 2009. See Note F to our
consolidated financial statements. |
Our revenues are attributed to countries based on the location of the customer. Substantially
all revenues generated are attributable to customers located within the United States.
70
Q. RELATED PARTY TRANSACTIONS
In accordance with our debt covenants, we declared and paid $8.5 million in dividends to NBC
during the fiscal years ended March 31, 2010 and 2009 to provide funding for interest due and
payable on NBCs $77.0 million 11% Senior Discount Notes. There were no dividends declared and
paid by the Company to NBC during the fiscal year ended March 31, 2008.
In conjunction with the Senior Credit Facility amendment on February 3, 2009, NBC entered into
a Stock Subscription Agreement with NBC Holdings Corp. (Holdings), pursuant to which Holdings
purchased 10,000 shares of a newly created series of NBC preferred stock, par value $0.01 per
share, for $1,000 per share, for an aggregate purchase price of $10.0 million. As a result of the
Stock Subscription Agreement, we received a $10.0 million capital contribution from NBC.
R. SUBSEQUENT EVENT
We have evaluated subsequent events through the filing date of this Form 10-K.
S. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Effective January 26, 2009, we established Campus Authentic LLC, a wholly-owned subsidiary
which was separately incorporated under the laws of the State of Delaware. On April 24, 2007, we
established Net Textstore LLC as a wholly-owned subsidiary separately incorporated under the laws
of the State of Delaware. On May 1, 2006, we acquired all of the outstanding stock of CBA, an
entity separately incorporated under the laws of the State of Illinois and now accounted for as one
of our wholly-owned subsidiaries. Effective January 1, 2005, our textbook division was separately
formed under the laws of the State of Delaware as NBC Textbooks LLC, one of our wholly-owned
subsidiaries. Effective July 1, 2002, our distance education business was separately incorporated
under the laws of the State of Delaware as Specialty Books, Inc., one of our wholly-owned
subsidiaries. In connection with their incorporation, Campus Authentic LLC, Net Textstore LLC,
CBA, NBC Textbooks LLC and Specialty Books, Inc. have unconditionally guaranteed, on a joint and
several basis, full and prompt payment and performance of our obligations, liabilities, and
indebtedness arising under, out of, or in connection with the Senior Subordinated Notes and Senior
Secured Notes. As of March 31, 2010, our wholly-owned subsidiaries were also a party to the First
Lien Amended and Restated Guarantee and Collateral Agreement related to the ABL Credit Agreement.
Condensed consolidating balance sheets, statements of operations, and statements of cash flows are
presented on the following pages which reflect financial information for the parent company
(Nebraska Book Company, Inc.), subsidiary guarantors (Campus Authentic LLC (from January 26, 2009),
Net Textstore LLC (from April 24, 2007), CBA, NBC Textbooks LLC and Specialty Books, Inc.),
consolidating eliminations, and consolidated totals.
71
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
55,410,821 |
|
|
$ |
5,561,804 |
|
|
$ |
|
|
|
$ |
60,972,625 |
|
Intercompany receivables |
|
|
17,716,457 |
|
|
|
57,770,424 |
|
|
|
(75,486,881 |
) |
|
|
|
|
Receivables, net |
|
|
32,613,517 |
|
|
|
25,374,277 |
|
|
|
|
|
|
|
57,987,794 |
|
Inventories |
|
|
55,017,307 |
|
|
|
42,480,382 |
|
|
|
|
|
|
|
97,497,689 |
|
Recoverable income taxes |
|
|
2,435,287 |
|
|
|
|
|
|
|
|
|
|
|
2,435,287 |
|
Deferred income taxes |
|
|
1,690,559 |
|
|
|
4,557,000 |
|
|
|
|
|
|
|
6,247,559 |
|
Prepaid expenses and other assets |
|
|
3,494,754 |
|
|
|
575,527 |
|
|
|
|
|
|
|
4,070,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
168,378,702 |
|
|
|
136,319,414 |
|
|
|
(75,486,881 |
) |
|
|
229,211,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, net |
|
|
36,815,903 |
|
|
|
5,339,521 |
|
|
|
|
|
|
|
42,155,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
|
199,900,018 |
|
|
|
15,671,108 |
|
|
|
|
|
|
|
215,571,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CUSTOMER RELATIONSHIPS, net |
|
|
4,315,113 |
|
|
|
75,587,707 |
|
|
|
|
|
|
|
79,902,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRADENAME |
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER IDENTIFIABLE INTANGIBLES, net |
|
|
3,455,593 |
|
|
|
1,839,731 |
|
|
|
|
|
|
|
5,295,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN SUBSIDIARIES |
|
|
171,532,241 |
|
|
|
|
|
|
|
(171,532,241 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
10,892,382 |
|
|
|
1,156,933 |
|
|
|
|
|
|
|
12,049,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
626,609,952 |
|
|
$ |
235,914,414 |
|
|
$ |
(247,019,122 |
) |
|
$ |
615,505,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
22,622,816 |
|
|
$ |
3,764,224 |
|
|
$ |
|
|
|
$ |
26,387,040 |
|
Intercompany payables |
|
|
57,770,424 |
|
|
|
17,716,457 |
|
|
|
(75,486,881 |
) |
|
|
|
|
Accrued employee compensation and benefits |
|
|
6,921,873 |
|
|
|
2,479,595 |
|
|
|
|
|
|
|
9,401,468 |
|
Accrued interest |
|
|
7,295,709 |
|
|
|
|
|
|
|
|
|
|
|
7,295,709 |
|
Accrued incentives |
|
|
31,148 |
|
|
|
6,282,785 |
|
|
|
|
|
|
|
6,313,933 |
|
Accrued expenses |
|
|
8,195,313 |
|
|
|
856,338 |
|
|
|
|
|
|
|
9,051,651 |
|
Income taxes payable |
|
|
(3,651,775 |
) |
|
|
3,651,775 |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
1,299,960 |
|
|
|
|
|
|
|
|
|
|
|
1,299,960 |
|
Current maturities of long-term debt |
|
|
54,403 |
|
|
|
|
|
|
|
|
|
|
|
54,403 |
|
Current maturities of capital lease obligations |
|
|
846,053 |
|
|
|
|
|
|
|
|
|
|
|
846,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
101,385,924 |
|
|
|
34,751,174 |
|
|
|
(75,486,881 |
) |
|
|
60,650,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT, net of current maturities |
|
|
374,343,069 |
|
|
|
|
|
|
|
|
|
|
|
374,343,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL LEASE OBLIGATIONS, net of current
maturities |
|
|
2,380,737 |
|
|
|
|
|
|
|
|
|
|
|
2,380,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES |
|
|
1,918,963 |
|
|
|
360,000 |
|
|
|
|
|
|
|
2,278,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAXES |
|
|
21,196,020 |
|
|
|
29,270,999 |
|
|
|
|
|
|
|
50,467,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUE TO PARENT |
|
|
23,194,711 |
|
|
|
|
|
|
|
|
|
|
|
23,194,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY |
|
|
102,190,528 |
|
|
|
171,532,241 |
|
|
|
(171,532,241 |
) |
|
|
102,190,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
626,609,952 |
|
|
$ |
235,914,414 |
|
|
$ |
(247,019,122 |
) |
|
$ |
615,505,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
40,811,478 |
|
|
$ |
3,226,990 |
|
|
$ |
|
|
|
$ |
44,038,468 |
|
Intercompany receivables |
|
|
17,795,278 |
|
|
|
31,381,837 |
|
|
|
(49,177,115 |
) |
|
|
|
|
Receivables, net |
|
|
34,406,593 |
|
|
|
26,895,043 |
|
|
|
|
|
|
|
61,301,636 |
|
Inventories |
|
|
47,625,966 |
|
|
|
45,489,697 |
|
|
|
|
|
|
|
93,115,663 |
|
Recoverable income taxes |
|
|
2,869,583 |
|
|
|
|
|
|
|
|
|
|
|
2,869,583 |
|
Deferred income taxes |
|
|
2,350,802 |
|
|
|
4,231,000 |
|
|
|
|
|
|
|
6,581,802 |
|
Prepaid expenses and other assets |
|
|
3,648,635 |
|
|
|
302,239 |
|
|
|
|
|
|
|
3,950,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
149,508,335 |
|
|
|
111,526,806 |
|
|
|
(49,177,115 |
) |
|
|
211,858,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, net |
|
|
40,057,891 |
|
|
|
5,580,631 |
|
|
|
|
|
|
|
45,638,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
|
199,900,017 |
|
|
|
15,536,109 |
|
|
|
|
|
|
|
215,436,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CUSTOMER RELATIONSHIPS, net |
|
|
4,625,181 |
|
|
|
81,019,159 |
|
|
|
|
|
|
|
85,644,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRADENAME |
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER IDENTIFIABLE INTANGIBLES, net |
|
|
7,071,442 |
|
|
|
2,101,180 |
|
|
|
|
|
|
|
9,172,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN SUBSIDIARIES |
|
|
151,290,937 |
|
|
|
|
|
|
|
(151,290,937 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
8,388,921 |
|
|
|
608,150 |
|
|
|
|
|
|
|
8,997,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
592,162,724 |
|
|
$ |
216,372,035 |
|
|
$ |
(200,468,052 |
) |
|
$ |
608,066,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
22,728,714 |
|
|
$ |
4,136,900 |
|
|
$ |
|
|
|
$ |
26,865,614 |
|
Intercompany payables |
|
|
31,381,837 |
|
|
|
17,795,278 |
|
|
|
(49,177,115 |
) |
|
|
|
|
Accrued employee compensation and benefits |
|
|
9,705,781 |
|
|
|
4,074,428 |
|
|
|
|
|
|
|
13,780,209 |
|
Accrued interest |
|
|
678,516 |
|
|
|
|
|
|
|
|
|
|
|
678,516 |
|
Accrued incentives |
|
|
42,593 |
|
|
|
6,068,107 |
|
|
|
|
|
|
|
6,110,700 |
|
Accrued expenses |
|
|
3,804,787 |
|
|
|
472,318 |
|
|
|
|
|
|
|
4,277,105 |
|
Income taxes payable |
|
|
(2,187,068 |
) |
|
|
2,187,068 |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
959,274 |
|
|
|
|
|
|
|
|
|
|
|
959,274 |
|
Current maturities of long-term debt |
|
|
6,917,451 |
|
|
|
|
|
|
|
|
|
|
|
6,917,451 |
|
Current maturities of capital lease obligations |
|
|
748,692 |
|
|
|
|
|
|
|
|
|
|
|
748,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
74,780,577 |
|
|
|
34,734,099 |
|
|
|
(49,177,115 |
) |
|
|
60,337,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT, net of current maturities |
|
|
361,445,728 |
|
|
|
|
|
|
|
|
|
|
|
361,445,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL LEASE OBLIGATIONS, net of current
maturities |
|
|
3,298,658 |
|
|
|
|
|
|
|
|
|
|
|
3,298,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES |
|
|
5,234,166 |
|
|
|
70,000 |
|
|
|
|
|
|
|
5,304,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAXES |
|
|
24,036,460 |
|
|
|
30,276,999 |
|
|
|
|
|
|
|
54,313,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUE TO PARENT |
|
|
20,130,189 |
|
|
|
|
|
|
|
|
|
|
|
20,130,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY |
|
|
103,236,946 |
|
|
|
151,290,937 |
|
|
|
(151,290,937 |
) |
|
|
103,236,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
592,162,724 |
|
|
$ |
216,372,035 |
|
|
$ |
(200,468,052 |
) |
|
$ |
608,066,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
|
377,306,980 |
|
|
$ |
264,870,178 |
|
|
$ |
(36,683,545 |
) |
|
$ |
605,493,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of depreciation shown below) |
|
|
236,892,355 |
|
|
|
171,376,403 |
|
|
|
(38,072,842 |
) |
|
|
370,195,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
140,414,625 |
|
|
|
93,493,775 |
|
|
|
1,389,297 |
|
|
|
235,297,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
113,325,037 |
|
|
|
47,143,940 |
|
|
|
1,389,297 |
|
|
|
161,858,274 |
|
Depreciation |
|
|
6,751,707 |
|
|
|
1,765,297 |
|
|
|
|
|
|
|
8,517,004 |
|
Amortization |
|
|
4,674,439 |
|
|
|
6,178,809 |
|
|
|
|
|
|
|
10,853,248 |
|
Intercompany administrative fee |
|
|
(6,732,823 |
) |
|
|
6,732,823 |
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
(20,241,303 |
) |
|
|
|
|
|
|
20,241,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,777,057 |
|
|
|
61,820,869 |
|
|
|
21,630,600 |
|
|
|
181,228,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS |
|
|
42,637,568 |
|
|
|
31,672,906 |
|
|
|
(20,241,303 |
) |
|
|
54,069,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
40,678,890 |
|
|
|
939 |
|
|
|
|
|
|
|
40,679,829 |
|
Interest income |
|
|
(83,373 |
) |
|
|
(97,336 |
) |
|
|
|
|
|
|
(180,709 |
) |
Loss on early extinguishment of debt |
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,661,276 |
|
|
|
(96,397 |
) |
|
|
|
|
|
|
43,564,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(1,023,708 |
) |
|
|
31,769,303 |
|
|
|
(20,241,303 |
) |
|
|
10,504,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(8,385,906 |
) |
|
|
11,528,000 |
|
|
|
|
|
|
|
3,142,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
7,362,198 |
|
|
$ |
20,241,303 |
|
|
$ |
(20,241,303 |
) |
|
$ |
7,362,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
$ |
386,910,695 |
|
|
$ |
260,062,026 |
|
|
$ |
(36,256,540 |
) |
|
$ |
610,716,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of depreciation shown below) |
|
|
244,484,547 |
|
|
|
165,056,393 |
|
|
|
(38,171,700 |
) |
|
|
371,369,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
142,426,148 |
|
|
|
95,005,633 |
|
|
|
1,915,160 |
|
|
|
239,346,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
115,276,253 |
|
|
|
51,123,198 |
|
|
|
1,915,160 |
|
|
|
168,314,611 |
|
Depreciation |
|
|
6,054,313 |
|
|
|
1,548,318 |
|
|
|
|
|
|
|
7,602,631 |
|
Amortization |
|
|
5,180,117 |
|
|
|
6,203,903 |
|
|
|
|
|
|
|
11,384,020 |
|
Goodwill impairment |
|
|
106,972,000 |
|
|
|
|
|
|
|
|
|
|
|
106,972,000 |
|
Intercompany administrative fee |
|
|
(4,923,600 |
) |
|
|
4,923,600 |
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
(19,707,636 |
) |
|
|
|
|
|
|
19,707,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208,851,447 |
|
|
|
63,799,019 |
|
|
|
21,622,796 |
|
|
|
294,273,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
|
(66,425,299 |
) |
|
|
31,206,614 |
|
|
|
(19,707,636 |
) |
|
|
(54,926,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
32,878,225 |
|
|
|
|
|
|
|
|
|
|
|
32,878,225 |
|
Interest income |
|
|
(385,514 |
) |
|
|
(41,022 |
) |
|
|
|
|
|
|
(426,536 |
) |
Loss on derivative financial instrument |
|
|
102,000 |
|
|
|
|
|
|
|
|
|
|
|
102,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,594,711 |
|
|
|
(41,022 |
) |
|
|
|
|
|
|
32,553,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(99,020,010 |
) |
|
|
31,247,636 |
|
|
|
(19,707,636 |
) |
|
|
(87,480,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(4,091,342 |
) |
|
|
11,540,000 |
|
|
|
|
|
|
|
7,448,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(94,928,668 |
) |
|
$ |
19,707,636 |
|
|
$ |
(19,707,636 |
) |
|
$ |
(94,928,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
75
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
$ |
381,697,820 |
|
|
$ |
240,155,652 |
|
|
$ |
(40,605,686 |
) |
|
$ |
581,247,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of depreciation shown below) |
|
|
240,688,980 |
|
|
|
156,028,070 |
|
|
|
(42,577,576 |
) |
|
|
354,139,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
141,008,840 |
|
|
|
84,127,582 |
|
|
|
1,971,890 |
|
|
|
227,108,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
108,050,482 |
|
|
|
47,171,054 |
|
|
|
1,971,890 |
|
|
|
157,193,426 |
|
Closure of California Warehouse |
|
|
|
|
|
|
(36,057 |
) |
|
|
|
|
|
|
(36,057 |
) |
Depreciation |
|
|
5,676,303 |
|
|
|
1,532,201 |
|
|
|
|
|
|
|
7,208,504 |
|
Amortization |
|
|
4,511,635 |
|
|
|
5,931,700 |
|
|
|
|
|
|
|
10,443,335 |
|
Intercompany administrative fee |
|
|
(4,838,800 |
) |
|
|
4,838,800 |
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiary |
|
|
(15,608,834 |
) |
|
|
|
|
|
|
15,608,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,790,786 |
|
|
|
59,437,698 |
|
|
|
17,580,724 |
|
|
|
174,809,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS |
|
|
43,218,054 |
|
|
|
24,689,884 |
|
|
|
(15,608,834 |
) |
|
|
52,299,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
33,559,239 |
|
|
|
|
|
|
|
|
|
|
|
33,559,239 |
|
Interest income |
|
|
(1,287,547 |
) |
|
|
(44,950 |
) |
|
|
|
|
|
|
(1,332,497 |
) |
Loss on derivative financial instrument |
|
|
198,000 |
|
|
|
|
|
|
|
|
|
|
|
198,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,469,692 |
|
|
|
(44,950 |
) |
|
|
|
|
|
|
32,424,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
10,748,362 |
|
|
|
24,734,834 |
|
|
|
(15,608,834 |
) |
|
|
19,874,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(1,707,661 |
) |
|
|
9,126,000 |
|
|
|
|
|
|
|
7,418,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
12,456,023 |
|
|
$ |
15,608,834 |
|
|
$ |
(15,608,834 |
) |
|
$ |
12,456,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED MARCH 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
29,900,573 |
|
|
$ |
6,336,135 |
|
|
$ |
|
|
|
$ |
36,236,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(3,737,872 |
) |
|
|
(1,730,751 |
) |
|
|
57,647 |
|
|
|
(5,410,976 |
) |
Acquisitions, net of cash acquired |
|
|
(463,474 |
) |
|
|
(2,384,134 |
) |
|
|
|
|
|
|
(2,847,608 |
) |
Proceeds from sale of property and equipment |
|
|
85,250 |
|
|
|
113,564 |
|
|
|
(57,647 |
) |
|
|
141,167 |
|
Software development costs |
|
|
(648,523 |
) |
|
|
|
|
|
|
|
|
|
|
(648,523 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
(4,764,619 |
) |
|
|
(4,001,321 |
) |
|
|
|
|
|
|
(8,765,940 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
199,000,000 |
|
|
|
|
|
|
|
|
|
|
|
199,000,000 |
|
Payment of financing costs |
|
|
(10,190,217 |
) |
|
|
|
|
|
|
|
|
|
|
(10,190,217 |
) |
Principal payments on long-term debt |
|
|
(193,125,225 |
) |
|
|
|
|
|
|
|
|
|
|
(193,125,225 |
) |
Principal payments on capital lease obligations |
|
|
(820,560 |
) |
|
|
|
|
|
|
|
|
|
|
(820,560 |
) |
Borrowings under revolving credit facility |
|
|
85,000,000 |
|
|
|
|
|
|
|
|
|
|
|
85,000,000 |
|
Payments under revolving credit facility |
|
|
(85,000,000 |
) |
|
|
|
|
|
|
|
|
|
|
(85,000,000 |
) |
Dividends paid to parent |
|
|
(8,470,000 |
) |
|
|
|
|
|
|
|
|
|
|
(8,470,000 |
) |
Capital contributions |
|
|
4,869 |
|
|
|
|
|
|
|
|
|
|
|
4,869 |
|
Due to parent |
|
|
3,064,522 |
|
|
|
|
|
|
|
|
|
|
|
3,064,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
(10,536,611 |
) |
|
|
|
|
|
|
|
|
|
|
(10,536,611 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
14,599,343 |
|
|
|
2,334,814 |
|
|
|
|
|
|
|
16,934,157 |
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
40,811,478 |
|
|
|
3,226,990 |
|
|
|
|
|
|
|
44,038,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
55,410,821 |
|
|
$ |
5,561,804 |
|
|
$ |
|
|
|
$ |
60,972,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED MARCH 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
29,207,254 |
|
|
$ |
2,458,659 |
|
|
$ |
|
|
|
$ |
31,665,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(6,096,566 |
) |
|
|
(1,989,243 |
) |
|
|
106,438 |
|
|
|
(7,979,371 |
) |
Acquisitions, net of cash acquired |
|
|
(3,236,139 |
) |
|
|
(3,084,633 |
) |
|
|
|
|
|
|
(6,320,772 |
) |
Proceeds from sale of property and equipment |
|
|
38,060 |
|
|
|
103,881 |
|
|
|
(106,438 |
) |
|
|
35,503 |
|
Software development costs |
|
|
(633,763 |
) |
|
|
|
|
|
|
|
|
|
|
(633,763 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
(9,928,408 |
) |
|
|
(4,969,995 |
) |
|
|
|
|
|
|
(14,898,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of financing costs |
|
|
(3,961,811 |
) |
|
|
|
|
|
|
|
|
|
|
(3,961,811 |
) |
Principal payments on long-term debt |
|
|
(2,070,654 |
) |
|
|
|
|
|
|
|
|
|
|
(2,070,654 |
) |
Principal payments on capital lease obligations |
|
|
(722,823 |
) |
|
|
|
|
|
|
|
|
|
|
(722,823 |
) |
Borrowings under revolving credit facility |
|
|
200,600,000 |
|
|
|
|
|
|
|
|
|
|
|
200,600,000 |
|
Payments under revolving credit facility |
|
|
(200,600,000 |
) |
|
|
|
|
|
|
|
|
|
|
(200,600,000 |
) |
Dividends paid to parent |
|
|
(8,470,000 |
) |
|
|
|
|
|
|
|
|
|
|
(8,470,000 |
) |
Capital contributions |
|
|
10,009,752 |
|
|
|
|
|
|
|
|
|
|
|
10,009,752 |
|
Due to parent |
|
|
3,160,038 |
|
|
|
|
|
|
|
|
|
|
|
3,160,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
(2,055,498 |
) |
|
|
|
|
|
|
|
|
|
|
(2,055,498 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS |
|
|
17,223,348 |
|
|
|
(2,511,336 |
) |
|
|
|
|
|
|
14,712,012 |
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
23,588,130 |
|
|
|
5,738,326 |
|
|
|
|
|
|
|
29,326,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
40,811,478 |
|
|
$ |
3,226,990 |
|
|
$ |
|
|
|
$ |
44,038,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED MARCH 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
18,407,954 |
|
|
$ |
2,455,807 |
|
|
$ |
|
|
|
$ |
20,863,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(6,607,380 |
) |
|
|
(690,551 |
) |
|
|
37,022 |
|
|
|
(7,260,909 |
) |
Acquisitions, net of cash acquired |
|
|
(14,246,655 |
) |
|
|
(435,000 |
) |
|
|
|
|
|
|
(14,681,655 |
) |
Proceeds from sale of property and equipment |
|
|
21,985 |
|
|
|
51,422 |
|
|
|
(37,022 |
) |
|
|
36,385 |
|
Software development costs |
|
|
(272,981 |
) |
|
|
|
|
|
|
|
|
|
|
(272,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
(21,105,031 |
) |
|
|
(1,074,129 |
) |
|
|
|
|
|
|
(22,179,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
|
(1,957,852 |
) |
|
|
|
|
|
|
|
|
|
|
(1,957,852 |
) |
Principal payments on capital lease obligations |
|
|
(624,910 |
) |
|
|
|
|
|
|
|
|
|
|
(624,910 |
) |
Borrowings under revolving credit facility |
|
|
148,000,000 |
|
|
|
|
|
|
|
|
|
|
|
148,000,000 |
|
Payments under revolving credit facility |
|
|
(148,000,000 |
) |
|
|
|
|
|
|
|
|
|
|
(148,000,000 |
) |
Capital contributions |
|
|
4,869 |
|
|
|
|
|
|
|
|
|
|
|
4,869 |
|
Due to parent |
|
|
236,872 |
|
|
|
|
|
|
|
|
|
|
|
236,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
(2,341,021 |
) |
|
|
|
|
|
|
|
|
|
|
(2,341,021 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS |
|
|
(5,038,098 |
) |
|
|
1,381,678 |
|
|
|
|
|
|
|
(3,656,420 |
) |
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
28,626,228 |
|
|
|
4,356,648 |
|
|
|
|
|
|
|
32,982,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
23,588,130 |
|
|
$ |
5,738,326 |
|
|
$ |
|
|
|
$ |
29,326,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
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. Our management, with the participation
of our chief executive officer and chief financial officer (our principal executive officer and
principal financial officer), evaluated the effectiveness of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2010. This
evaluation was performed to determine if our disclosure controls and procedures were effective, in
that they are designed to ensure that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and regulations, including ensuring that such
information is accumulated and communicated to management, including our chief executive officer
and chief financial officer, as appropriate to allow timely decisions regarding required
disclosure. Based on this evaluation, our chief executive officer and chief financial officer
concluded that, as of March 31, 2010, our disclosure controls and procedures were effective.
(b) Managements annual report on internal control over financial reporting:
Management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The
Companys internal control system was designed to provide reasonable assurance to management
and the board of directors regarding the preparation and fair presentation of published
financial statements.
Management assessed the effectiveness of the Companys internal control over financial
reporting as of March 31, 2010. In making this assessment, it used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control Integrated Framework. Based on its assessment management has concluded that, as of
March 31, 2010, the Companys internal control over financial reporting was effective.
(c) Attestation report of the registered public accounting firm. This annual report does not
include an attestation report of the Companys registered public accounting firm regarding internal
control over financial reporting. Managements report was not subject to attestation by the
Companys registered public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only managements report in this annual report.
(d) Changes in internal control over financial reporting. There were no changes in our
internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) which occurred during the quarter ended March 31, 2010 that materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting. During
the fiscal year ended March 31, 2010, we completed a conversion to a general ledger/business
planning and consolidation solution from SAP, which is utilized for external financial reporting
purposes. Various controls have been modified due to the new solution, and additional controls
over financial reporting, including reconciliation and verification reports and tools, have been
established to ensure the accuracy and integrity of our financial statements.
ITEM 9B. OTHER INFORMATION.
We are not required to file reports with the SEC pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, but are filing this Annual Report on Form 10-K on a
voluntary basis.
80
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The members of our Board of Directors and senior executive officers and their ages are as
follows:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Mark L. Bono
|
|
|
50 |
|
|
Director |
R. Sean Honey
|
|
|
39 |
|
|
Director |
Mark W. Oppegard
|
|
|
60 |
|
|
Chief Executive Officer and Director |
Barry S. Major
|
|
|
53 |
|
|
Chief Operating Officer, President, and Director |
Alan G. Siemek
|
|
|
49 |
|
|
Chief Financial Officer, Senior Vice President of Finance and Administration, Treasurer, and Assistant Secretary |
Robert A. Rupe
|
|
|
63 |
|
|
Senior Vice President Bookstore Division |
Michael J. Kelly
|
|
|
52 |
|
|
Senior Vice President Textbook Division |
Larry R. Rempe
|
|
|
62 |
|
|
Senior Vice President Complementary Services |
Nathan D. Rempe
|
|
|
32 |
|
|
Chief Technology Officer |
The business experience, principal occupation and employment as well as the periods of service
of each of our directors and senior executive officers during the last five fiscal years are set
forth below.
Mark L. Bono became a Director of ours and NBC upon the consummation of the March 4, 2004
Transaction. Mr. Bono joined Weston Presidio in 1999 and is a member of the general partners of
the Weston Funds. Prior to 1999, Mr. Bono served in various positions at Tucker Anthony, an
investment banking firm, including Managing Director and Co-Head of Mergers and Acquisitions. Mr.
Bono also serves as a Director of Trimark Sportswear Group, Summit Energy, Herbal Science and
Rockwood. As a result of these and other professional experiences, Mr. Bono possesses particular
knowledge and experience in capital structure and corporate governance practices that strengthen
the Boards collective qualification, skills and experience.
R. Sean Honey was named a Director of ours and NBC upon the consummation of the March 4, 2004
Transaction. Mr. Honey joined Weston Presidio in 1999 and is a member of the general partners of
the Weston Funds. Prior to 1999, Mr. Honey served in various positions at J.P. Morgan in both
Mergers and Acquisitions and Merchant Banking. Mr. Honey also serves as a Director of Apple
American Group, Cellu Tissue Holdings, and Purcell Systems. As a result of these and other
professional experiences, Mr. Honey possesses particular knowledge and experience in capital
structure and corporate governance practices that strengthen the Boards collective qualification,
skills and experience.
Mark W. Oppegard has served in the college bookstore industry for 40 years (all of which have
been with us). Mr. Oppegard became our Chief Executive Officer and Chief Executive Officer,
Secretary and a Director of NBC on February 13, 1998 and served as President of NBC from that date
to September, 2008. Additionally, Mr. Oppegard served as our President from 1992 to September,
2008 and has served as our Director since 1995. Prior to 1998, Mr. Oppegard served as Vice
President, Secretary, Assistant Treasurer and a Director of NBC between 1995 and 1998. Prior to
1992, Mr. Oppegard served in a series of positions with us, including Vice President of the
Bookstore Division. Mr. Oppegard brings to the Board extensive executive management experience,
significant knowledge of the Company, our operations, our competitors and our market, leadership
skills and a long history in strategy and strategic planning.
Barry S. Major, who has served in the college bookstore industry for 11 years (all of which
have been with us), was named our President and NBCs President in September, 2008, upon
consummation of the March 4, 2004 Transaction was named our Director and NBCs Director, and was
named our Chief Operating Officer in January, 1999. Mr. Major is also a member of the board of
directors of Mutual of Omaha Bank, where he also serves on the loan committee of the board of
directors and chairs the audit and compensation committees. Mr. Major brings to the Board
extensive executive management experience, knowledge of the Company, our operations, our
competitors and our market, financial acumen and private company corporate governance experience.
Alan G. Siemek, who has served in the college bookstore industry for 11 years (all of which
have been with us), was named our Senior Vice President of Finance and Administration in April,
2001. Mr. Siemek has also served as our Chief Financial Officer, Treasurer and Assistant Secretary
and Vice President and Treasurer of NBC since July, 1999.
81
Robert A. Rupe, who served in the college bookstore industry for 9 years (all of which have
been with us), was named Senior Vice President of the Bookstore Division in April, 2001. Mr. Rupe
retired from his position as Senior Vice President of the Bookstore Division effective April 23,
2010, upon the hiring of and transition of responsibilities to Steven A. Clemente who was named our
new Senior Vice President of the Bookstore Division.
Michael J. Kelly, who has served in the college bookstore industry for 10 years (all of which
have been with us), was named Senior Vice President of the Textbook Division in April, 2005. Prior
to April, 2005, Mr. Kelly served as Senior Vice President of Distance Learning/Marketing Services
and Other Complementary Services from August, 2001 to March, 2005 and as Vice President of
e-commerce from November, 1999 to July, 2001.
Larry R. Rempe has served in the college bookstore industry for 24 years (all of which have
been with us) and was named Senior Vice President of Complementary Services in April, 2005. Prior
to April, 2005, Mr. Rempe served as Vice President of Information Systems since 1986. Between 1974
and 1986, Mr. Rempe served in various positions for Lincoln Industries, Inc., a holding company
that owned us until 1995. Mr. Larry Rempe is the father of Mr. Nathan Rempe, our Chief Technology
Officer.
Nathan D. Rempe, who has served in the college bookstore industry for 5 years (all of which
have been with us) was named Chief Technology Officer in March, 2009. Prior to March, 2009, Mr.
Rempe served as Vice President of Internet Services since 2006 and Director of Internet Strategy in
2005. Prior to joining us, Mr. Rempe served as Lead e-Business Developer for Commercial Federal
Bank where he managed the banks online consumer banking application. Mr. Rempe is also an
Executive Faculty member at Creighton University, teaching graduate level courses in information
technology. Mr. Nathan Rempe is the son of Mr. Larry Rempe, our Senior Vice President of
Complementary Services.
Board of Directors
Our Board of Directors (the Board) and NBCs Board is led by Mark L. Bono. Mark W. Oppegard
serves as our CEO and Director and NBCs Director, Barry S. Major serves as our President, COO and
our Director and NBCs Director, and R. Sean Honey serves as our Director and NBCs director. The
Board has determined that this is an effective leadership structure at the present time because Mr.
Bono and Mr. Honey bring experience regarding acquisitions and corporate governance practice of
other corporations while the Board gets the benefit of Mr. Oppegard and Mr. Majors intimate
knowledge of the day-to-day operations of our business and their significant experience in the
industry.
Our Board generally administers its risk oversight function through the board as a whole. Our
CEO and President and Chief Operating Officer, members of the Board, and other executives have
day-to-day risk management responsibilities. In addition, management provides a monthly report of
our financial and operation performance to each member of the Board. The Audit Committee provides
additional oversight through its quarterly meetings, where it reviews our contingencies,
significant transactions and subsequent events, among other matters with management and our
independent auditors.
The Board has not established a formal process for identifying director nominees, nor does it
have a formal policy regarding consideration of diversity in identifying director nominees.
Audit Committee
Our audit committee currently consists of Mark L. Bono and R. Sean Honey. Among other
functions, our audit committee (a) makes recommendations to our board of directors regarding the
selection of independent auditors; (b) reviews the results and scope of the audit and other
services provided by our independent auditors; (c) reviews our financial statements; and (d)
reviews and evaluates our internal control functions. The Board of Directors has determined that
the audit committee does not have an audit committee financial expert as that term is defined by
the applicable rules and regulations of the SEC. However, the Board of Directors is satisfied that
the members of our audit committee have sufficient expertise and business and financial experience
necessary to effectively perform their duties as the audit committee.
Code of Ethics
We have adopted a written code of ethics for our principal executive officer and senior
financial officers as required by the SEC under Section 406 of the Sarbanes-Oxley Act of 2002. The
code sets forth written standards to deter wrongdoing and promote honest and ethical conduct,
accurate and timely disclosure in reports and documents, compliance with applicable governmental
laws and regulations, prompt internal reporting of violations of the code, and accountability for
adherence to the code.
82
ITEM 11. EXECUTIVE COMPENSATION.
The following tables and paragraphs provide information concerning compensation paid by us for
the last three fiscal years to our Chief Executive Officer, Chief Financial Officer, and three
other most highly compensated senior executive officers (each, an
Executive) earning in excess of $100,000 in total compensation as defined in Regulation S-K,
subpart 229.402(a)(3), including compensation discussion and analysis, summary compensation table,
grants of plan-based awards, employment agreements, outstanding equity awards, nonqualified
deferred compensation, potential payments upon termination or change in control, compensation of
directors, compensation committee interlocks and insider participation, and compensation committee
report.
Compensation Discussion and Analysis
Compensation Philosophy. Our compensation programs are intended to attract and retain vital
employees and to properly incent high level talent to work for and ultimately add value to the
Company for the benefit of the shareholders.
Compensation Committee and Compensation Process. We do not have a formal Compensation
Committee; however, Messrs. Bono and Honey, the two directors affiliated with Weston Presidio, the
majority equity owner of NBC Holdings Corp. (our ultimate parent company), act to approve the chief
executive officer base salary compensation, our budget, and all stock option or other equity
awards. All other decisions related to compensation are approved by our chief executive officer
and President as appropriate.
Executive Compensation Components. Components of our Executive compensation include base
salary, bonus, stock option and other equity awards, severance benefits, health insurance,
disability and life insurance, and various other insurance coverages as described in further detail
below. The following is a brief description of each principal element of compensation:
|
1) |
|
Base Salary. Base salaries are intended to compensate the Executives and all other
salaried employees for their basic services performed for us on an annual basis. In
setting base salaries, we take into account the Executives experience, the functions and
responsibilities of the job, and any other factors relevant to that particular job. Base
salaries are typically adjusted annually by our chief executive officer and President;
however, we do not limit ourselves to this schedule. The chief executive officers base
salary is approved by Messrs. Bono and Honey of the Board of Directors, the two directors
affiliated with Weston Presidio. |
|
|
2) |
|
Bonus Plan. We use our executive bonus plan to incent each Executive on an annual
basis. Bonuses for each Executive are initially determined by a preset percentage of the
Executives salary based upon attainment of goals related to our consolidated EBITDA and
Adjusted EBITDA compared to budget. Such goals may be revised for material unbudgeted
events. Typically the minimum percentage needed to qualify for a bonus is 93% of budgeted
EBITDA, and the maximum bonus amounts are achieved at 110% of budgeted EBITDA. Such
initial calculated amounts are then adjusted by our chief executive officer and President
based upon non-quantifiable criteria in evaluating job performance. |
|
|
3) |
|
Stock Option and Other Equity Awards. We use nonqualified stock options and other
equity awards to incent our Executives to remain with us and to maximize long-term value
for our shareholders. We have generally awarded stock options on an annual basis to each
Executive based upon informal performance measures. Generally, we must achieve at least
93% of the budgeted EBITDA before options are granted. Messrs. Bono and Honey, the two
directors affiliated with Weston Presidio, receive a recommendation from our chief
executive officer regarding the number of stock options to be granted to each Executive and
then adjust such recommendation as they consider appropriate. In addition, in March 2006,
upon the approval of the entire Board of Directors, our chief executive officer, chief
financial officer, and President were each issued 1,400 shares of nonvested stock for $0.01
per share. This issuance of shares was designed to incent those named Executives to remain
with us until at least September 30, 2010. Since this issuance of nonvested stock, these
named Executives have not received any further grants of stock options. |
83
|
4) |
|
Severance Plans. Each Executive has signed a memorandum of understanding under which
they may be paid severance of up to (i) one year of base salary, (ii) pro rata bonuses and
(iii) continuation of health, life and disability benefits for up to 12 months if they are
terminated without cause (as defined in those agreements). |
|
|
5) |
|
Other Benefits. We maintain health, dental and vision insurance plans for the benefit
of eligible employees, including the Executives. The health and dental plans require the
employee to pay a portion of the premium and we pay the remainder. The vision plan premium
is paid in its entirety by the employee. We also maintain a 401(k) retirement plan that is
available to all eligible employees. For fiscal year ended March 31, 2010, we matched
elective employee-participant contributions on the basis of 100% of the employees
contribution up to 1% of their total compensation plus 50% of the employees contribution
on the next 5% of their total compensation. For fiscal years ended March 31, 2008 and
2009, we matched elective employee-participant contributions on the basis of 100% of the
employees contribution up to 5% of their total compensation. Certain amounts of life,
accidental death and dismemberment, and short and long-term disability insurance coverage
is also offered to all eligible employees and premiums or costs are paid in full by us.
Certain other voluntary insurance coverages are available to eligible employees, such as
supplemental life, cancer and personal accident insurance with the entire premium paid by
the employee. The foregoing benefits are available to each Executive on the same basis as
all other eligible employees. |
We do not have a policy regarding the adjustment or recovery of compensation if the results on
which that compensation was determined are restated or otherwise adjusted.
84
Summary Compensation Table
The table presented below summarizes compensation to each Executive for the last three fiscal
years:
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
(3) |
|
|
|
|
|
|
Fiscal |
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Compensation |
|
|
All Other |
|
|
|
|
Name and Principal Position |
|
Year |
|
|
Salary |
|
|
Bonus |
|
|
Awards (1) |
|
|
Awards (1) |
|
|
Earnings (2) |
|
|
Compensation |
|
|
Total |
|
|
Mark W. Oppegard Chief Executive Officer and Director |
|
|
2010 |
|
|
$ |
200,426 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
8,827 |
|
|
$ |
209,253 |
|
|
|
|
2009 |
|
|
|
266,500 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
206 |
|
|
|
11,752 |
|
|
|
378,458 |
|
|
|
|
2008 |
|
|
|
295,006 |
|
|
|
76,000 |
|
|
|
|
|
|
|
|
|
|
|
5,439 |
|
|
|
11,502 |
|
|
|
387,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice President
of Finance and Administration, Treasurer, and Assistant
Secretary |
|
|
2010 |
|
|
|
214,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
223,200 |
|
|
|
|
2009 |
|
|
|
214,857 |
|
|
|
80,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,752 |
|
|
|
306,609 |
|
|
|
|
2008 |
|
|
|
209,690 |
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,502 |
|
|
|
246,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President, and Director |
|
|
2010 |
|
|
|
284,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
293,273 |
|
|
|
|
2009 |
|
|
|
287,694 |
|
|
|
106,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,752 |
|
|
|
405,446 |
|
|
|
|
2008 |
|
|
|
279,691 |
|
|
|
73,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,502 |
|
|
|
364,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Rupe Senior Vice President Bookstore Division |
|
|
2010 |
|
|
|
230,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
239,234 |
|
|
|
|
2009 |
|
|
|
230,928 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,752 |
|
|
|
292,680 |
|
|
|
|
2008 |
|
|
|
222,926 |
|
|
|
40,000 |
|
|
|
|
|
|
|
33,145 |
|
|
|
|
|
|
|
11,502 |
|
|
|
307,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division |
|
|
2010 |
|
|
|
203,250 |
|
|
|
|
|
|
|
|
|
|
|
9,709 |
|
|
|
|
|
|
|
8,827 |
|
|
|
221,786 |
|
|
|
|
2009 |
|
|
|
204,083 |
|
|
|
65,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,752 |
|
|
|
280,835 |
|
|
|
|
2008 |
|
|
|
199,771 |
|
|
|
50,000 |
|
|
|
|
|
|
|
26,760 |
|
|
|
|
|
|
|
11,502 |
|
|
|
288,033 |
|
|
|
|
(1) |
|
The amounts shown represent the aggregate grant date fair value for awards granted in
fiscal years 2010, 2009 and 2008, computed in accordance with FASB ASC Topic 718. See Note
O of the notes to the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data. |
|
(2) |
|
The amounts shown represent above market earnings on non-qualified deferred
compensation. |
|
(3) |
|
All other compensation consists of the following components: (a) matching contributions
to the NBC Retirement Plan; and (b) life insurance premiums paid by us on the Executives
behalf. Directors do not receive compensation for their services as a director. See Note
M of the notes to the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data. |
85
Grants of Plan-Based Awards
The following table provides information concerning each grant of an award to an Executive in the
last completed fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards: |
|
|
Exercise |
|
|
Grant |
|
|
|
|
|
|
|
Number of |
|
|
or Base |
|
|
Date Fair |
|
|
|
|
|
|
|
Securities |
|
|
Price of |
|
|
Value of |
|
|
|
Grant |
|
|
Underlying |
|
|
Option |
|
|
Option |
|
Name |
|
Date |
|
|
Options |
|
|
Awards |
|
|
Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard Chief Executive Officer, President, and Director, NBC |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice President of
Finance and Administration, Treasurer, and Assistant Secretary, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer and Director, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Rupe Senior Vice President Bookstore Division, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division, NBC |
|
|
2/3/2010 |
|
|
|
700 |
|
|
|
85 |
|
|
|
9,709 |
|
The exercise price of the options granted under the 2004 Stock Option Plan approximated the
estimated fair value at the date of grant of the shares underlying such options. The estimated
fair value of the shares underlying such options was determined utilizing the methodology described
in Note O of the notes to the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table -
Employment Agreements
We have employment agreements with each of the Executives. As amended, such agreements (the
Employment Agreements) with the previously mentioned Executives provide for (1) an annual base
salary, (2) incentive compensation based upon the attainment of financial objectives, and (3)
customary fringe benefits. The salaries of the Executives are approximately as follows: Mr.
Oppegard, $200,000 per annum; Mr. Siemek, $214,000 per annum; Mr. Major, $284,000 per annum; Mr.
Rupe, $230,000 per annum; and Mr. Kelly, $203,000 per annum. Each of the Employment Agreements
provides that their term will be automatically extended from year to year, unless terminated upon
specified notice by either party.
The Employment Agreements also provide that each Executive may be granted a number of options
annually under the stock option plan described in Note O to the consolidated financial statements
presented in Item 8, Financial Statements and Supplementary Data, with the size of such grant to be
determined by the Board of Directors. Each such option shall have an exercise price not to be less
than the fair market value per share as of the date of grant and will be exercisable as to 25% of
the shares covered thereby on the date of grant and as to an additional 25% of the shares covered
thereby on each of the first three anniversaries of the date of grant, subject to the Executives
continued employment with us on such dates.
86
The Employment Agreements also provide for specified payments to the Executive upon the
expiration of such agreements, in the event of termination of employment with us without cause
(as defined in the respective agreements), and in the event of death or disability of the Executive
during the term, as outlined below:
|
|
|
Termination of Employment upon Expiration of the Term of the Employment Agreement If we
have given the Executive notice of our intention to terminate employment at the end of the
term of the Employment Agreement, the Executive is entitled to continued payment of base
salary and health, life insurance and disability insurance benefits for a period of one year
following the expiration of the term of the Employment Agreement. |
|
|
|
|
Termination of Employment Without Cause prior to the Expiration of the Term of the
Employment Agreement If we have given the Executive notice of our intention to terminate
employment without cause prior to the end of the term of the Employment Agreement, the
Executive is entitled to continued payment of base salary and health, life insurance and
disability insurance benefits for a period of one year following the date of termination.
Additionally, the Executive is entitled to payment of any incentive bonus when otherwise
due, prorated through the date of termination. |
|
|
|
|
Termination of Employment upon Death or Disability If an Executives employment is
terminated as a result of death or disability, the Executive is entitled to continued
payment of base salary for a period of six months following the date of termination.
Additionally, the Executive is entitled to payment of any incentive bonus when otherwise
due, prorated through the date of termination. |
The Employment Agreements also contain customary confidentiality obligations and
non-competition agreements for each Executive spanning a period of three years from the date of
termination.
Finally, the Employment Agreements provide that the Executives will not sell, transfer, pledge
or otherwise dispose of any shares of NBC common stock, except for certain transfers to immediate
family members, in the event of disability and for estate planning purposes prior to the
consummation by NBC of an initial public offering of NBC common stock.
87
Outstanding Equity Awards
The following table provides information concerning outstanding equity awards held by each
Executive:
Outstanding Equity Awards at March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Plan Awards: |
|
|
|
|
|
|
|
|
|
|
Market |
|
|
Plan Awards: |
|
|
Market or |
|
|
|
(1) |
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Value of |
|
|
Number of |
|
|
Payout Value |
|
|
|
Number |
|
|
Number |
|
|
|
|
|
|
|
|
|
|
of Shares |
|
|
Shares or |
|
|
Unearned |
|
|
of Unearned |
|
|
|
of Securities |
|
|
of Securities |
|
|
|
|
|
|
|
|
|
|
or Units |
|
|
Units of |
|
|
Shares, Units |
|
|
Shares, Units |
|
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
of Stock |
|
|
Stock |
|
|
or Other |
|
|
or Other |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
That |
|
|
That |
|
|
Rights That |
|
|
Rights That |
|
|
|
Options - |
|
|
Options - |
|
|
Exercise |
|
|
Expiration |
|
|
Have Not |
|
|
Have Not |
|
|
Have Not |
|
|
Have Not |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
Price |
|
|
Date |
|
|
Vested (2) |
|
|
Vested (3) |
|
|
Vested (2) |
|
|
Vested (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard Chief Executive Officer, and Director |
|
|
5,950 |
|
|
|
|
|
|
$ |
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,675 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,200 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,963 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,244 |
|
|
$ |
1,419,217 |
|
|
|
156 |
|
|
$ |
177,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice President
of Finance and Administration, Treasurer, and Assistant
Secretary |
|
|
4,728 |
|
|
|
|
|
|
|
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,375 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,375 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,885 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,244 |
|
|
|
1,419,217 |
|
|
|
156 |
|
|
|
177,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President, and Director |
|
|
4,780 |
|
|
|
|
|
|
|
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,050 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,963 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,244 |
|
|
|
1,419,217 |
|
|
|
156 |
|
|
|
177,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Rupe Senior Vice President Bookstore Division |
|
|
1,375 |
|
|
|
|
|
|
|
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,175 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,700 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400 |
|
|
|
|
|
|
|
160.00 |
|
|
|
8/29/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,180 |
|
|
|
|
|
|
|
160.00 |
|
|
|
3/30/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650 |
|
|
|
217 |
|
|
|
205.00 |
|
|
|
10/12/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division |
|
|
2,111 |
|
|
|
|
|
|
|
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,375 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,175 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,600 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400 |
|
|
|
|
|
|
|
160.00 |
|
|
|
8/29/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,180 |
|
|
|
|
|
|
|
160.00 |
|
|
|
3/30/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
525 |
|
|
|
175 |
|
|
|
205.00 |
|
|
|
10/12/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175 |
|
|
|
525 |
|
|
|
85.00 |
|
|
|
2/3/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Separate grants of stock options occurred on February 3, 2010, October 12, 2007, March
30, 2006, August 29, 2005 and November 9, 2004. Twenty-five percent of the options granted
were exercisable immediately upon granting with the remaining options becoming exercisable
in 25% increments over the subsequent three years. In connection with the March 4, 2004
Transaction, all existing options at March 4, 2004 vested, certain of which were cancelled
in exchange for new options granted under the 2004 Stock Option Plan. Options granted in
fiscal year 2004 under the 2004 Stock Option Plan were fully vested and exercisable at
prices consistent with the options which were cancelled. |
88
|
|
|
(2) |
|
Except in certain circumstances, the shares of nonvested stock do not vest until
September 30, 2010. |
|
(3) |
|
Represents the recognized portion of share-based compensation associated with the 1,400
shares of nonvested stock issued to each of Messrs. Oppegard, Siemek, and Major on March
31, 2006. Due to the existence of the put rights, share-based compensation is being
remeasured at the end of each reporting period and recognized from the date of issuance of
the nonvested stock through September 30, 2010. See Note O of the notes to the
consolidated financial statements in Item 8, Financial Statements and Supplementary Data. |
|
(4) |
|
Represents the unrecognized portion of share-based compensation associated with the
1,400 shares of nonvested stock issued to each of Messrs. Oppegard, Siemek, and Major on
March 31, 2006. Due to the existence of the put rights, share-based compensation is
being remeasured at the end of each reporting period and recognized from the date of
issuance of the nonvested stock through September 30, 2010. See Note O of the notes to the
consolidated financial statements in Item 8, Financial Statements and Supplementary Data. |
Nonqualified Deferred Compensation
The following table provides information concerning nonqualified deferred compensation for
each Executive:
Nonqualified Deferred Compensation March 31, 2010 (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
Aggregate |
|
|
Aggregate |
|
|
|
Executive |
|
|
Registrant |
|
|
Aggregate |
|
|
Withdrawals/ |
|
|
Balance |
|
|
|
Contributions |
|
|
Contributions |
|
|
Earnings |
|
|
Distributions |
|
|
as of |
|
|
|
in Fiscal |
|
|
in Fiscal |
|
|
in Fiscal |
|
|
in Fiscal |
|
|
March 31, |
|
Name |
|
Year 2010 |
|
|
Year 2010 |
|
|
Year 2010 |
|
|
Year 2010 |
|
|
2010 (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard Chief Executive Officer and Director |
|
$ |
|
|
|
$ |
|
|
|
$ |
9,240 |
|
|
$ |
|
|
|
$ |
293,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice President
of Finance and Administration, Treasurer, and Assistant
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President, and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Rupe Senior Vice President Bookstore Division |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note N of the notes to the consolidated financial statements in Item 8, Financial
Statements and Supplementary Data for a brief description of the deferred compensation
plan. |
|
(2) |
|
There are no above market earnings included herein for fiscal year 2010; above market
earnings in prior years were $206 in fiscal year 2009 and $5,439 in fiscal year 2008 which
are included in the Summary Compensation Table above. |
89
Potential Payments Upon Termination or Change-In-Control
As described above, the employment agreements for each Executive include provisions for
potential payment upon termination of employment. The following table quantifies the estimated
payments and benefits that would be provided to the Executive in each covered circumstance,
assuming the triggering event occurred on March 31, 2010:
Potential Payments Upon Termination or Change in Control March 31, 2010 (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
(3) |
|
|
|
|
|
|
(5) |
|
|
(5) |
|
|
(5) |
|
|
Potential |
|
|
|
(2) |
|
|
Prorated |
|
|
(4) |
|
|
Health |
|
|
Life |
|
|
Disability |
|
|
Payment |
|
|
|
Base |
|
|
Incentive |
|
|
Restricted |
|
|
Insurance |
|
|
Insurance |
|
|
Insurance |
|
|
Upon |
|
Name |
|
Salary |
|
|
Bonus |
|
|
Stock |
|
|
Benefits |
|
|
Benefits |
|
|
Benefits |
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard Chief Executive Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon Expiration of Term |
|
$ |
199,992 |
|
|
$ |
|
|
|
$ |
1,419,217 |
|
|
$ |
10,098 |
|
|
$ |
252 |
|
|
$ |
285 |
|
|
$ |
1,629,844 |
|
Termination of Employment Without Cause |
|
|
199,992 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
10,098 |
|
|
|
252 |
|
|
|
285 |
|
|
|
1,629,844 |
|
Termination of Employment upon Death or Disability |
|
|
99,996 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,519,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice President
of Finance and Administration, Treasurer, and Assistant
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon Expiration of Term |
|
|
213,990 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
10,692 |
|
|
|
252 |
|
|
|
285 |
|
|
|
1,644,436 |
|
Termination of Employment Without Cause |
|
|
213,990 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
10,692 |
|
|
|
252 |
|
|
|
285 |
|
|
|
1,644,436 |
|
Termination of Employment upon Death or Disability |
|
|
106,995 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,526,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President, and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon Expiration of Term |
|
|
284,003 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
12,180 |
|
|
|
252 |
|
|
|
285 |
|
|
|
1,715,937 |
|
Termination of Employment Without Cause |
|
|
284,003 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
12,180 |
|
|
|
252 |
|
|
|
285 |
|
|
|
1,715,937 |
|
Termination of Employment upon Death or Disability |
|
|
142,002 |
|
|
|
|
|
|
|
1,419,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,561,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Rupe Senior Vice President Bookstore Division |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon Expiration of Term |
|
|
230,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
252 |
|
|
|
285 |
|
|
|
230,543 |
|
Termination of Employment Without Cause |
|
|
230,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
252 |
|
|
|
285 |
|
|
|
230,543 |
|
Termination of Employment upon Death or Disability |
|
|
115,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon Expiration of Term |
|
|
203,008 |
|
|
|
|
|
|
|
|
|
|
|
8,679 |
|
|
|
252 |
|
|
|
285 |
|
|
|
212,224 |
|
Termination of Employment Without Cause |
|
|
203,008 |
|
|
|
|
|
|
|
|
|
|
|
8,679 |
|
|
|
252 |
|
|
|
285 |
|
|
|
212,224 |
|
Termination of Employment upon Death or Disability |
|
|
101,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,504 |
|
|
|
|
(1) |
|
The Employment Agreements are silent as to how payment amounts are ultimately
determined and how payment is to be made (i.e. monthly, lump sum, etc.). Our Board of
Directors would ultimately be responsible for approving the terms of such termination
payments. |
|
(2) |
|
Base salary in place at time of termination. |
90
|
|
|
(3) |
|
It is assumed that the incentive bonus earned for fiscal year 2010, if any, was paid in
the normal course of business. As the assumed termination does not fall within a fiscal
year, no pro rata allocation is necessary. |
|
(4) |
|
In accordance with the Stock Repurchase Agreement, if Messrs. Oppegard, Siemek, or
Major are terminated by us without cause or by reason of their death or disability during
the period from March 31, 2006 to September 30, 2010, a number of the shares of nonvested
stock will become vested on the date of termination equal to the 1,400 shares which were
issued times the number of days from March 31, 2006 to the date of termination divided by
the number of days from March 31, 2006 to September 30, 2010. This value represents the
cumulative balance of share-based compensation recognized at March 31, 2010 in Accrued
Expenses see Note O of the notes to the consolidated financial statements in Item 8,
Financial Statements and Supplementary Data. For purposes of this table, it is assumed
that Messrs. Oppegard, Siemek, and Major would put the vested shares in accordance with
the Stock Repurchase Agreement upon termination. |
|
(5) |
|
Represents premiums paid by us on the Executives behalf. |
Compensation of Directors
Our Directors receive no compensation for services but are reimbursed for out-of-pocket
expenses. These reimbursements are less than $10,000 annually to each Director.
Compensation Risk Assessment
We believe that our executive compensation policies and practices are not reasonably likely to
have a material adverse effect on the Company and that the compensation programs do not encourage
excessive risk and instead encourage behaviors that support sustainable value creation.
Compensation Committee Interlocks and Insider Participation
As previously mentioned, we do not currently have a compensation committee. Mark W. Oppegard,
Chief Executive Officer and Director, participates with Messrs. Bono and Honey, the two directors
affiliated with Weston Presidio, in deliberations concerning stock options and other equity awards
from time to time granted to the Executives.
Compensation Committee Report
Our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis
above with management and has approved the inclusion of such Compensation Discussion and Analysis
in this Annual Report on Form 10-K for the year ended March 31, 2010.
Board of Directors:
Mark L. Bono;
R. Sean Honey;
Mark W. Oppegard; and
Barry S. Major.
91
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND
RELATED
STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial
Owners and Management All shares of our common
stock are owned by NBC; therefore, the following table sets forth information on security ownership
of NBC common stock beneficially owned by each person who owns more than 5.0% of such shares; each
director; each named executive officer in Item 11, Executive Compensation; and all of our directors
and named executive officers treated as a group. Shares of NBC common stock issued and outstanding
totaled 554,094 on June 25, 2010. Weston Presidio owns 36,455 of the issued and outstanding shares
directly, with the remaining 517,639 issued and outstanding shares being owned by NBC Holdings
Corp, which has 517,639 shares of capital stock issued and outstanding that are owned either by
Weston Presidio or current and former members of management. The securities underlying the 2004
Stock Option Plan, of which 89,391 options are outstanding as of June 25, 2010, are shares of NBC
Holdings Corp. capital stock. The shares listed and percentages calculated thereon are based upon
NBC common stock outstanding as of June 25, 2010 and NBC Holdings Corp. capital stock underlying
nonqualified stock options that are exercisable within sixty days, pursuant to Rule 13d-3 of the
Securities Exchange Act of 1934. To the knowledge of NBC, each of such holders of shares has sole
voting and investment power as to the shares owned unless otherwise noted. The address for each
senior executive officer and director is 4700 South 19th Street, Lincoln, Nebraska 68501
unless otherwise noted.
|
|
|
|
|
|
|
|
|
|
|
Amount and |
|
|
|
|
|
|
Nature of |
|
|
|
|
|
|
Beneficial |
|
|
Percent of |
|
Title of Class/Name of Beneficial Owner |
|
Ownership (1) |
|
|
Class (3) |
|
|
|
|
|
|
|
|
|
|
Common Stock: |
|
|
|
|
|
|
|
|
Owning Greater Than 5% of Shares: |
|
|
|
|
|
|
|
|
Weston Presidio Capital IV, L.P. (2) |
|
|
365,449 |
|
|
|
66.0 |
% |
Weston Presidio Capital III, L.P. (2) |
|
|
153,623 |
|
|
|
27.7 |
% |
WPC Entrepreneur Fund, L.P. (2) |
|
|
7,579 |
|
|
|
1.4 |
% |
WPC Entrepreneur Fund II, L.P. (2) |
|
|
5,785 |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
Ownership of Directors: |
|
|
|
|
|
|
|
|
Mark L. Bono (2) |
|
|
532,436 |
|
|
|
96.1 |
% |
R. Sean Honey (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership of Senior Executive Officers Named in Item 11: |
|
|
|
|
|
|
|
|
Mark W. Oppegard |
|
|
18,188 |
|
|
|
3.2 |
% |
Alan G. Siemek |
|
|
10,763 |
|
|
|
1.9 |
% |
Barry S. Major (4) |
|
|
14,440 |
|
|
|
2.6 |
% |
Robert A. Rupe |
|
|
9,730 |
|
|
|
1.7 |
% |
Michael J. Kelly |
|
|
10,541 |
|
|
|
1.9 |
% |
|
Ownership of Directors and All Senior Executive Officers as a Group |
|
|
604,283 |
|
|
|
98.4 |
% |
|
|
|
(1) |
|
Beneficial ownership is determined in accordance with the rules of the SEC and includes
voting and investment power with respect to the shares of NBC common stock. Such shares
include NBC Holdings Corp. shares underlying nonqualified stock options exercisable within
sixty days, as follows: Mr. Oppegard 12,788 shares; Mr. Siemek 9,363 shares; Mr. Major
11,293 shares; Mr. Rupe 9,730 shares; Mr. Kelly 10,541 shares; and 59,900 shares for
all directors and senior executive officers as a group. |
|
(2) |
|
The sole general partner of Weston Presidio Capital IV, L.P., Weston Presidio Capital
III, L.P., WPC Entrepreneur Fund, L.P., and WPC Entrepreneur Fund II, L.P. (the Weston
Presidio Funds) is a limited liability company of which Messrs. Bono and Honey are
members. Messrs. Bono and Honey disclaim beneficial ownership of the shares held by the
Weston Presidio Funds, except to the extent of their respective pecuniary interests
therein. The address of the Weston Presidio Funds, and Messrs. Bono and Honey is 200
Clarendon Street, 50th Floor, Boston, Massachusetts 02116. |
|
(3) |
|
The percentages are calculated based upon 554,094 shares of NBC common stock
outstanding as of June 25, 2010 and shares underlying nonqualified stock options
exercisable within sixty days as detailed in footnote (1). |
|
(4) |
|
Beneficial ownership includes 1,747 shares of NBC common stock which are pledged as
security for the full and timely payment of remaining amounts due under a promissory note
Mr. Major has with NBC. In January, 1999, NBC issued 4,765 shares of its common stock to
Mr. Major at a price of $52.47 per share, in exchange for $25,000 in cash and a promissory
note in the principal amount of $225,000 bearing interest at 5.25% per year. Remaining
amounts due under the promissory note at March 31, 2010 totaled approximately $91,000. |
92
Securities Authorized for
Issuance under Equity Compensation Plans Through NBCs parent, NBC
Holdings Corp., NBC has a share-based compensation plan established to provide for the granting of
options to purchase capital stock of NBC Holdings Corp. NBC also has a restricted stock plan
established through NBC Holdings Corp. to provide for the sale of 4,200 shares of NBC Holdings
Corp. capital stock to certain of our officers and directors. Details regarding these plans are
presented in the footnotes to the consolidated financial statements found in Item 8, Financial
Statements and Supplementary Data. Specific information as of March 31, 2010 regarding the plans,
which were not approved by security holders, is also presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted- |
|
|
Number of |
|
|
|
Securities to |
|
|
Average |
|
|
Securities |
|
|
|
be Issued Upon |
|
|
Exercise |
|
|
Remaining |
|
|
|
Exercise of |
|
|
Price of |
|
|
Available for |
|
|
|
Outstanding |
|
|
Outstanding |
|
|
Future |
|
Plan |
|
Options |
|
|
Options |
|
|
Issuance |
|
2004 Stock Option Plan |
|
|
84,391 |
|
|
$ |
117.75 |
|
|
|
15,276 |
|
2005 Restricted Stock Plan |
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Director Independence We are a corporation with public debt (not listed on any exchange)
whose equity is privately held. Although our Board has not made a formal determination on the
matter, under current New York Stock Exchange listing standards (which we are not currently subject
to) and taking into account any applicable committee standards, we believe that Messrs. Oppegard
and Major would not be considered independent under any general listing standards or those
applicable to any particular committee due to their employment relationship with us, and Messrs.
Bono and Honey may not be considered independent under any general listing standards or those
applicable to any particular committee, due to their relationship with Weston Presidio, our largest
indirect stockholder.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following table shows our fees for audit and audit-related services and fees paid for tax
and all other services rendered by Deloitte & Touche LLP, the member firms of Deloitte Touche
Tohmatsu, and their respective affiliates for each of the last two years:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Audit Fees |
|
$ |
234,500 |
|
|
$ |
215,000 |
|
Audit-Related Fees |
|
|
118,600 |
|
|
|
|
|
Tax Fees |
|
|
173,162 |
|
|
|
187,039 |
|
Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
526,262 |
|
|
$ |
402,039 |
|
|
|
|
|
|
|
|
93
Audit Fees include professional services rendered for the audit of our annual consolidated
financial statements and for the reviews of the consolidated interim financial statements included
in our Quarterly Reports on Form 10-Q.
Audit-Related Fees consist of fees for assurance and related services that are related to the
performance of the audit or review of our consolidated financial statements, including services
provided in conjunction with the Senior Secured Notes offering and the SEC comment letter dated
November 24, 2009.
Tax Fees consist of fees for professional services for tax compliance, tax advice, and tax
planning. These services include assistance regarding federal and state tax compliance, return
preparation, and tax audits.
The audit committee pre-approves all audit and non-audit services performed by our independent
registered public accounting firm.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
(a) |
|
Financial Statements, Financial Statement Schedules, and Exhibits. |
|
(1) |
|
Consolidated Financial Statements of Nebraska Book Company, Inc. |
|
|
|
|
Index to Consolidated Financial Statements. |
|
|
|
|
Report of Independent Registered Public Accounting Firm. |
|
|
|
|
Consolidated Balance Sheets as of March 31, 2010 and 2009. |
|
|
|
|
Consolidated Statements of Operations for the Years Ended March 31, 2010, 2009 and
2008. |
|
|
|
|
Consolidated Statements of Stockholders Equity for the Years Ended March 31, 2010,
2009 and 2008. |
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended March 31, 2010, 2009 and
2008. |
|
|
|
|
Notes to Consolidated Financial Statements. |
|
(2) |
|
Financial Statement Schedules. |
Schedule II (Item 15(a)(2)) Valuation and Qualifying Accounts.
|
|
|
|
|
|
2.1 |
|
|
Agreement and Plan of Merger, dated as of July 1, 2003, by and among
TheCampusHub.com, Inc., Nebraska Book Company, Inc., and NBC Acquisition Corp., filed
as Exhibit 2.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended June 30,
2003, is incorporated herein by reference. |
|
|
|
|
|
|
2.2 |
|
|
Share Purchase Agreement, dated as of April 2, 2006, by and among Nebraska
Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1 to Nebraska Book
Company, Inc. Current Report on Form 8-K dated April 6, 2006, is incorporated herein by
reference. |
|
|
|
|
|
|
2.3 |
|
|
Second Amendment to Share Purchase Agreement, dated as of April 30, 2006, by
and among Nebraska Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1
to Nebraska Book Company, Inc. Current Report on Form 8-K dated May 4, 2006, is
incorporated herein by reference. |
|
|
|
|
|
|
3.1 |
|
|
Certificate of Incorporation, as amended, of Nebraska Book Company, Inc.,
filed as Exhibit 3.1 to Nebraska Book Company, Inc. Registration Statement on Form S-4,
as amended (File No. 333-48221), is incorporated herein by reference. |
|
|
|
|
|
|
3.2 |
|
|
First Restated By-laws of Nebraska Book Company, Inc., filed as Exhibit 3.2 to
Nebraska Book Company, Inc. Form 10-Q for the quarter ended September 30, 2003, is
incorporated herein by reference. |
94
|
|
|
|
|
|
4.1 |
|
|
Indenture, dated March 4, 2004, by and among Nebraska Book Company, Inc., the
subsidiary guarantors parties thereto and BNY Midwest Trust Company as Trustee, filed
as Exhibit 4.6 to Nebraska Book Company, Inc. Registration Statement on Form S-4 (File
No. 333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
4.2 |
|
|
Form of 8 5/8% Senior Subordinated Note Due 2012 (included in Exhibit 4.6),
filed as Exhibit 4.7 to Nebraska Book Company, Inc. Registration Statement on Form S-4
(File No. 333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
4.3 |
|
|
Form of Exchange Note of Nebraska Book Company, Inc. 8 5/8% Senior Subordinated
Note Due 2012, filed as Exhibit 4.8 to Nebraska Book Company, Inc. Form 10-K for the
fiscal year ended March 31, 2004, is incorporated herein by reference. |
|
|
|
|
|
|
4.4 |
|
|
Supplemental Indenture, dated as of December 31, 2004, by and among NBC
Textbooks LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 10.1 to Nebraska Book
Company. Inc. Current Report on Form 8-K dated January 6, 2005, is incorporated herein
by reference. |
|
|
|
|
|
|
4.5 |
|
|
Supplemental Indenture, dated as of May 1, 2006, by and among CBA, Nebraska
Book Company, Inc., each other then existing Subsidiary Guarantor under the Indenture,
and the Trustee, filed as Exhibit 10.2 to Nebraska Book Company, Inc. Current Report on
Form 8-K dated May 4, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
4.6 |
|
|
Supplemental Indenture, dated as of May 1, 2007, by and among Net Textstore
LLC, Nebraska Book Company, Inc., each other then existing Subsidiary Guarantor under
the Indenture, and the Trustee, filed as Exhibit 10.1 to Nebraska Book Company, Inc.
Current Report on Form 8-K dated May 7, 2007, is incorporated herein by reference. |
|
|
|
|
|
|
4.7 |
|
|
Supplemental Indenture, dated as of January 26, 2009, by and among Campus
Authentic LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 4.7 Nebraska Book
Company, Inc. Form 10-K for the fiscal year ended March 31, 2009, is incorporated
herein by reference. |
|
|
|
|
|
|
4.8 |
|
|
Indenture, dated October 2, 2009, by and among Nebraska Book Company, Inc., the
Subsidiary Guarantors and Wilmington Trust FSB, as trustee and noteholder collateral
agent, filed as Exhibit 4.1 to Nebraska Book Company, Inc. Current Report on Form 8-K
filed October 7, 2009, is incorporated herein by reference. |
|
|
|
|
|
|
4.9 |
|
|
Form of 10% Senior Secured Note Due 2011 (included in Exhibit 4.1 as Exhibit A
to Nebraska Book Company, Inc. Current Report on Form 8-K filed October 7, 2009), is
incorporated herein by reference. |
|
|
|
|
|
|
4.10 |
|
|
Pledge and Security Agreement, dated October 2, 2009, among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as Noteholder
Collateral Agent, filed as Exhibit 4.3 to Nebraska Book Company, Inc. Current Report on
Form 8-K filed October 7, 2009, is incorporated herein by reference. |
|
|
|
|
|
|
10.1 |
|
|
Amended and Restated Credit Agreement, dated October 2, 2009, among Nebraska
Book, the Subsidiary Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A.,
as administrative agent, Wells Fargo Bank, National Association, as syndication agent,
Bank of America, N.A., as documentation agent, filed as Exhibit 10.1 to Nebraska Book
Company, Inc. Form 10-Q for the quarter ended September 30, 2009, is incorporated
herein by reference. |
|
|
|
|
|
|
10.2 |
|
|
First Amendment, dated as of March 22, 2010, to the Amended and Restated Credit
Agreement, dated October 2, 2009, among NBC Holdings Corp., NBC Acquisition Corp.,
Nebraska Book Company Inc., the Subsidiary
Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative
agent, Wells Fargo Bank, National Association, as syndication agent, and Bank of
America, N.A., as documentation agent filed as Exhibit 10.1 to Nebraska Book Company,
Inc. Current Report on Form 8-K filed March 25, 2010, is incorporated herein by
reference. |
95
|
|
|
|
|
|
10.3 |
|
|
First Lien Amended and Restated Guarantee and Collateral Agreement, dated October 2,
2009, among NBC Holdings Corp., NBC Acquisition Corp., Nebraska Book Company, Inc.,
the Subsidiary Guarantors, and JPMorgan Chase Bank, N.A., as administrative agent,
filed as Exhibit 10.2 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended
September 30, 2009, is incorporated herein by reference. |
|
|
|
|
|
|
10.4 |
|
|
First Amendment dated as of March 22, 2010, to the First Lien Amended and
Restated Guarantee and Collateral Agreement, dated October 2, 2009, among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
and JPMorgan Chase Bank, N.A., as administrative agent, filed as Exhibit 10.1 to
Nebraska Book Company, Inc. Current Report on Form 8-K filed March 25, 2010, is
incorporated herein by reference. |
|
|
|
|
|
|
10.5 |
|
|
Intercreditor Agreement, dated October 2, 2009, by and among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as trustee, filed as
Exhibit 10.3 to Nebraska Book Company, Inc. Current Report on Form 8-K filed October 7,
2009, is incorporated herein by reference. |
|
|
|
|
|
|
10.6 |
|
|
Purchase Agreement, dated as of March 4, 2004, by and among Nebraska Book
Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Fleet
Securities, Inc., filed as Exhibit 10.13 to Nebraska Book Company, Inc. Registration
Statement on Form S-4 (File No. 333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
10.7 |
|
|
Registration Rights Agreement, dated as of March 4, 2004, by and among Nebraska
Book Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and
Fleet Securities, Inc., filed as Exhibit 10.15 to Nebraska Book Company, Inc.
Registration Statement on Form S-4 (File No. 333-114891), is incorporated herein by
reference. |
|
|
|
|
|
|
10.8 |
|
|
Registration Rights Agreement, dated as of October 2, 2009, by and among
Nebraska Book Company, Inc., the guarantors listed in Schedule 1 thereto, J.P. Morgan
Securities Inc., Banc of America Securities LLC, Wells Fargo Securities, LLC and Piper
Jaffray & Co., filed as Exhibit 10.28 to Nebraska Book Company, Inc. Registration
Statement on Form S-4 (File No. 333-164271), is incorporated herein by reference. |
|
|
|
|
|
|
10.9 |
* |
|
Form of Memorandum of Understanding, dated as of February 13, 1998 by and
between NBC Acquisition Corp. and each of Mark W. Oppegard, Bruce E. Nevius, Larry R.
Rempe, Kenneth F. Jirovsky, William H. Allen, Thomas A. Hoff and Ardean A. Arndt, filed
as Exhibit 10.4 to Nebraska Book Company, Inc. Registration Statement on Form S-4, as
amended (File No. 333-48221), is incorporated herein by reference. |
|
|
|
|
|
|
10.10 |
* |
|
Memorandum of Understanding, dated as of December 22, 1998 by and between Nebraska
Book Company, Inc. and Barry S. Major, Chief Operating Officer, filed as Exhibit 10.1
to Nebraska Book Company, Inc. Form 10-Q for the quarter ended December 31, 1998, is
incorporated herein by reference. |
|
|
|
|
|
|
10.11 |
* |
|
Addendum to the Memorandum of Understanding, dated as of December 22, 1998 by and
between Nebraska Book Company, Inc. and Barry S. Major, dated March 29, 2002, filed as
Exhibit 10.9 to Nebraska Book Company, Inc. Form 10-K for the fiscal year ended March
31, 2002, is incorporated herein by reference. |
|
|
|
|
|
|
10.12 |
* |
|
Amended and Restated Secured Promissory Note dated July 9, 2002 by and between NBC
Acquisition Corp. and Barry S. Major, filed as Exhibit 10.4 to Nebraska Book Company,
Inc. Form 10-Q for the quarter ended June 30, 2002, is incorporated herein by
reference. |
|
|
|
|
|
|
10.13 |
* |
|
First Amendment to the Amended and Restated Secured Promissory Note, dated as of
December 31, 2008, between Barry S. Major and NBC Acquisition Corp., filed as Exhibit
10.1 to NBC Acquisition Corp. Current Report on Form 8-K dated January 7, 2009, is
incorporated herein by reference. |
|
|
|
|
|
|
10.14 |
* |
|
Memorandum of Understanding, dated as of July 1, 1999 by and between Nebraska Book
Company, Inc. and Alan Siemek, Chief Financial Officer, filed as Exhibit 10.1 to
Nebraska Book Company, Inc. Form 10-Q for the quarter ended September 30, 1999, is
incorporated herein by reference. |
96
|
|
|
|
|
|
10.15 |
* |
|
Addendum to the Memorandum of Understanding, dated as of July 1, 1999 by and between
Nebraska Book Company, Inc. and Alan Siemek, dated March 29, 2002, filed as Exhibit
10.11 to Nebraska Book Company, Inc. Form 10-K for the fiscal year ended March 31,
2002, is incorporated herein by reference. |
|
|
|
|
|
|
10.16 |
* |
|
Memorandum of Understanding, dated as of November 1, 1999 by and between Nebraska
Book Company, Inc. and Michael J. Kelly, Vice President of e-commerce, filed as Exhibit
10.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended December 31, 1999,
is incorporated herein by reference. |
|
|
|
|
|
|
10.17 |
* |
|
Memorandum of Understanding, dated as of April 17, 2001 by and between Nebraska Book
Company, Inc. and Robert Rupe, Senior Vice President of the Bookstore Division, filed
as Exhibit 10.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended June 30,
2001, is incorporated herein by reference. |
|
|
|
|
|
|
10.18 |
* |
|
Amendment to the Memorandums of Understanding by and between Nebraska Book Company,
Inc. and each of Mark W. Oppegard, Larry R. Rempe, Kenneth F. Jirovsky, William H.
Allen, Thomas A. Hoff, Barry S. Major, Alan Siemek, Michael J. Kelly, and Robert Rupe,
dated March 4, 2004, filed as Exhibit 10.27 to Nebraska Book Company, Inc. Form 10-K
for the fiscal year ended March 31, 2004, is incorporated herein by reference. |
|
|
|
|
|
|
10.19 |
* |
|
Executive Employment Agreement dated as of March 27, 2010, by and between Nebraska
Book Company, Inc. and Steven Clemente, Senior Vice President of the Bookstore
Division, filed herewith. |
|
|
|
|
|
|
10.20 |
* |
|
NBC Holdings Corp. 2004 Stock Option Plan adopted March 4, 2004, filed as Exhibit
10.34 to Nebraska Book Company, Inc. Registration Statement on Form S-4 (File No.
333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
10.21 |
* |
|
First Amendment, dated August 18, 2008, to the NBC Holdings Corp. 2004 Stock Option
Plan adopted March 4, 2004, filed as Exhibit 10.1 to Nebraska Book Company, Inc. Form
10-Q for the quarter ended September 30, 2008, is incorporated herein by reference. |
|
|
|
|
|
|
10.22 |
* |
|
Second Amendment, dated January 14, 2010, to the NBC Holdings Corp. 2004 Stock Option
Plan, filed as Exhibit 10.1 to Nebraska Book Company, Inc. Current Report on Form 8-K
filed January 19, 2010, is incorporated herein by reference. |
|
|
|
|
|
|
10.23 |
* |
|
NBC Holdings Corp. 2005 Restricted Stock Plan adopted September 29, 2005, filed as
Exhibit 10.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended September
30, 2005, is incorporated herein by reference. |
|
|
|
|
|
|
10.24 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.1 to Nebraska Book Company, Inc. Current Report on Form
8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.25 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Major, filed as Exhibit 10.2 to Nebraska Book Company, Inc. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.26 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Siemek, filed as Exhibit 10.3 to Nebraska Book Company, Inc. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.27 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.4 to Nebraska Book Company, Inc. Current Report on Form
8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.28 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Major,
filed as Exhibit 10.5 to Nebraska Book Company, Inc. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.29 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Siemek,
filed as Exhibit 10.6 to Nebraska Book Company, Inc. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
97
|
|
|
|
|
|
10.30 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Oppegard, filed as Exhibit 10.7 to Nebraska Book Company, Inc.
Current Report on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.31 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Major, filed as Exhibit 10.8 to Nebraska Book Company, Inc. Current
Report on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.32 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Siemek, filed as Exhibit 10.9 to Nebraska Book Company, Inc. Current
Report on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.33 |
* |
|
Form of Deferred Compensation Agreement by and among Nebraska Book Company, Inc. and
each of Mark W. Oppegard, Bruce E. Nevius, Larry R. Rempe and Thomas A. Hoff, filed as
Exhibit 10.6 to Nebraska Book Company, Inc. Registration Statement on Form S-4, as
amended (File No. 333-48221), is incorporated herein by reference. |
|
|
|
|
|
|
10.34 |
* |
|
Amendment of Form of Deferred Compensation Agreement, dated December 30, 2002, by and
among Nebraska Book Company, Inc. and each of Mark W. Oppegard, Larry R. Rempe and
Thomas A. Hoff, filed as Exhibit 10.1 to Nebraska Book Company, Inc. Form 10-Q for the
quarter ended December 31, 2002, is incorporated herein by reference. |
|
|
|
|
|
|
10.35 |
* |
|
NBC Acquisition Corp. 401(k) Savings Plan, filed as Exhibit 10.7 to Nebraska Book
Company, Inc. Registration Statement on Form S-4, as amended (File No. 333-48221), is
incorporated herein by reference. |
|
|
|
|
|
|
12.1 |
|
|
Statements regarding computation of ratios, filed as Exhibit 12.1 to Nebraska
Book Company, Inc. Registration Statement on Form S-4 (File No. 333-164271), is
incorporated herein by reference. |
|
|
|
|
|
|
14.1 |
|
|
Code of Business Conduct and Ethics and Code of Ethics for Our Principal
Executive Officer and Senior Financial Officers for Nebraska Book Company, Inc., filed
as Exhibit 14.1 to Nebraska Book Company, Inc. Form 10-K for the fiscal year ended
March 31, 2004, is incorporated herein by reference. |
|
|
|
|
|
|
21.1 |
|
|
Subsidiaries of Nebraska Book Company, Inc., filed as Exhibit 21.1 to Nebraska
Book Company, Inc. Registration Statement on Form S-4 (File No. 333-164271), is
incorporated herein by reference. |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.1 |
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
99.1 |
|
|
Mirror Option Agreement between NBC Acquisition Corp. and NBC Holdings Corp.,
dated September 30, 2005, filed as Exhibit 99.1 to Nebraska Book Company, Inc. Form
10-Q for the quarter ended September 30, 2005, is incorporated herein by reference. |
|
|
|
|
|
|
99.2 |
|
|
Mirror Restricted Stock Agreement between NBC Acquisition Corp. and NBC
Holdings Corp., dated March 31, 2006, filed as Exhibit 99.2 to Nebraska Book Company,
Inc. Form 10-K for the fiscal year ended March 31, 2006, is incorporated herein by
reference. |
|
|
|
* |
|
- Management contracts or compensatory plans filed herewith or incorporated by reference. |
98
All other schedules for which provision is made in the applicable accounting regulations of
the SEC are either not required under the related instructions, are not applicable (and therefore
have been omitted), or the required disclosures are contained in the consolidated financial
statements included herein.
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.
|
|
|
|
|
|
NEBRASKA BOOK COMPANY, INC.
|
|
|
/s/ Mark W. Oppegard
|
|
|
Mark W. Oppegard |
|
|
Chief Executive Officer and Director June 25, 2010 |
|
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.
|
|
|
|
|
|
|
/s/ Mark W. Oppegard
Mark W. Oppegard
|
|
|
|
/s/ Mark L. Bono
Mark L. Bono
|
|
|
Chief Executive Officer and Director
|
|
|
|
Director |
|
|
(principal executive officer)
|
|
|
|
June 25, 2010 |
|
|
June 25, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Alan G. Siemek
Alan G. Siemek
|
|
|
|
/s/ R. Sean Honey
R. Sean Honey
|
|
|
Chief Financial Officer, Senior Vice President of Finance
|
|
|
|
Director |
|
|
and Administration, Treasurer, and Assistant Secretary
|
|
|
|
June 25, 2010 |
|
|
(principal financial and accounting officer) |
|
|
|
|
|
|
June 25, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Barry S. Major
Barry S. Major
|
|
|
|
|
|
|
President and Director |
|
|
|
|
|
|
June 25, 2010 |
|
|
|
|
|
|
Supplemental Information to Be Furnished With Reports Filed Pursuant to Section 15(d) of the
Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act:
No annual report or proxy material with respect to any annual or other meeting of security
holders for the fiscal year ended March 31, 2010 has been, or will be, sent to security holders.
99
NEBRASKA BOOK COMPANY, INC.
SCHEDULE II (ITEM 15(a)(2)) VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged to |
|
|
Added |
|
|
|
|
|
|
|
|
|
|
Beginning of |
|
|
Charged to |
|
|
Other |
|
|
through |
|
|
|
|
|
|
End of |
|
|
|
Fiscal Year |
|
|
Costs and |
|
|
Accounts |
|
|
Stock |
|
|
Net |
|
|
Fiscal Year |
|
|
|
Balance |
|
|
Expenses |
|
|
(Revenue) |
|
|
Acquisitions |
|
|
Charge-Offs |
|
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
FISCAL YEAR ENDED MARCH 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
1,283,360 |
|
|
$ |
1,399,466 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(1,399,466 |
) |
|
$ |
1,283,360 |
|
Allowance for sales returns |
|
|
5,452,166 |
|
|
|
|
|
|
|
31,799,536 |
|
|
|
|
|
|
|
(31,978,051 |
) |
|
|
5,273,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED MARCH 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
1,033,360 |
|
|
|
1,366,979 |
|
|
|
|
|
|
|
|
|
|
|
(1,116,979 |
) |
|
|
1,283,360 |
|
Allowance for sales returns |
|
|
5,292,620 |
|
|
|
|
|
|
|
32,627,107 |
|
|
|
|
|
|
|
(32,467,561 |
) |
|
|
5,452,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED MARCH 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
1,100,360 |
|
|
|
468,007 |
|
|
|
|
|
|
|
|
|
|
|
(535,007 |
) |
|
|
1,033,360 |
|
Allowance for sales returns |
|
|
4,958,090 |
|
|
|
|
|
|
|
29,591,517 |
|
|
|
|
|
|
|
(29,256,987 |
) |
|
|
5,292,620 |
|
100
EXHIBIT INDEX
|
|
|
|
|
|
2.1 |
|
|
Agreement and Plan of Merger, dated as of July 1, 2003, by and among
TheCampusHub.com, Inc., Nebraska Book Company, Inc. and NBC Acquisition Corp., filed as
Exhibit 2.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended June 30,
2003, is incorporated herein by reference. |
|
|
|
|
|
|
2.2 |
|
|
Share Purchase Agreement, dated as of April 2, 2006, by and among Nebraska
Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1 to Nebraska Book
Company, Inc. Current Report on Form 8-K dated April 6, 2006, is incorporated herein by
reference. |
|
|
|
|
|
|
2.3 |
|
|
Second Amendment to Share Purchase Agreement, dated as of April 30, 2006, by
and among Nebraska Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1
to Nebraska Book Company, Inc. Current Report on Form 8-K dated May 4, 2006, is
incorporated herein by reference. |
|
|
|
|
|
|
3.1 |
|
|
Certificate of Incorporation, as amended, of Nebraska Book Company, Inc.,
filed as Exhibit 3.1 to Nebraska Book Company, Inc. Registration Statement on Form S-4,
as amended (File No. 333-48221), is incorporated herein by reference. |
|
|
|
|
|
|
3.2 |
|
|
First Restated By-laws of Nebraska Book Company, Inc., filed as Exhibit 3.2 to
Nebraska Book Company, Inc. Form 10-Q for the quarter ended September 30, 2003, is
incorporated herein by reference. |
|
|
|
|
|
|
4.1 |
|
|
Indenture, dated March 4, 2004, by and among Nebraska Book Company, Inc., the
subsidiary guarantors parties thereto and BNY Midwest Trust Company as Trustee, filed
as Exhibit 4.6 to Nebraska Book Company, Inc. Registration Statement on Form S-4 (File
No. 333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
4.2 |
|
|
Form of 8 5/8% Senior Subordinated Note Due 2012 (included in Exhibit 4.6),
filed as Exhibit 4.7 to Nebraska Book Company, Inc. Registration Statement on Form S-4
(File No. 333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
4.3 |
|
|
Form of Exchange Note of Nebraska Book Company, Inc. 8 5/8% Senior Subordinated
Note Due 2012, filed as Exhibit 4.8 to Nebraska Book Company, Inc. Form 10-K for the
fiscal year ended March 31, 2004, is incorporated herein by reference. |
|
|
|
|
|
|
4.4 |
|
|
Supplemental Indenture, dated as of December 31, 2004, by and among NBC
Textbooks LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 10.1 to Nebraska Book
Company. Inc. Current Report on Form 8-K dated and filed on January 6, 2005, is
incorporated herein by reference. |
|
|
|
|
|
|
4.5 |
|
|
Supplemental Indenture, dated as of May 1, 2006, by and among CBA, Nebraska
Book Company, Inc., each other then existing Subsidiary Guarantor under the Indenture,
and the Trustee, filed as Exhibit 10.2 to Nebraska Book Company, Inc. Current Report on
Form 8-K dated May 4, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
4.6 |
|
|
Supplemental Indenture, dated as of May 1, 2007, by and among Net Textstore
LLC, Nebraska Book Company, Inc., each other then existing Subsidiary Guarantor under
the Indenture, and the Trustee, filed as Exhibit 10.1 to Nebraska Book Company, Inc.
Current Report on Form 8-K dated May 7, 2007, is incorporated herein by reference. |
|
|
|
|
|
|
4.7 |
|
|
Supplemental Indenture, dated as of January 26, 2009, by and among Campus
Authentic LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 4.7 to Nebraska Book
Company, Inc. Form 10-K for the fiscal year ended March 31, 2009, is incorporated
herein by reference. |
|
|
|
|
|
|
4.8 |
|
|
Indenture, dated October 2, 2009, by and among Nebraska Book Company, Inc., the
Subsidiary Guarantors and Wilmington Trust FSB, as trustee and noteholder collateral
agent, filed as Exhibit 4.1 to Nebraska Book Company, Inc. Current Report on Form 8-K
filed October 7, 2009, is incorporated herein by reference. |
101
|
|
|
|
|
|
4.9 |
|
|
Form of 10% Senior Secured Note Due 2011 (included in Exhibit 4.1 as Exhibit A
to Nebraska Book Company, Inc. Current Report on Form 8-K filed October 7, 2009), is
incorporated herein by reference. |
|
|
|
|
|
|
4.10 |
|
|
Pledge and Security Agreement, dated October 2, 2009, among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as Noteholder
Collateral Agent, filed as Exhibit 4.3 to Nebraska Book Company, Inc. Current Report on
Form 8-K filed October 7, 2009, is incorporated herein by reference. |
|
|
|
|
|
|
10.1 |
|
|
Amended and Restated Credit Agreement, dated October 2, 2009, among Nebraska
Book, the Subsidiary Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A.,
as administrative agent, Wells Fargo Bank, National Association, as syndication agent,
Bank of America, N.A., as documentation agent, filed as Exhibit 10.1 to Nebraska Book
Company, Inc. Form 10-Q for the quarter ended September 30, 2009, is incorporated
herein by reference. |
|
|
|
|
|
|
10.2 |
|
|
First Amendment, dated as of March 22, 2010, to the Amended and Restated Credit
Agreement, dated October 2, 2009, among NBC Holdings Corp., NBC Acquisition Corp.,
Nebraska Book Company, Inc., the Subsidiary Guarantors, the lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National
Association, as syndication agent, and Bank of America, N.A., as documentation agent,
filed as Exhibit 10.1 to Nebraska Book Company, Inc. Current Report on Form 8-K filed
March 25, 2010, is incorporated herein by reference. |
|
|
|
|
|
|
10.3 |
|
|
First Lien Amended and Restated Guarantee and Collateral Agreement, dated
October 2, 2009, among NBC Holdings Corp., NBC Acquisition Corp., Nebraska Book
Company, Inc., the Subsidiary Guarantors, and JPMorgan Chase Bank, N.A., as
administrative agent, filed as Exhibit 10.2 to Nebraska Book Company, Inc. Form 10-Q
for the quarter ended September 30, 2009, is incorporated herein by reference. |
|
|
|
|
|
|
10.4 |
|
|
First Amendment, dated as of March 22, 2010, to the First Lien Amended and
Restated Guarantee and Collateral Agreement, dated October 2, 2009, among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
and JPMorgan Chase Bank, N.A., as administrative agent, filed as Exhibit 10.1 to
Nebraska Book Company, Inc. Current Report on Form 8-K filed March 25, 2010, is
incorporated herein by reference. |
|
|
|
|
|
|
10.5 |
|
|
Intercreditor Agreement, dated October 2, 2009, by and among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as trustee, filed as
Exhibit 10.3 to Nebraska Book Company, Inc. Current Report on Form 8-K filed October 7,
2009, is incorporated herein by reference. |
|
|
|
|
|
|
10.6 |
|
|
Purchase Agreement, dated as of March 4, 2004, by and among Nebraska Book
Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Fleet
Securities, Inc., filed as Exhibit 10.13 to Nebraska Book Company, Inc. Registration
Statement on Form S-4 (File No. 333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
10.7 |
|
|
Registration Rights Agreement, dated as of March 4, 2004, by and among Nebraska
Book Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and
Fleet Securities, Inc., filed as Exhibit 10.15 to Nebraska Book Company, Inc.
Registration Statement on Form S-4 (File No. 333-114891), is incorporated herein by
reference. |
|
|
|
|
|
|
10.8 |
|
|
Registration Rights Agreement, dated as of October 2, 2009, by and among
Nebraska Book Company, Inc., the guarantors listed in Schedule 1 thereto, J.P. Morgan
Securities Inc., Banc of America Securities LLC, Wells Fargo Securities, LLC and Piper
Jaffray & Co., filed as Exhibit 10.28 to Nebraska Book Company, Inc. Registration
Statement on Form S-4 (File No. 333-164271), is incorporated herein by reference. |
|
|
|
|
|
|
10.9 |
* |
|
Form of Memorandum of Understanding, dated as of February 13, 1998 by and
between NBC Acquisition Corp. and each of Mark W. Oppegard, Bruce E. Nevius, Larry R.
Rempe, Kenneth F. Jirovsky, William H. Allen, Thomas A. Hoff and Ardean A. Arndt, filed
as Exhibit 10.4 to Nebraska Book Company, Inc. Registration Statement on Form S-4, as
amended (File No. 333-48221), is incorporated herein by reference. |
102
|
|
|
|
|
|
10.10 |
* |
|
Memorandum of Understanding, dated as of December 22, 1998 by and between Nebraska
Book Company, Inc. and Barry S. Major, Chief Operating Officer, filed as Exhibit 10.1
to Nebraska Book Company, Inc. Form 10-Q for the quarter ended December 31, 1998, is
incorporated herein by reference. |
|
|
|
|
|
|
10.11 |
* |
|
Addendum to the Memorandum of Understanding, dated as of December 22, 1998 by and
between Nebraska Book Company, Inc. and Barry S. Major, dated March 29, 2002, filed as
Exhibit 10.9 to Nebraska Book Company, Inc. Form 10-K for the fiscal year ended March
31, 2002, is incorporated herein by reference. |
|
|
|
|
|
|
10.12 |
* |
|
Amended and Restated Secured Promissory Note dated July 9, 2002 by and between NBC
Acquisition Corp. and Barry S. Major, filed as Exhibit 10.4 to Nebraska Book Company,
Inc. Form 10-Q for the quarter ended June 30, 2002, is incorporated herein by
reference. |
|
|
|
|
|
|
10.13 |
* |
|
First Amendment to the Amended and Restated Secured Promissory Note, dated as of
December 31, 2008, between Barry S. Major and NBC Acquisition Corp., filed as Exhibit
10.1 to NBC Acquisition Corp. Current Report on Form 8-K dated January 7, 2009, is
incorporated herein by reference. |
|
|
|
|
|
|
10.14 |
* |
|
Memorandum of Understanding, dated as of July 1, 1999 by and between Nebraska Book
Company, Inc. and Alan Siemek, Chief Financial Officer, filed as Exhibit 10.1 to
Nebraska Book Company, Inc. Form 10-Q for the quarter ended September 30, 1999, is
incorporated herein by reference. |
|
|
|
|
|
|
10.15 |
* |
|
Addendum to the Memorandum of Understanding, dated as of July 1, 1999 by and between
Nebraska Book Company, Inc. and Alan Siemek, dated March 29, 2002, filed as Exhibit
10.11 to Nebraska Book Company, Inc. Form 10-K for the fiscal year ended March 31,
2002, is incorporated herein by reference. |
|
|
|
|
|
|
10.16 |
* |
|
Memorandum of Understanding, dated as of November 1, 1999 by and between Nebraska
Book Company, Inc. and Michael J. Kelly, Vice President of e-commerce, filed as Exhibit
10.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended December 31, 1999,
is incorporated herein by reference. |
|
|
|
|
|
|
10.17 |
* |
|
Memorandum of Understanding, dated as of April 17, 2001 by and between Nebraska Book
Company, Inc. and Robert Rupe, Senior Vice President of the Bookstore Division, filed
as Exhibit 10.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended June 30,
2001, is incorporated herein by reference. |
|
|
|
|
|
|
10.18 |
* |
|
Amendment to the Memorandums of Understanding by and between Nebraska Book Company,
Inc. and each of Mark W. Oppegard, Larry R. Rempe, Kenneth F. Jirovsky, William H.
Allen, Thomas A. Hoff, Barry S. Major, Alan Siemek, Michael J. Kelly, and Robert Rupe,
dated March 4, 2004, filed as Exhibit 10.27 to Nebraska Book Company, Inc. Form 10-K
for the fiscal year ended March 31, 2004, is incorporated herein by reference. |
|
|
|
|
|
|
10.19 |
* |
|
Executive Employment Agreement dated as of March 27, 2010, by and between Nebraska
Book Company, Inc. and Steven Clemente, Senior Vice President of the Bookstore
Division, filed herewith. |
|
|
|
|
|
|
10.20 |
* |
|
NBC Holdings Corp. 2004 Stock Option Plan adopted March 4, 2004, filed as Exhibit
10.34 to Nebraska Book Company, Inc. Registration Statement on Form S-4 (File No.
333-114891), is incorporated herein by reference. |
|
|
|
|
|
|
10.21 |
* |
|
First Amendment, dated August 18, 2008, to the NBC Holdings Corp. 2004 Stock Option
Plan adopted March 4, 2004, filed as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q
for the quarter ended September 30, 2008, is incorporated herein by reference. |
|
|
|
|
|
|
10.22 |
* |
|
Second Amendment, dated January 14, 2010, to the NBC Holdings Corp. 2004 Stock Option
Plan, filed as Exhibit 10.1 to NBC Acquisition Corp. Current Report on Form 8-K filed
January 19, 2010, is incorporated herein by reference. |
|
|
|
|
|
|
10.23 |
* |
|
NBC Holdings Corp. 2005 Restricted Stock Plan adopted September 29, 2005, filed as
Exhibit 10.1 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended September
30, 2005, is incorporated herein by reference. |
103
|
|
|
|
|
|
10.24 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.1 to Nebraska Book Company, Inc. Current Report on Form
8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.25 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Major, filed as Exhibit 10.2 to Nebraska Book Company, Inc. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.26 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Siemek, filed as Exhibit 10.3 to Nebraska Book Company, Inc. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.27 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.4 to Nebraska Book Company, Inc. Current Report on Form
8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.28 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Major,
filed as Exhibit 10.5 to Nebraska Book Company, Inc. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.29 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Siemek,
filed as Exhibit 10.6 to Nebraska Book Company, Inc. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.30 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Oppegard, filed as Exhibit 10.7 to Nebraska Book Company, Inc.
Current Report on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.31 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Major, filed as Exhibit 10.8 to Nebraska Book Company, Inc. Current
Report on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
|
|
|
|
|
10.32 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Siemek, filed as Exhibit 10.9 to Nebraska Book Company, Inc. Current
Report on Form 8-K dated April 6, 2006,
is incorporated herein by reference. |
|
|
|
|
|
|
10.33 |
* |
|
Form of Deferred Compensation Agreement by and among Nebraska Book Company, Inc. and
each of Mark W. Oppegard, Bruce E. Nevius, Larry R. Rempe and Thomas A. Hoff, filed as
Exhibit 10.6 to Nebraska Book Company, Inc. Registration Statement on Form S-4, as
amended (File No. 333-48221), is incorporated herein by reference. |
|
|
|
|
|
|
10.34 |
* |
|
Amendment of Form of Deferred Compensation Agreement, dated December 30, 2002, by and
among Nebraska Book Company, Inc. and each of Mark W. Oppegard, Larry R. Rempe and
Thomas A. Hoff, filed as Exhibit 10.1 to Nebraska Book Company, Inc. Form 10-Q for the
quarter ended December 31, 2002, is incorporated herein by reference. |
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10.35 |
* |
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NBC Acquisition Corp. 401(k) Savings Plan, filed as Exhibit 10.7 to Nebraska Book
Company, Inc. Registration Statement on Form S-4, as amended (File No. 333-48221), is
incorporated herein by reference. |
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12.1 |
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Statements regarding computation of ratios, filed as Exhibit 12.1 to Nebraska
Book Company, Inc. Registration Statement on Form S-4 (File No. 333-164271), is
incorporated herein by reference. |
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14.1 |
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Code of Business Conduct and Ethics and Code of Ethics for Our Principal
Executive Officer and Senior Financial Officers for Nebraska Book Company, Inc., filed
as Exhibit 14.1 to Nebraska Book Company, Inc. Form 10-K for the fiscal year ended
March 31, 2004, is incorporated herein by reference. |
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21.1 |
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Subsidiaries of Nebraska Book Company, Inc., filed as Exhibit 21.1 to Nebraska
Book Company, Inc. Registration Statement on Form S-4 (File No. 333-164271), is
incorporated herein by reference. |
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31.1 |
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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99.1 |
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Mirror Option Agreement between NBC Acquisition Corp. and NBC Holdings Corp.,
dated September 30, 2005, filed as Exhibit 99.1 to Nebraska Book Company, Inc. Form
10-Q for the quarter ended September 30, 2005, is incorporated herein by reference. |
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99.2 |
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Mirror Restricted Stock Agreement between NBC Acquisition Corp. and NBC
Holdings Corp., dated March 31, 2006, filed as Exhibit 99.2 to Nebraska Book Company,
Inc. Form 10-K for the fiscal year ended March 31, 2006, is incorporated herein by
reference. |
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* |
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- Management contracts or compensatory plans filed herewith or incorporated by reference. |
All other schedules for which provision is made in the applicable accounting regulations of
the SEC are either not required under the related instructions, are not applicable (and therefore
have been omitted), or the required disclosures are contained in the consolidated financial
statements included herein.
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